Not sure what Melchi does with time frames, but here is my theory. But first, think of a pizza, the three main ingredients cheese, tomato sauce, and dough/crust. I used to make pizza at home and found out that all three must be of exceptional quality. You can't have bad sauce and expect the bread and cheese to make up for it. Can't have bad bread and expect good sauce and cheese to make up for it. Same thing with indicators and time frames. Each indicator, or time frame must be tasty all on it's own, meaning, it must make a profit, even if a little profit, all on it's own.
So then, if an indicator, all by itself, is not able to make a profit, i don't yet understand how it could possibly help guide any other signals that are supposed to make a profit. Same with a time frame. For a high time frame to be used to guide signals on a lower time frame, the higher time frame MUST be expected to make some kind of profit all by itself.
So let's say you find a method that works on all time frames, yielding a 1.5 profit factor (PF), average, on all. Only then, could you possibly use a higher time frame to guide a lower. The intention is to reduce the number of signals taken, but to significantly raise the PF for trades taken to more toward 2 or better. This can't happen if the higher time frame only ever breaks even, minus commissions, which is the worst scenario possible. If both time frames yield profits, then you could start experimenting with getting in on the low frame, and out on the high frame, or visa versa. Getting in on the higher and out on the lower should yield a higher win% percentage. Only your data could tell you what would happen with the PF. And visa versa.
The idea is that an ok signal can be significantly boosted by trading in harmony with something on a higher time frame that also makes a little profit. That way, two fairly low (but still profitable) PF systems can work together to get a much better PF. Profit factor is gross wins divided by gross losses. A PF of 1.3 works, but the drawdowns can be so significant, that it prevents you from using leverage responsibly. You have to get the PF up to around 2 to see an equity curve reliable enough to apply leverage.
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