Indicators on different time frames

I am having issues with understanding indicators using the different time frame. When I check the H4 tomeframe the indicator can be saying overbought whereas on 30 min timeframe it is showing it is just rising. Also the valise of ADX diffrrs and likewise other indicators. How do I resolve this?

Hi, indicators use information from time frames where are installed for calculations. That is why you see difference. Regards Greg

2 Likes

@ProfesorPips
I was tempted to explain then I noticed that this user has no likes given/received , no comments a part from this question.
This is the tipical behavior of bots, generic questions to post on 10 different trading forums.

1 Like

I am new to forex. Started reading Forex on this blog just barely a month now and I just join the forum.

1 Like

Thanks for the response. My problem is this: if H4 is showing oversold and 30min time frame is just diving down towards sold. Which should I use when I want to enter a trade? Most times when I see such I get confused if I should enter or wait

3 Likes

It is to depend on your strategy, market research, knowledge, skills, risk appetite, funds on account.

2 Likes

Hi @kemaona
All these indicators are based on mathematical formulas using a selected number of candles/bars.
If you apply the same indicator with the same parameters on different timeframes then your indicator is calculating a value across a different period of time and will give different answers. But each answer is correct for the timeframe it is being applied to.

For example, if you apply a 12-period RSI to a 4-hour chart then it is calculating a value across 12 bars of 4 hours each, i.e. across the previous 4x12 = 48 hours of price movements. Thatâ€™s 2 whole days. But if you apply the same indicator on a 30min chart then it is only calculating a value from the previous 12x0.5= 6 hours of price movements.

So you need to consider the indicator value in the context of the period of time it is using.

In the situation you describe, it could be, for example, that prices have made a fast move upwards during the last two days that has pushed the 4-hour indicator into an O/B situation, but during the last 6 hours has pulled back a little and started another push upwards.

What you need to do is decide which TF you are actually trading from and then use the other TF to help in timing your entries and exits. In this case, you might be trading the 4-Hour as your main chart and using the 30min for your entries. And although the 30-min is showing a possible new leg in the upmove you could decide to ignore it because the main 4-hour TF is still showing an O/B condition.

The main consideration is to only consider what the indicator is telling you within the time parameter that you have set for it. And, of course, this will be different depending on whether your indicator is using values from the past hour, hours, day, week, and so on.

5 Likes

Thanks so much.

Thatâ€™s how we all move forwardsâ€¦step by step

1 Like

Even without indicators if you display 100 bars on 5m timeframe you can see an uptrend while with 100 bars on 4h you see a downtrend.
Indicators are only filtering noise, they see what you see.

2 Likes

Thatâ€™s the point. How do one take advantage of this in order to trade properly.

1 Like

1 Like

There are 2 ways :

1. use a multitimeframe strategy and take advandage of different timeframes agreeing on the same setup
2. choosing one timeframe and sticking to it

Both ways can work.

1 Like

Thanks. Iâ€™ll check it out

I just got it. Thanks

1 Like

hope it helps you!

sorry to answer your good and important with just a book recommendation rather than trying to summarise a whole book in a forum post, but i think itâ€™s really likely to help (and itâ€™s hard to describe briefly!)

1 Like

An indicator should only be one part of your strategy. You would combine indicators with price action, support/resistant levels, patterns, etcâ€¦

People use indicators to signal entries, exits, and to determine trends and overbought/oversold conditions.

Some only use indicators on the daily chart as there has been plenty of back testing done with optimal results on this time frame. Others will disagree.

Most people rely on indicators as confirmation, and it all depends on your strategy. You can use a single TF or you can use multiple TFâ€™s. An example of using multiple TFâ€™s for momentum, such as the popular RSI would be to look at it on the 4H, if itâ€™s showing overbought then switch to 1H. If itâ€™s showing overbought on both then that would be confirmation that perhaps price might be going down soon.

Like most questions in forex, there is rarely one right answer. You need to test different strategies and learn from that testing. Keep a journal of your results. Eventually, with lots of practice and patience this will develop into a reliable strategy that will give you consistent results.

Good luck!

3 Likes

It is common to see such a difference. Thatâ€™s why traders are suggested to stick to one time frame while trading to avoid confusion. Higher time frames help you establish a long-term trend while shorter time frames help you spot ideal entries into the market. Choose your time frame wisely.

2 Likes

which time frame is best for intra day trading ?

Whatâ€™s your looking at is lagging indicators in the short-term and long-term. Theyâ€™re not generally accurate for predicting price movement they are there to support your decision not to make them.

1 Like