TIME AS A TOOL OF ANALYSIS: MULTIPLE TIME FRAMES

Once you become familiar with trading setups, using time as a variable of analysis
is appropriate. In a real sense, the forex trader is a time traveler moving from the intrahour chart worlds to the outer reaches of weekly and monthly charts. The question
often arises: Which time interval frame is the best to use to put on the trade?
The answer is that each time interval generates trade-offs that the trader has to
consider. A short time interval such as a 5-minute or 15-minute chart provides less
risk exposure to wider moves, but also involves the risk that the pattern traded is not
reliable and has more noise than information in it. A longer time frame such as a 4-
hour or day chart generates a much wider price range and great potential for larger
pip profits.
At the same time, it is also associated with risk of larger losses since a wider range
increases volatility. The proper way to utilize time is to compare and align different time
frames. This allows time itself to be a confirming indicator, increasing confidence in the
decision made by the trader to put on the trade.

SUMMARY
Technical analysis, when applied to trading forex, must also include recognition of price
patterns. When forex prices form patterns, they represent a variety of emotions. Understanding
patterns and whether they are stable is a key milestone in evolving into a
knowledgeable and skilled trader.




By ABE COFNAS