Unlocking the Secrets of Multiple Time Frame Analysis
Most traders find themselves analyzing a currency pair for trading purposes on a single time frame. While that is all well and good, a much more in depth analysis can be accomplished by consulting several time frames on the same pair. Think of it as trying to “size up” a person based on meeting them on one occasion versus meeting them several times. You will have more insight regarding both the person and the trade if you view them from more than one vantage point.
Since a currency pair is moving through multiple time frames at the same time, it is beneficial for a trader to examine several of those time frames to determine where the pair is in it “trading cycle” on each time frame. Ideally a trader will want to postpone their entry until momentum in each time frame is aligned…all bullish for an uptrend or all bearish for a downtrend.
The entire process regarding trading in general and Multiple Timeframe Analysis (MTFA) specifically begins by identifying the trend the direction in which the market has been moving the currency pair in question over time. For our purposes here, the trend can be identified on the Daily chart.
On the Daily chart of the GBPUSD pair below, we can see that the pair has been in an uptrend since mid-January. The pair has been trading above the 200 SMA (green line) and pulling away from it. Price has also been building higher highs and higher lows, and, at the time of this chart the GBP is strong and USD is weak.
Also, when we look at Slow Stochastics, we can see that the indicator is giving us a very bullish look in that the two moving averages which comprise Stochastics are at a strong upward angle and the separation between them is increasing meaning momentum is becoming stronger.
All this adds up to bullish (upside) momentum. This means that we only want to buy the pair when each time frame is reflecting that same bullish momentum.
So now that we know the direction that we want to trade the pair, let’s check out the lower time frame charts to see how they line up with the Daily so we can “fine tune” our entry.
In looking at the 4 hour chart we see that the uptrend is present here as well after a mild retracement. Stochastics reflects the pullback that took place but is still poised to crossover to the upside should bullish momentum ensue.
We can now check out our one hour chart for our entry signal…
The one hour chart provides us with our optimum entry signal. Notice how Stochastics has retraced, moved below 20 and then crossed over to the upside and continued to move above the 20 line.
That crossover in the red circle would be our entry signal since that is the point when bullish momentum kicks back in on the one hour chart. When that bullish crossover takes place, the one hour time frame is now aligned with both the four hour and the Daily chart. They are all moving in the same direction at the same time and our Multiple Time Frame Analysis objective is accomplished.
While MTFA will not guarantee a winning trade, by employing it in our analysis we are putting another trading “edge” in our favor and increasing the likelihood that we will have a successful trade.
Bottom Line: To implement Multiple Time Frame Analysis, after we establish the trend, we want to check a couple of lower time frame charts and not enter the trade until they are in agreement with the longer time frame chart that we used to establish the trend. Once they are all in agreement, we enter the trade. It is like aligning the tumblers in a lock. Once that is accomplished, the lock will open freely.
It is always god to investigate what the best Forex brokers promise their traders. Black Diamond broker for instance made some attractive and unrealistic promises that the traders would have easily spot. As an illustration, they promised a four percent return to traders every month. It would have flashed a warning sign. If you are aware of the Bernie Madoff scenario, you would remember that during the scandal experts criticized the company for unrealistic promises when the company only guaranteed investors a 10 percent annual return. Another sign of an FX broker scam is the company itself. For example, Black Diamond Capital Solutions, LLC, founded by Keith Simmons was never licensed to operate as an investment firm, neither was it regulated by the CFTC in the US. This is why it is always essential to do your research on the legitimacy of a forex company before you invest with it to be sure that they are regulated. Gerald Leo Rogers founded Premium Investment Corp., TriForex International Ltd, and InForex Ltd, in just a single year. Isn’t that enough warning sign? The Scammer had stolen nearly 30 million dollars of clients’ funds before being caught. Even then, he only refunded 11 million dollars. The scam managed by Rogers was quite tricky because the transactions were carried out outside US, which made it difficult for the authorities to recover the money back. Things you can do to stay away from These Forex Scams Most scammers are as a rule very clever people. There’s no way an idiot could put together a scam that made tens of millions of dollars. But, if you can follow these tips, you will be much less vulnerable to scam in the future: Perform Your Due Diligence On The forex broker It’s recommended to find out if retail Forex broker is licensed and regulated, but you also need to find out everything you can about the company itself. Before you make that deposit, find out as much as you can about the forex brokerage company. In the case of Black Diamond, if the investors have carried out research it wouldn’t have taken them time to recognize that there was something suspicious about it by looking at its structure. First, it wasn’t licensed to operate in the US and not regulated by any financial regulator. Also, it wasn’t even based in the US. As for Gerald Rogers, the chap had earlier been convicted of fraud and was in fact on parole when he launched Premium Investment Corp. Evidently, these two major FX brokerage scams could have been avoided by carrying out a simple research into the companies and their founder. Check credible reviews from verified users of the broker Make Google your friend before making the leap. You can also use this resource to learn more about a Forex broker and avoid Forex brokers’ scams. However, you need to be wary where you source your information because there are some review websites that the fraudulent brokers themselves use to spread the fake positive news. It’s not easy selecting the good review websites from the bad, however, you should check if the comments appear inconsistent. Be Careful Of any promise that appears too good to be true In the first case of Black Diamond, the most noticeable sign that it was all a Forex brokers scam was in the extent of promises made. Don’t forget that when the deal is too good, think twice. And if it is extremely good, assume the worst and run. Look for any signs where the broker tries to talk you down about the risks involved. Forex trading is a very risky venture, even riskier than most other investments. Thus, if the broker says that there are minimal risks, just assume that they are lying. The most recent Forex regulations set out by MiFID II require that all Forex brokers indicate clearly that Forex trading is extremely risky. Moreover, they must warn traders about the possibility of losing more than their initial investment. Hence, do not believe anyone who claims tells you there are only minimal risks involved.
In the legal profession, lawyers and advocates are always guided by one major ethical code throughout their practice, whether in the courts or their outdoor legal engagements; they must never disclose or discuss details shared to them by their clients in confidence with outside parties. This practice is commonly referred to as ‘The Rule of Confidentiality.’ With this code of practice, any details shared by a lawyer in a court of law that was disclosed to them in confidence by their clients is dismissible and can be rendered futile by the presiding judge/advocate. This rule holds grounds throughout their practice unless the courts or the Law otherwise demands or provides grounds strong enough to necessitate the lawyer/advocate to disclose such confidential information. That’s too much legal talk for a Forex & CFD’s trading article, right? All this will make total sense in a moment. Let’s call it ‘the preempting before the sentence.’ The rule of information confidentiality applies equally for the esteemed medical profession. No doctor or medical practitioner is allowed to discuss their patients’ diagnosis and treatment status with their colleagues or spouses. The ‘Confidentiality Rule’ holds grounds and guides their professional practice, the same way as the legal profession.It is with this resonance that as professional Forex and CFD’s traders, we must as well uphold this healthy code of ethical practice when going about our trading activities, and to stay truthful to the Rule of Confidentiality. Never at any point and time should a trader share or make public their open/running trades to their friends or to the public. The fact that isn’t an oversight body to keep us in-check in our adherence to this rule must be our very reason to develop self-engraved discipline if we are to achieve meaningful and long term trading success. There are very few professions, not even the legal nor the medical profession, where the rule of confidentiality has ever been so imperative to the welfare and value-based performance than in the trading business. The ability to develop strong self-restraint and discipline among traders cannot be overstated. This principle falls on the significance of upholding the right trading psychology as a strategic ingredient in achieving long term successful trading. The main reasoning behind this rule is that once a trader makes their trades known to their peers or to the public, or any other party for that matter, (even worse to their spouses) is that it invites the emotional burden of ego and pride, driven by the desire ‘to be right’. Human beings possess an inborn urge to be right. Over the years, society has condemned failure and losses as if they define your ultimate destiny. On the contrary, it is the challenges, failures, and losses we encounter in life that grow our resilience and grit to break free and make a mark in achieving success. As a rule of the thumb, anyone who doesn’t experience failure or losses, whether in trading or in life, is either not trying at all or not doing enough, and is therefore self-limiting. At Fourthstreet Consultants, we don’t discuss or publicize our live trades. This only causes one to grow the ‘need’ to convince the other party of how ‘right’ they were. Consequently, this mounts their ego and clouds their judgment, thereby distorting their actions, which ultimately leads to costly mistakes. Mistakes that could easily be avoided by keeping calm, and strictly following your trading plan to guide all your actions in the markets. It’s okay to share trading ideas and thoughts as that shows one’s command and understanding of their trading business, but no trader should ever make their personal open trades public, unless one is doing it purely for educational purposes only. For instance, Module (III) of our comprehensive Forex course covers a full three months of live trading. We took our time to record every trade we took live on the market charts for our trainees/traders, recording both the losing and the winning trades. We adopted this approach because there’s no better way of teaching than illustrating live. Every trainer must demonstrate their craft or skills live to their students. Otherwise how can you teach that which you can’t practice? The recorded live trading sessions, together with the test of the Forex trading course educational content is only accessible to our members who sign up for our Online course. The goal was to illustrate and teach our traders that losses are part of the trading business, the same way you cannot avoid losses in life or in any other ‘real’ business. You can only control and keep the losses small, while locking in big profitable trades. At the end of the three months of our live trading as is covered in our Online Forex course, (which is essentially a quarter of a year) we made a great deal of net profit, even with the few losses we encountered factored in. Lesson of the day; whether you’re a novice or an experienced trader, strive to develop the discipline of ‘not disclosing your open trades,’ keep them private. In case you get the urge to talk about them, it’s advised you write them down in your trading journal to keep track of your progress and performance. Otherwise they will dent your ego and confidence in your trading system, especially if your trades end up as losers.
Ticking the best commodity to trade is often a headache because there are usually plenty of options in the fray. The financial market is growing rapidly, and it is responsible for determining the prices of essential goods. Mostly, what we eat or wear rate for them gets described by traders and investors. Commodities find price tags according to the demand and supply in the world market. And it is exclusive to what ordinary people require. Multiple factors make for a good portfolio of an intelligent buyer and seller. Let us discuss and figure out the best prospects that have the potential to garner feasible returns. Safe havens The commodities that can do well irrespective of the circumstances and situations fall under the safe haven term. Once traders invest in those products or equities, then chances of their loss are far lesser. And a long term investment always gives a fantastic profit. Investors resort to buying commodities when stocks, currency exchange markets, mutual funds, bonds and other financial bazaars fail to impress. People look forward to ideas that can keep their money safe and at the same time provide them an interest in it. Banks and insurance companies do that in some cases. Why is the commodity market so profitable? One does not need Einstein to know that with volatility in the market comes an opportunity to mint money. Any understanding or an experienced trader wouldn’t let go of a chance when the market is vulnerable. The commodity market is one such space which is full of such ups and downs. The market rallies around the production of goods. All the names listed in the index are daily usage things. So, productivity is one of the elements which makes it profitable. People can hoard them physically and sell them as and when they want. So, It also gives extra leverage to traders who wish to deduce different parameters. In every other market, a trader literally has a piece of paper. If numbers attributing them does not justify their needs and intent, then besides selling they have no option left. That is why the superiority of the commodity market is galvanising global investors, businesses and companies. What are the most common commodities? The daily use products consist of oil, natural gas, precious metals like gold, platinum and silver. They are in huge demand and cost higher than other commodities relatively. A little quantity when purchased then the price ranges somewhere between hundreds to thousands of Euros. The percentage of benefits is directly proportional to the risk taken. And in this market, there is no shortage of these glimpses. One cannot predict the rise and fall. It happens in a blink. Even if someone feels that an opportunity is lost while trading, then the commodity market has ample juice for all traders. The volumes of buyers and sellers keep on changing. People, who keep a tap on the inconstancy of the commodity market, they can put their money on the right time. Hence, the time here is vital by and large not because of learning about the fluctuation but for investment. How to check if the commodity market will grow? Even the most experienced cannot speculate on the growth or slide of any commodity. A slight tickle of rumour can trigger the market run like a bull and a cheetah. There is no other way but to regularly sit in front of the system and keep a check periodically. Also, watching the production of a commodity can give a clue about the performance. And because traders deal in the future form of the market, knowing about the quantity becomes essential. Which are the best market spheres for the commodity? There are expectations in uncertainty, as well. But it is a challenging sphere. If someone still wants to keep a check, then they can see the futures trades. It is the market that also paves a pathway in the present trading. For accommodating the requirement of the future, production gets increased or decreased. And based on that, the rates of goods and services change. It can slip down the abyss or touch the new heights. However, there are measures which regulating bodies of these markets take during troubled times. So, one can avoid fear unnecessarily. If a beginner is looking to get some knowledge, then there is no harm in seeking an expert’s advice. It is always better to gain some information before initiating a step into putting money on a commodity. What is the ideal time for investment? Predicting an ideal moment in the market is like catching a fish in a fast-flowing river. But patience is a prized possession in the scheme of things. And if luck serves the destiny, the lethal combination can work wonders for an investor. Moreover, calculating the scenario of profit and loss and keeping the money to average later on is a wise decision. Can brokers play a role in hatching a brilliant deal? Brokers do not have a magic wand. They see the market as others do. But the difference in opinion and peculiar way of thinking abstract them. A real broker is one who takes a look at all the parameters and trading degrees before assisting a client. If these traits fall in place, then they can help buy time along with amazing deals in a surging commodity. A broker enriches the portfolio of traders. So, listening to him is equally important for investors to get into the elite group of sound investment. Also, a good broker will always suggest bits and pieces from everywhere. They pay attention to them by understanding the dynamics of each commodity, namely; copper, zinc etc. What are the best prospects for investment? The question comes naturally when trillions of dollars are at stake. And there is so much for a person to gain in terms of bucks. It is a serious career and a professional arena for a bunch of people. For these people, Gold, Palladium, Silver, Oil, copper, platinum are a magical buy. Also, some of the commodities which may not be doing as well currently, but have a future. Some should be included inexcusably. Find the details, specifics below:- Copper Before selecting any metal for the portfolio search its utility in households or daily life. It will give a clear picture of how well people associate or connect with this alloy metal. The rise in demand impacts the market price and valuation. None can argue it. The metal channelises the global economic brand of the cycle. It exhibits the growth aspects of a country. So, its utilisation happens in determining. Copper has the potential to bounce back and resurrect from the lowest of the circuits. It displayed the same power in the year 2016 after remaining at a lower side for the time being. No one was expecting it. And the one who held their patience had the last laugh. And from the past two years, it is consolidating the position. Currently, it is showcasing the upward trendline and has symptoms to touch the pinnacle. So, it can prove to be a jewel in the stock. Platinum People irrespective of genders have an interest in wearing jewellery made from platinum. So, it is in demand all the time. It saw the double bottom a while back but sustained the blow. And experts are of the view that it will give exceptional returns on a long hold. Once the time is conducive, that can be any time; then it will see a surge in the volumes of investors. Also, precious metals have a backing of the market from other frays. It cannot dwindle on a negative side. Palladium On checking its past record of ten years, one can realise how commendable it is performing. It is a valuable asset that a trader can cherish for years. The demand for palladium is so high that its price has gained an unprecedented upward move. The characteristics are witnessing the flock of brokers to investors. One can calculate its momentum by equating it with the cryptocurrency giant Bitcoin. In the year 2017, the white metal touched an all-time high value around 2760 Euro. The noble figure left everyone in its awe. And since then, all doubts broke away. Some people might feel a little sceptical regarding it squeezing at a higher level. For them, it is still time to purchase the metal. There can be small bit corrections but ignoring them and keeping patience is a medicine that leads to profit. Gold While talking about any metal or commodity, gold is king Solomon, and one can’t speak enough of it. It broke the all-time high mark of 1747 Euro. And it witnesses no stopping from here. One reason that makes it boastful is that people, especially women, love wearing jewellery made from it across the Earth. All countries use it as a standard to mint currencies. Hence, it is a hedge against inflation. Central banks of various nations open their reserves of gold when they find no other way to protect falling economies. Also, during the forex exchange, when prices of currencies like the US Dollar plunge, the value of Gold touches heights. Such a symptom can be desirable for those who want to take notice of gold for buying it. The best part of gold is, one can buy it in the physical form. And can keep for the time being if the prices are low. And can sell them when time is right. Bars, bricks and coins are the best and purest forms. In the form of jewellery, it comes mixed with some external elements and other metals. When a trader witnesses a downfall, he/she must know that it is a matter of time when it again soars to a new level. It is not surprising because universal acceptability empowers gold. And it is always the standard gold people talk about while comparing the best in the business in any field. The prices of gold also depend on mining, besides purchasing by common masses. However, it is the bulk buying that impacts the rate. So, whenever such news breaks out, one can check the indexes showing the upward trend without any inhibitions. Silver It won’t be an exaggeration to call silver a sustainable commodity among all the high fliers. It is maintaining sanity by now slipping out of the hands of ordinary people. Someone who is eyeing for a surplus return but does not have enough to spend, silver accomplishes their wishes. It may not be as volatile as its contemporaries, but one that favours the metal is its consistency. It has a broad market in many countries. Nations use it in making kitchen cutlery, jewellery, coins, currency threads etc. Also, many electrical and electronic appliances utilise silver in making them. On looking closely, one will find some relatable factors between gold and silver. Both the commodities go hand in hand. The metals rise and fall almost at the same time. Going by that theory and analysis, it is better to get both of them in the kitty. Steel This may not be a precious metal but used extensively in day to day life. From a sofa set to a keychain or a lock have chunks of steel in them somewhere. The dishes used to eat food and water bottles. Moreover, homes and building material consist of steel for creating a strong structure that lasts long. As it is the alloy of carbon and iron, it has both the strength and agility. These are the features that make it demandable. And that is why it is one of the hottest commodities in the market. Wisdom words A commodity is relatable in many ways with a person. And the market and its substantial growth is the testimony to it. But at the same time, it is the most. Unpredictable. Hence, investing all the money at a time in it is like playing games with fire. Taking small steps in the right direction is mindful and a need of the time. There is no substitute for patience and watching and seeing a game. Going slow sometimes can help a trader get maximum return, Remember the hare and the tortoise story and go steady.