Multiple Time-Frame Analysis
Multiple timeframes analysis equals using 2 chart time frames to trade commodity - a shorter one used for trading and a longer one to check the trend.
Since it's always good to follow the market trend, in Multiple Time-Frame Analysis, the longer time-frame gives us the direction of the long-term trend.
If the long-term market direction supports the direction of the smaller chart time frame then the probability of being profitable is greatly increased. This is because even if you make a mistake the long-term commodity trend will eventually save you. Also if you trade with direction of commodity market, then mostly you'll be on the winning side, this is what this analysis is all about.
Remember there is a popular saying by many Commodity Trading and market investors that says: "The commodity trend is your friend" - never go against the market.
There are four different types of traders - all these use different charts to trade as described below.
Examples of how each type of trader uses multiple Time-Frames analysis trading strategy:
Scalpers
This group holds onto their trades for only a few minutes. Scalper never holds on to a trade for more than ten minutes. With the objective of making small amounts of pips as profit, 5 - 20 pips.
A Scalper using 1 minutes chart wants to go long, checks 5 min chart, which looks like the one below, since 5 min show trend is heading up, then decides from the analysis it's ok to buy.
Day Traders
This group holds on to their trades for a few hours but not more than a day. With the objective to make quite a number of pips, 30 to 100 pips.
Day trader trading 15 min chart wants to go long, checks 1 H chart, which looks like the one below, since 1 hour portrays market commodity trend is heading up, then decides from the analysis it's ok to buy
Swing Traders
This group holds on to their trades for a few days to a week. With the aim to make a big number of pips, 100 to 400 pips.
Swing trader using 1 H chart wants to go short, checks 4 hour chart, which looks like the commodity example illustrated and demonstrated below, since 4 hour portrays the commodity trend is heading down, then decides from the analysis it's ok to sell.
Position traders
These are the investors that hold on to their trades for weeks or months. With the aim to make a big number of pips, 300 to 1000 pips.
Position trader using the daily trading chart wants to short, checks the weekly chart, weekly looks like the one below, since weekly highlights the commodity trend is heading down, then decides from the analysis it's ok to sell.
How to Define A Commodity Trading Trend
Using a commodity system has 3 indicators - MA Crossover System, RSI and MACD and uses simple guide-lines to define the trend. The rules are:
Upwards trend
Both MAs Moving Up
RSI above 50
MACD Above Center-Line
Down-wards Trend
Both MAs Moving Down
RSI below 50
MACD Below Center-Line
For More explanation about this system read: How to Generate Trading Signals With a Trading System.