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FOREX TIMEFRAMES

Formación
OANDA:EURUSD   Euro/Dólar estadounidense
Most technical traders have come across the concept of multiple time frame analysis in their market education. However, it is a well established chart reader.
Many market participants miss the larger trend, miss clear support and resistance levels, and miss entry and stop levels because they don't analyze the higher timeframes.

Multiple Time Frame Analysis
Multiple time frame analysis involves monitoring the same currency pair on different time frames.
As a general rule, using three different periods gives a fairly broad view of the market, while using fewer can result in significant loss of data, and using more often provides overanalysis.
When choosing three time frames, a simple strategy might be to follow the "rule of four". This means that you should first determine the medium-term period in which the trader is going to trade. From here, a shorter time frame should be chosen, which should be at least one-fourth of the interim period. Using the same calculation, the long-term timeframe must be at least four times larger than the intermediate one.
In the long term, the current trend will be determined, in the short term, the ideal entry point, and the medium term will indicate how long you can hold the position and where the targets are.

When choosing a range of three periods, be sure to select the correct timeframe.
A long-term trader does not need to follow a minute chart, and a short-term trader does not need to follow a monthly one.

Long term time frames
With this method of studying charts, it is generally best to start with long-term time frames and move on to more detailed frequencies. Looking at the long term time frame, a dominant trend is established.
Long-term price movement is influenced by fundamental data that a long-term trader should take into account in the analysis.
It is important to consider interest rates, which are a major component in the pricing of exchange rates.

Medium term time frames
This is the most versatile of the three because at this level one can gain insight into both short and long term time frames. In fact, this level should be the most commonly used chart when planning a trade when a trade is active and when a position is approaching either its target profit or stop loss.

Short term time frame
As the smaller price action swings become clearer, the trader can better choose an attractive entry for a position whose direction is already determined by the higher frequency charts.
Another consideration for this period is that the fundamentals again have a strong influence on the price movement on these charts, although in a very different way than for the higher time frames. Fundamental trends are no longer visible when the charts are below the four hour frequency. Instead, short-term time frames will react with increased volatility to the news. Often these jerky movements last for a very short time and as such are sometimes described as noise.

Putting it all together
When all three timeframes are combined to evaluate a currency pair, a trader will easily increase the chances of success for a trade, regardless of other rules applied to the strategy. Performing a downward analysis helps to trade with the trend. This alone reduces risk as there is a higher chance that the price action will eventually continue in the direction of the longer trend. Applying this theory, the level of confidence in a trade should be measured by how the time frames match up.
For example, if the larger trend is up and the medium and short-term trends are moving down, cautious shorts should be entered with reasonable profit targets and stops. Alternatively, a trader can wait until the bearish wave ends on the smaller charts and try to go long at a good level when the three timeframes realign.
Another obvious benefit of including multiple timeframes in trade analysis is the ability to identify support and resistance values, as well as strong entry and exit levels. The chances of a trade being successful are increased when it is tracked on a short-term chart due to the trader's ability to avoid bad entry prices, misplaced stops, and/or unreasonable targets.

essence
Using multiple timeframe analysis can greatly increase the chances of a successful trade. Unfortunately, many traders ignore the usefulness of this method when they start trading. As we have shown in this article, it may be time for many novice traders to return to this method, because it is the easiest way to know the direction of the trend and not go against it.

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