Which higher time frame is the right one?

Hi again,

as I couldn’t find the answer I would like to ask here a question which came to me quite some times in the last days and as the last thread in this forum worked quite well for me, here one more:

I’m trading (mostly) in a 1 hour or 4 hour time frame. To be sure that I am trading in the same direction like the pair is moving to on a higher time frame, I do always look as well at the daily, weekly and monthly time frame. When they are all in the same direction it is pretty clear, but which one is the right one if e.g. the monthly one had an up-trend for more than 40 bars, only the last 5 bars did a retracement to, let’s say, the 38,2% Fibo-level. This means that on a weekly time frame we had a down-trend of 12 candlesticks and on the daily time frame we had a short up-trend of few days.

If my trading rules tell me to trade only in the same direction as on a higher time frame, how do I know which one is the right one???:confused:
Looking back at my previous trades I discovered that I fudged on myself choosing the one that “confirmed” my trading idea :8:
Is there any common rule or experience from someone trading already for 200 years and could tell me which one I should choose, please? Many thanks in advance!

That is a really difficult question to answer, and possibly the reason you’ve had no replies yet.

with respect, Im not sure if you have a fundamental misconception over the need to have an established system (or trading strategy) which would have already answered your question, or are you looking for someone to help you with the decision making of your fledgling trading strategy ?

The first point is that there is no “right” time frame to be using - outside of an established system. No one can tell you which to use. Also, the time frames in no way predict or tell you what is likely to happen next. In fact, nothing can tell you that. If that were the case we would all be multi-billionaires overnight.

The second point - it sounds like your system is not complete. A complete system will not leave this decision unprepared. If you have looked to a certain time frame to confirm your trading idea, then it may not be the time frame that is wrong - not all trades win.
On a system, you have to be certain that out of X amount of trades, Y amount will lose and Z amount will win, hopefully winning more that you lose.

hope this makes sense. I think you should do the babypips school if you havent already.

I agree with ScottishMike completely…

Weekly and Daily charts are my preferred time frames for evaluating trends. A trend will always have a beginning and an end. I use the daily and weekly identify that beginning and end. The weekly will override anything from the daily, but some reversal patterns may show up better on the daily then the weekly

Here is current daily chart of EURUSD, this pair had been on a 5 month uptrend that came to an abrupt end on May 3rd with a pin bar reversal, the weekly chart also showed a pin bar giving this trend change a lot of clout.

In answer to your question, Weekly best, daily is 2nd

Hi all,

thanks a lot for the answers even when I asked something that looks to be difficult to answer. I will try to explain it better (sorry for my bad english) with a chart:
EUR/NZD on a monthly time frame:

I would see a downtrend with a short retracement to the 38.2% fibo level and now the pair is continuing its way to the south.
Now the same chart on a weekly time frame:

Here I would see an uptrend with a retracement which, probably, will come to an end soon and the pair will continue to move to the north.

So if I would like to enter a trade on the long side I would find a confirmation on the weekly chart but a negation on the monthly one. So which one I should take in consideration??? Is there any experience saying e.g. that you should confirm 2 time frames higher (so trading on a 1hour chart I would look at the daily one)?

Personally, I think there is no “right” timeframe(s) to use. The first consideration is what kind of trader you are. For varoius reasons some people are only comfortable with short-term day trading whilst others only have time for longer term trades. This first consideration determines at which end of the “timeframes” scale you are, in general, interested in. Either you will concentrate on, say, the 1H to 1min range or the 4H to Monthly.

Once one knows which end of this scale fits one’s trading style then you can select which combination of timeframes are meaningful. If they are too close together then there will not be sufficient distinction between them but if they are too far apart then the trade opportunities on the shorter TF will be over before the longer TF has reacted. To make the point, you couldn’t expect to gain meaningful relative signals by comparing a weekly chart with 1min signals - that’s a bit like watching a water jet scooter circling around an oil tanker.

The usual concept with multiple Tf trading is to use the longer TF to identify the underlying trend and then enter actual positions whenever the shorter TF gives signals in the same direction. Therefore the TFs must be sufficiently distant to give an opportunity to identify a trend whilst still allowing the shorter TF to move within that trend.

Common combinations that are neither too distant nor too close are typically 30m/5m, 1H/15min, 4H/30min, Daily/4H, weekly/daily, monthly/weekly and so on. These are not, of course, concrete ratios, they are only guides and each trader using multiple TFs will seek which combination suits their method best. Some will use three TF’s but the point is the more TFs you look at and the further apart they stretch the more contradictory they will become.

Having said that, there is a benefit for short-term traders to be aware of what the overall trend is for the pair concerned. For example, if there is a clear and strong trend in progress as shown on a daily chart then there is good reason to be cautious about taking trades in the opposing direction on a 15min chart. In this sense, the trade “method” is still only based on say 1H/15m TF’s but the daily picture is more like a “commonsense add-on” concerning whether to actually take the trades signalled on the 15m TF.

Here is a good example of using three timeframes - this is the EURUSD 1H/15M/5M immediately after today’s NFP: :smiley: :smiley:

In my experience the larger the time frame, the more reliable the signal that appears on it, but also the longer it takes for that signal to be realized. However, I also don’t think there is such a thing as a right and wrong time frame. It all depends on the kind of strategy you use. Some strategies use even the 1-minute time frame and they are still profitable.

I am use weekly timeframe and also look daily timeframe and also 4H timeframe and also 1H timeframe, usually my trigger analysis is use daily timeframe and will choose 1 hour and 15 M timeframe to making decision, combine with price action

Same here. H4 is the lowest (sometimes H1 to check if there are any starting changes in trend) and then Daily, and finally Weekly for trend guidance.

We have to choose our own trading Time-frames as we will get to know about them only after doing a lot or practice in our trading accounts.

I seem, daily time frame is the best selection for retail traders who are mainly using scalping and swing trading style. It carries enough information of market trend status, so a trader who has proper trading skills, he can track market trend comfortably by using D1 time frame. But you may get final conformation into lower time frames like m5 or m15.

I like to use all timeframe from weekly daily hourly and 15M timeframe,usually I will look on daily movement tp analyze the majority trend and tendencies price moving, and then use hourly timeframe also to look on behaviour on these range frame, and going to 15 M timeframe to making entry point and determine stop loss