Today, I plan to share the investment insights Benjamin Graham, Warren Buffet’s mentor, gleane...
How I Use Multi-Time Frame Analysis
12/17/2012 9:00 am EST
Technician Corey Rosenbloom shares how he performs multi-time frame analysis and the factors he looks for before taking a trade.
One of the things I’ve seen traders do a lot of lately is multi-time-frame analysis, and using multiple time frames on their chart to try to make a good trading decision. My guest today is Corey Rosenbloom to talk about that. So, Corey, how do you do time-frame analysis?
Sure. In multiple time frames, the traditionally look at it, it should go monthly charts, weekly charts, and daily charts, and assess when the trends are moving in the same direction. That’s problematic, especially when the time frames don’t always align, and there is different kind of trends that take place on different time frames. For example, a simple, nothing out of the ordinary retracement or, just a typical pullback on an intermediate trend on say a weekly chart may develop, and almost does always develop, into a downtrend, breaking of support, breaking of moving averages, things that look very bearish on a daily chart, and especially those hourly and 30-minute charts. So, one can get involved in time-frame relativity errors where the lower frames are downtrending, but yet it’s just a simple, no out of the ordinary retracement with the higher frames.
All right, so do you want to find a trade that hopefully would have the 4-hour chart on the same level, up to a daily chart, up to an hourly chart, so that all of these are confluent and they show the same thing?
Well, not necessarily. The best trades that I’ve taken on intra-day basis will be those that are higher time-frame retracement to a known support level. For example, a trend line introduces Fibonacci, a moving average, so we have a context, a higher time-frame trend that is simply pulling back to a known support level, so that’s factor one. On the intra-day frame, 30-minute chart, 15-minute chart. What I want to see in context with that higher pullback is a positive divergence, maybe in volume, momentum, internals, whatever the case is, a positive divergence, reversal candles, and factors that show me that that lower time-frame, even though it is downtrending, is coming towards a potential reversal or an inflection point in context with that higher time-frame support.
What time frames do you like to use, Corey?
I like to use, in terms of my intra-day trading, the daily and the 5-minute, specifically, so I look for analysis and I do my game planning for the next trading session off of the daily, hourly, and 30-minute charts, looking structure levels, Fibonacci, any kind of major trend lines, major levels in the context of the trend or the range environment, and I’m playing those into a thesis, a game plan, or a bullish thesis or bearish thesis, on the lower frames, so that’s what I’m looking for especially.
You get more information in the lower frames, and I trade off the 5-minute charts, those are quick. The 1-minute charts give too much information, I think, for intra-day trades, at least for what I do, so it’s putting together a game plan of the higher frame daily chart to support level or even a break of resistance in seeing momentum pick up, volume increase, as the price breaks through. That will be an intra-day breakout trade.
Related Articles on STRATEGIES
I spend a lot of time talking about block trades. These are the huge trades that show up on your opt...
I have been tracking a set-up for the SPDR Gold Trust ETF (GLD), which I analyze as a proxy for the ...
AllianzGI Equity & Convertible Income Fund (NIE), which yields 6.8%, invests in convertible equi...