Multiple Time Frames Can Multiply Returns

In order to consistently make money in the markets, traders need to learn how to identify an underlying trend and trade around it accordingly. Common clichés include: "trade with the trend", "don't fight the tape" and "the trend is your friend".

Trends can be classified as primary, intermediate and short term. However, markets exist in several time frames simultaneously. As such, there can be conflicting trends within a particular currency pair depending on the time frame being considered. It is not out of the ordinary for a currency pair to be in a primary uptrend while being mired in intermediate and short-term downtrends.

Typically, beginning or novice traders lock in on a specific time frame, ignoring the more powerful primary trend. Alternately, traders may be trading the primary trend but underestimating the importance of refining their entries in an ideal short-term time frame

In the table below  we've highlighted some of the basic time frames and the differences between each.

You also have to consider the amount of capital you have to trade.

Shorter time frames allow you to make better use of margin and have tighter stop losses.

Larger time frames require bigger stops, thus a bigger account, so you can handle the market swings without facing a margin call.

The most important thing to remember is that whatever time frame you choose to trade, it should naturally fit your personality.

If you feel a little uptight like you're undies are loose or your pants are little too short, then maybe it's just not the right fit.

This is why we suggest demo trading on several time frames for a while to find your comfort zone. This will help you determine the best fit for you to make the best trading decisions you can.

When you finally decide on your preferred time frame, that's when the fun begins. This is when you start looking at multiple time frames to help you analyze the market.

Trading using multiple time frames has probably kept us out of more losing trades than any other one thing alone. It will allow you to stay in a trade longer because you're able to identify where you are relative to the big picture.

Most beginners look at only one time frame. They grab a single time frame, apply their indicators and ignore other time frames.

The problem is that a new trend, coming from another time frame, often hurts traders who don't look at the big picture.