The Importance Of Higher Timeframes
I can’t stress enough to traders of all levels of experience the importance of the higher time frame charts. Having come up in the business from a trading floor environment where time frames are so compressed was definitely a handicap in becoming a screen trader, and then a trend trader. Because of that I know the importance of always starting with the higher time frame view. What most traders do not understand is that even if I’m using the 3 & 15 minute charts to day-trade, it’s still the current Weekly trend which is determining whether I’m taking trend or counter-trend trades. The distinction between trend and counter-trend is very important because this determines how closely we monitor a trade. Bottom line, you don’t sleep on a counter-trend trade. And when you are looking at things from the eagle’s perspective what looks like a counter-trend to a guy on a daily chart may actually be a trend trade on the Weekly chart. ¦lt;br /> ¦lt;br /> The Weekly Chart below of GBPUSD is a great example of the vantage point we need to get students to view the market from. On this chart we see we have a double bottom in place, and an uptrend defined by the pattern of higher lows and higher highs. Irrefutable, no? If the market closes above resistance at 150 it opens the door to 160 and then 165. If it tests 141 – the white line – weekly support – it redefines itself as a sideways trend, it closes below 141 this creates a wider sideways channel and opens the door to a test of the Jan – March lows and a potential triple bottom, etc.
¦lt;br /> The 60 minute chart below is interesting because what looks like positive divergence in a down trend on this lower time frame chart is actually positive divergence in an overall up-trend on the Weekly.Jay
The beauty of markets is they are dynamic, meaning always in motion. What is important to realize and remember about markets and trading is that they are not a science. Speculating in the financial markets is very definitely an art form which teachs us the freedom of detachment from our own opinions.
