How to use multiple time frames?

[Dollardogs]

Another beginner question. I've been backtesting moving average crossovers against lower time frames for daytrading: 5min vs 1 min, also 4hrs vs 5mins.

I'd been told you should always use the higher time frame as your main buy/sell signal and then go down to the lower timeframe, and if both confirm it, you know your signal is more reliable so make the trade. But with the way I have my MAs setup, it's always one timeframe doesn't confirm, and so I've just watched basically a week of great trades leave me behind.

I welcome any wisdom on these two questions:

1. Is it foolish to just ride one timeframe?
2. Is there a smarter way of comparing multiple timeframes that doesn't just talk you out of making every trade?

Immediate basis for this question: I just spent 4 hours watching FSLY and I coulda cleaned up if I had just trusted my 1min chart, but instead I sat on my hands, "learning."

 

[trdes]

I use multiple charts, but I don't obsess over everything lining up. I have a main chart that I typically take trades off of and use other charts to give an overall view, however if a signal triggers on those larger charts I'll still take it, just expanding my expectations for profit and stop / risk.

But the more charts you add, that's more decisions to potentially make so it's only helpful as long as you don't get analysis paralysis, as soon as you hit that point than it actually becomes a huge negative to use multiple charts. If you haven't / don't hit that point than I personally find it pretty beneficial.


For every chart I have it parsed so I know:
#1 Is it in a position for a new buy that's likely to sustain or has it triggered a new buy signal

#2 Is it in a continuation buy (meaning the new buy / entry already came in lower so should already be long if you're taking the trade)

#3 Is it in a position to go into possible sell mode or has it triggered a new sell signal

#4 Is it in a continuation sell (meaning the new sell / entry already came in higher so should already be short if you're taking the trade)


So, I quickly review a multitude of charts and just see if it's #1, #2, #3, #4 the more that line up generally the stronger / more reliable the move is.

If half the charts are in a sell and half in a buy, than it can become more of a net neutral situation at that point I'll just trade my main chart as signals come in, if I can't determine a clear bias.

 

[Dollardogs]

That's really helpful, thank you! I'm 100% locked in analysis-paralysis last couple weeks, but I'm still new enough to this that I guess it's understandable. I'll hear a "rule of thumb" like never buy based on a single timeframe, and I stick to it too strictly, not enough experience yet to know better.

Mind if I ask a follow-up question.... I noticed for awhile 5min was super reliable, then it got fuzzier, so I switched to looking at 1-min. Any signs I should be looking for to move from 1 timeframe to another? In other words, how do you "promote" or "demote" them besides just hindsight?

 

[trdes]

That's really helpful, thank you! I'm 100% locked in analysis-paralysis last couple weeks, but I'm still new enough to this that I guess it's understandable. I'll hear a "rule of thumb" like never buy based on a single timeframe, and I stick to it too strictly, not enough experience yet to know better.

Mind if I ask a follow-up question.... I noticed for awhile 5min was super reliable, then it got fuzzier, so I switched to looking at 1-min. Any signs I should be looking for to move from 1 timeframe to another? In other words, how do you "promote" or "demote" them besides just hindsight?

I don't use time charts, most people here say a 1 minute is too choppy and to use a 2 minute or 5 minute. I also know someone who is a good trader who preferred 2 minute over 1 minute. I personally don't see much of a difference on the things I use, but I do see how faster time frames could be more difficult to trade as people have less time to process the information.

Experience helps, but I don't really demote or promote it goes back to what I call whichever chart is most active.

An example is whatever chart is putting in a fresh signal, that's the chart that's most active. Like a lot of the times really large charts are in a continuation buy or a continuation sell, however whenever they put in a new Buy or a new Sell than they become active and that's when I would look to assign more meaning in that direction as the larger chart has become "active".

 

[Dollardogs]

Great way to think about it. I also haven't tried 2-min timeframe once so I'll give that a try, might be a nice balance. The 5 min is too sedate for me, everything looks kind flat, whereas the 1-min is too much of a videogame. I'm slowly getting better at processing stuff at that speed, but 1-min is still too fast for me to act. Maybe 2-min will seem just right.

 

[murray t turtle]

I don't use time charts, most people here say a 1 minute is too choppy and to use a 2 minute or 5 minute. I also know someone who is a good trader who preferred 2 minute over 1 minute. I personally don't see much of a difference on the things I use, but I do see how faster time frames could be more difficult to trade as people have less time to process the information.

Experience helps, but I don't really demote or promote it goes back to what I call whichever chart is most active.

An example is whatever chart is putting in a fresh signal, that's the chart that's most active. Like a lot of the times really large charts are in a continuation buy or a continuation sell, however whenever they put in a new Buy or a new Sell than they become active and that's when I would look to assign more meaning in that direction as the larger chart has become "active".

%%
That about the way i do it; weight /value a weekly chart over daily/55+ minutes > 5 minutes/noise.........................................................................

 

[ondafringe]

The 5 min is too sedate for me, everything looks kind flat, whereas the 1-min is too much of a videogame. I'm slowly getting better at processing stuff at that speed, but 1-min is still too fast for me to act.

A 1m chart is pretty fast. From what I've read, too fast for most people. But I honestly don't see how you can day trade from a slower chart. I know some day trade from a 5m chart, but that's about the slowest I could see working in a day trade scenario, just not for me.

I have my DOM pre-config'ed for limit orders, as well as for attached OCOs. When it looks like it's getting close to party time, my mouse pointer is hovering over the buy column (only trading long right now), on the price I want for entry, ready to click. Because just moving the mouse pointer from the chart to the DOM, and locating the desired entry price, takes too much time and has cause me to miss trades. <lol>

 

[Dollardogs]

Yeah I hear you, I'm doing all this on a clunky old laptop setup too with an unreliable touchpad. The faster Dell desktop with a proper mouse and bigger screen shipped yesterday!

 

[kaizer]

****I'd been told you should always use the higher time frame as your main buy/sell signal and then go down to the lower timeframe, and if both confirm it, you know your signal is more reliable so make the trade.


You should always use CONTEXT for your trading signals. Context mean special conditions, which should take place to validate your signal(s).

Context is essential. Context-less trading signal, if profitable, is so called ‘holy grail’ or signal, which works profitably for any conditions. You can spend the rest of your life in quest for Holy Grail, look here for example: https://www.elitetrader.com/et/threads/need-somewhere-to-think-out-loud.285511/

This thread started 2014 is perfect example of endless loop of searching the universal pattern/signal for all conditions.

There are many ways to define your context, including (but not limited to): time of the day (assume you want trade intraday), key market events and also price action dynamics.

One of the ways to define context is pure price action, but on the timeframe greater than your trading timeframe. I already shared my view how to do it here: https://www.elitetrader.com/et/thre...s-material-alive.320588/page-172#post-5042925

Feel free to ask concrete Q’s.

 

[formikatrading]

Dollardogs:

Greetings again. I appreciate your willingness to learn.

Just make sure you're not choosing time frames just based on action and stimulation. The big money is in the big moves - which happen over larger time frames. Just my view, but it's a brutal way to make a living being a slave to your screens with 5 minute / 1 minute charts. Also, if there was a major edge in moving average crossovers, some hedge fund alogos would have coded that and exploited it already. If you find a way to make money doing that and you enjoy it without losing your mind, then more power to you, but if you find it's not working for you, you're not alone.

Best wishes!

Great way to think about it. I also haven't tried 2-min timeframe once so I'll give that a try, might be a nice balance. The 5 min is too sedate for me, everything looks kind flat, whereas the 1-min is too much of a videogame. I'm slowly getting better at processing stuff at that speed, but 1-min is still too fast for me to act. Maybe 2-min will seem just right.