A Complete Guide to Multi-Timeframe Trading: From Beginner to Pro

Whether you are a scalper, a day trader, or even a long-term investor, multi-timeframe trading is an essential element that cannot be overlooked in technical analysis. Trading in multiple timeframes provides the most comprehensive overview of price movements in the market, enabling more accurate and efficient trading decisions. But what exactly is multi-timeframe trading, how should it be combined and applied? Let’s find out in detail in the content of the article below.

How to trade in multiple timeframes?

What is a timeframe?

When you open any price movement chart of a stock or coin, you will see many different timeframe options, from 1 minute to 1 month.
Each period corresponds to data forming the price chart. For example:

• For a 1-minute timeframe, a candlestick is formed every minute.
• For a 1-hour timeframe, a candlestick is formed every hour.

This data is combined, creating a price fluctuation graph according to minute, hour, week… timeframes, depending on your choice.

(Or with a line graph, each period = that timeframe, forms one point. Connecting these points creates a line graph).

In some markets, such as Forex, timeframes are often abbreviated with symbols like: M1, M5, M15, M30, H1, H4, D1, W1, and MN. Where:

• M1, M5, M15, and M30 correspond to timeframes of 1 minute, 5 minutes, 15 minutes, and 30 minutes, respectively.
• H1 and H4 correspond to 1-hour and 4-hour timeframes.
• D1 corresponds to a 1-day timeframe.
• W1 corresponds to a 1-week timeframe.
• MN corresponds to a 1-month timeframe.

What is multi-timeframe trading?

Multi-timeframe trading involves, instead of only considering price movements in a single timeframe, combining various timeframes to gather more data on market trends and fluctuations. Each timeframe provides different informational value, which helps make the most appropriate investment decisions.

Multi-timeframe analysis may use 2 to 3 timeframes, primarily different ones, with the purpose of:

• Using a larger timeframe to examine long-term trends.
• Using a smaller timeframe to determine entry points.

Why is multi-timeframe analysis necessary?

When conducting any trade, don’t just focus on a single price chart, but “look further afield”.
Because:

• Firstly: By only looking at a single timeframe, you cannot accurately know which trend the market is in.

For instance, in the image below, if you look at the 1H (1 hour) timeframe of Bitcoin price, it “seems” like the market is in an uptrend and undergoing a slight correction.

However, if you switch to the 1D (1 day) timeframe, it shows that the market is in a deep and clear downtrend.

• Secondly: Multi-timeframe analysis provides you with more signals and data for trading.

Let’s take another example, if you are looking at a 4H (4 hour) chart of the EUR/USD currency pair, you will see a clear uptrend.

Then, if you switch to the 1H (1 hour) timeframe, the market is undergoing a strong correction at this timeframe, but a Doji candlestick has appeared (indicating selling pressure is no longer strong), and the RSI is indicating oversold.

=> The larger timeframe (4H) has helped you identify the uptrend, suggesting to BUY. The smaller timeframe (1H) signals a very good entry point.

If you decide to place a BUY/LONG order after analyzing these two timeframes, see what happens:

In summary, have you seen the importance of multi-timeframe analysis and trading?

– If you only look at the 4H timeframe, you won’t know if you should buy at that time.

– If you only look at the 1H timeframe, you will think that the market is gradually shifting to a downtrend (while its main trend is rising).

Therefore, multi-timeframe trading is extremely necessary if you want to succeed in becoming a “professional trader”.

Mistakes to avoid in multi-timeframe trading

Many people think that multi-timeframe analysis and trading are very simple, however, due to lack of thorough research, they often make the following two mistakes:

Mistake 1: Starting from the lowest timeframe ⇒ moving to higher ones

The biggest mistake traders make when they trade in multiple timeframes is starting their analysis at the lowest timeframe, then gradually moving to higher timeframes.

Many traders have a habit of choosing a very small timeframe (usually 5 minutes, 15 minutes), and then stubbornly stick to the signals obtained in this timeframe. They only use a larger timeframe to somewhat confirm this view. This approach is NOT CORRECT. Trading from low to high timeframes creates a mistaken view of the trend.

Reason:

• The trend in a longer timeframe is more important, requires time to form and needs a significant market movement to change the trend.

• Support and resistance levels are more effective on a longer timeframe than on shorter ones.

=> You cannot observe price fluctuations in a zone on a lower timeframe and predict that it is a support/resistance area. Because as soon as you switch to a higher timeframe, you will see that the price fluctuation in the lower timeframe is just like “a drop in the ocean”, almost unable to affect the market trend.
Therefore, the most accurate approach is top-down, from high timeframe to low timeframe.

Example:

Looking at the image below, the BTC chart in the 5-minute timeframe. At first glance, some of you might assess the resistance zone to be around ~22800 USD, and support ~22600 USD.

However, just by switching to the 1-hour timeframe, you will see that the assessment of support/resistance or trend in the 15-minute timeframe is completely incorrect. Because the price fluctuations between 22500USD -> 22800USD are very small in a larger chart.

=> If you maintain the mindset of moving from Low ⇒ High, it will be very time-consuming, inefficient, and prone to mistakes in trading.

Mistake 2: Combining too many timeframes

Apart from the mistake mentioned above, there’s another common oversight in multi-timeframe trading:
Using too many different timeframes.

Using multiple timeframes is not wrong, but it can lead to signal noise and difficulty in making accurate trading decisions.

How to combine multiple timeframes?

By now, you might have understood what multi-timeframe is and its importance in technical analysis, right?
But surely you have many questions:

– How should the timeframes be combined?

– I often trade in the 5-minute timeframe, so should I choose a higher timeframe of 1 hour or 4 hours?

– My higher timeframe is 1 day, so what should be the lower timeframe?

There is a rule for choosing two/three timeframes to combine, which is: Not too close, but not too far away. This means:

• If you are viewing the 1-minute timeframe, choosing a higher timeframe of 3 minutes or 5 minutes – it makes little sense and is not much different.
• If you trade in the 5-minute timeframe, but choose a larger timeframe of 1 day – it’s too far to synchronize with each other.

How to find a balance between two timeframes?

Use the ratio 1:4 or 1:6.

There’s no specific rule or explanation, but it is widely used and proven effective by many professional traders. For example:
– Suppose your lower timeframe is 1 hour, you can choose a higher timeframe by multiplying by 4 or 6 ⇒ Your higher timeframe will be 4 hours or 6 hours (even 5 hours).

– Suppose your lower timeframe is 5 minutes, then your higher suitable timeframe is 20 minutes or 30 minutes.

*** You can apply this mindset to determine your lower timeframe (if you want), when you have a higher timeframe, by dividing by 4 or 6 ***

Guide to multi-timeframe trading in technical analysis

Now that you know how to combine multiple timeframes and have chosen two for yourself. So how should you trade accurately to minimize losses?

Trade when both timeframes have the same trend

Always remember:
“If your trading timeframe (lower timeframe) is in an uptrend, it does not mean that your higher timeframe is also in an uptrend.

Conversely, sometimes the higher timeframe is in an uptrend, but the lower timeframe is showing a downtrend.”

Trading when signals in both timeframes are opposite is very risky, hence my advice:

• Ensure both timeframes are in the same trend.

Example:
As you can see, with the 4-hour chart below, the price is in a downtrend:

Check the daily timeframe to see if it is also in a downtrend, and the result:

=> If both of your timeframes give the same trend signal, you can consider entering a trade following the market trend.

However, I also say that this trading method is only relatively accurate, not too high in precision, it only reduces risk more than trading when the trends of the two timeframes are opposite. If you want to be more certain, continue to learn about the two trading methods below.

Using support/resistance in the LOWER timeframe

– Support is an area on your chart where, when the price reaches that price range, there will be a volume of buying that pushes the price higher.

Conversely, resistance is an area where, when the price reaches resistance, selling pressure will cause the price to decrease.

And here is the approach for you:

• Identify support/resistance in the LOWER timeframe.
• Ensure this support/resistance area is still within the major trend of the HIGHER timeframe (this can be based on support/resistance, moving averages, trend lines… to determine)

It may be a bit confusing, but I will give you an example for easier illustration:
First, in the 4-hour timeframe, the price is in a downtrend and has moved towards resistance.

Next, you also see the price being rejected, unable to break out past the resistance, so it has a high probability of reversing downwards.

But that’s not all, because the resistance area in the 4-hour timeframe is still part of the downtrend in the 1-day timeframe (it’s below the 20-day moving average).

=> Both timeframes indicate a strong downtrend.

=> Based on the signal from the higher timeframe (1 day), you will see that the resistance area in the lower timeframe (4 hours) is more significant, stronger, and provides better price resistance, thus having a higher probability of a price decrease. You can consider placing a SHORT order as both short/long-term signals indicate a price decrease.

Using support/resistance in the HIGH timeframe

In the two trading methods above, they both have the common feature of both timeframes having the same trend.
However, you can apply multi-timeframe trading to combine with price reversal patterns. This can provide a basis for you to filter out the most accurate price patterns.

• Step 1: Look at the HIGH timeframe, wait for the price to appear in the SUPPORT/RESISTANCE area.
• Step 2: Switch to the LOWER timeframe, look for price patterns that appear to provide entry signals. For example: double tops, double bottoms, wedge patterns…

Example: If you see the price moving around the support area in the high timeframe.

• Then switch to the lower timeframe, for example, in the image below, you will see a double bottom pattern (a bullish reversal signal).
  

At this point:

• The high timeframe signals a price increase when the price touches support.
• The low timeframe signals an increase with a double bottom pattern.

=> The probability of the price increasing is very high, you can consider placing a BUY/LONG order.
*** The same thinking applies if the price appears in the resistance area in the HIGH timeframe. You can switch to the LOW timeframe to find signals with price reversal patterns for a decrease ***

Above are our guidelines on multi-timeframe trading. It’s clear that multi-timeframe analysis is very important for any trader, and as you get familiar with the market, you will have to apply this method daily, hourly. Therefore, the important thing is to always practice regularly to gain valuable trading experience. Wish you success.