Time frames for swing and day trading

Just a quick question post your toughts, I appreciate every feedback. Now to the point, I trade demo to learn before using real money and I dont realy understand relation between timeframes I like (1h,4h) and for example I do analysis on hourly chart and then when I switch to four hour one indicators show different story for example I use ichimoku and on hourly chart is in the cloud so then I go to check 4 hours and chart is above cloud. tf am I supposed to do? any feedback highly appreciated :slight_smile:

Both the 1H and 4H charts are using the same stream of price data. The difference is that the 1H chart is chopping it into 1H strips (candles or bars) whereas the 4H is chopping it into 4H strips. Therefore there are 4 candles on the 1H chart for every candle on the 4H.

This means (if you are using the same settings for Ichimoku on both charts) that, say, a 26 period MA on the 1H chart is an average of the closes for the last 26 hours of price whereas a 26MA on the 4H is an average of the 26 closes covering 26x4 hours of prices, i.e. 104 hours. This means it is processing prices extending back 104 hours into the past compared with only 26 hrs on the 1H chart.

The usual reason for doing this is because the 4H can identify the underlying longer term trend and the 1H can then identify near term moves that are either in the same direction or contra to the longer term trend. Generally, if one is trading trends then the preferred situation for a trade is when the near term chart starts a move in the same direction as the main trend on the long term chart. Sometimes, there are opportunities in the contrary direction but at least one is aware that it is against the longer term direction.

In your example, the bottom chart (4H) is showing a strong uptrend that has already been running for some time and is still above its cloud. The upper chart (1H) also showed the most recent part of this uptrend but has now dropped into its cloud. This could be interpreted as showing that the price has lost, at least temporarily, its momentum and stalled and that it might be time to close a position and wait to see which way the price then exits the 1H cloud. If it again breaks on the upside then it suggests that the longer term trend is about to continue another leg. If it breaks on the downside then it may be the start of a significant retracement or even a trend reversal - in this situation one could anticipate some jerky price action up and down as the market gradually sorts itself out!

Using multiple TFs in this way is a very powerful and widely used technique. One key challenge is deciding which TFs to use. If they are too close then there is insufficient room to distinguish between long and short term “waves” whereas too far, say, Daily and 5min charts may prove to be ineffective since significant intraday moves on a 5min chart will be within a single one candle on the daily chart and not even really visible there.

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I use D1 for identifying market trend, but collect my entry points into H4 and H1! Yes I am also a day trader!

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Very helpful anwser, simple and understandable, thank you Manxx :slight_smile:

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Yes, I agree. Thank you.

I would like to add that there is a book that you may find interesting that discusses a similar strategy in more detail. It is “Trading For A Living,” by Dr, Alexander Elder. It is available in a free audio format online. In the book, he discusses his “triple screen trading strategy.” I think you’ll find his “top-down” approach will align very nicely with your system.

Best of luck on the charts.

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Here is an extract from that book describing the core principle of the triple screen trading strategy:

Each trader needs to decide which timeframe he wants to trade. Triple Screen calls that the intermediate timeframe. The long-term timeframe is one order of magnitude longer. The short-term timeframe is one order of magnitude shorter.

For example, if you want to carry a trade for several days or weeks, then your intermediate timeframe will be defined by the daily charts. Weekly charts are one order of magnitude longer, and they determine the long-term timeframe. Hourly charts are one order of magnitude shorter, and they determine the short-term timeframe

This is actually an interesting method and differs from what I described in the post above. Generally, the idea of multiple TFs is to watch for alignment in all TFs, but this triple screen method is different.

As an example, it describes a three-TF scenario using weekly, daily and hourly charts. If the weekly chart demonstrates a major uptrend then you wait for an opposite minor downtrend in the daily (trading) chart and set a buy-stop order in the third chart to catch a buy breakout to the upside (on the assumption that it is now continuing the weekly uptrend)…and vice versa of course!

An interesting concept. Long term trend following combined with medium term buying low on dips - which are also short term upside breakouts. There is considerable logic there! :smiley:

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I have the same habits with you. As an intraday trader, also, I am checking for an entry point on the 5min chart.

Swing trading is a long-term trading style so I seem, high time frames are mainly useful like H4, D1, W1 etc. By the way, I mainly do scalping trading.

That’s really interesting! But I have never used such a small-time frame! By the way, thanks a lot for sharing your tricks!

It’s normal when use certain indicator with setting default and using different timeframe hence also will different view, because indicator will use data from open high low close on certain timeframe then calculating with certain formula, so timeframe used to look trading swing or intraday trading