Im struggling to understand how to place entrys using multiple timeframes. I work 8-4 but i can actually look at charts quite a lot of the time due to spare time (Not complaining getting paid to learn ti trade at work :D). I am currently looking at the 1hour timeframe but getting the over all trend on the 4-hour and comfirming it with the daily timeframe. Im using the 20,50,100 SMA but struggling where to enter my trade on the hour/30min chart Im entering when the 20 crosses the 50 MA but this seems to lose more than gain. Can anyone advise me where i am going wrong or supply me with some useful tips/Links to understand the moving averages and multiple timeframes a lot better.
MA crossovers as entry signals are notoriously unreliable but also on a fixed time-frame often give late entry signals following a reversal. These two problems are different but the incorrectly the same solution is given as if it would solve both, and that is to stop down to a shorter time-frame.
A shorter time-frame for MA cross-over signals is just the same as shortening the time duration of your selected two MA’s. So in your case, instead of looking for say a 20 day MA crossing above a 50 day MA, you are using a 20 x 30min MA crossing a 50 x 30min MA. A lot of traders will tell you this is fine but it isn’t. Its just the same as shortening your 20 day MA to 6 days and your 50 day MA to 17 days and expecting it to work better. Sure, it gives earlier entries to the winners but it also generates far more signals.
And there’s the problem, because all MA crossover signals are poor entry signals anyway - if you’re using a signal that is only 30% reliable, will it help your bottom line to take 100 trades a week from this signal or just 10? Yes, that’s right - Neither. Both strategies will be losers.
The traders who use shorter time-frames and who make a profit are generally looking at support and resistance levels, trends and market confluence, not MA crossovers.
Do search out the Three Ducks Trading Strategy that’s on this site. You’ll also find a lot of Youtube clips showing examples from the author, Captain Currency.
What Tommor said, but also - watch out for cycles on the various timeframes. Sometimes when you look at other timeframes it is clear that Price is cycling in a trend in one of them, and your crossover signal can give you a buy signal when actually another TF would suggest that you’re going to get a retracement before that move you’re after. The retracement can stop you out before your trade ever gets going. So always make sure that if you’re juggling multiple TFs you understand the story on each chart. They will line up sometimes, and that’s where you make your money. Otherwise you can just be cut to pieces in the crossfire.
Im entering when the 20 crosses the 50 MA but this seems to lose more than gain. Can anyone advise me where i am going wrong or supply me with some useful tips/Links to understand the moving averages and multiple timeframes a lot better.
we’re blessed to be able to have that time to do that