Multiple Time-Frame Analysis
Multiple time frames analysis equals using 2 chart time-frames to trade oil - a shorter one used for trading and a longer one to check Oil trend.
Since it's always good to follow the trend, in Multiple Time Frame Analysis, the longer timeframe 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 oil trend will eventually save you. Also if you trade with the direction of the oil 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 Oil Trading and stock market investors that says: "The oil trend is your friend" - never go against the crude oil trading market.
There are four different types of Oil traders - all these use different oil trading charts to trade as described below.
Examples of how each type of trader uses multiple time frames analysis oil trading strategy:
Scalpers
This group holds on to their trades for only a few minutes. scalper never holds on to a trade for more than ten minutes. With the objective of making a small amount 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 minute show oil trend is going up, then decides from this analysis it is 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 hour chart, which looks like the one below, since 1 hour shows market oil trend is going up, then decides from this analysis it is ok to buy
Swing Traders
This group holds on to their trades for a few days to a week. With the objective to make a large number of pips, 100 to 400 pips.
Swing trader using 1 hour chart wants to go short, checks 4 hour chart, which looks like the oil example shown below, since 4 hour shows the oil trend is going down, then decides from this analysis it's ok to sell.
Position traders
These are the investors that hold on to their trades for weeks or months. With the objective to make a large number of pips, 300 to 1000 pips.
Position trader using the daily chart wants to short sell, checks weekly chart, weekly looks like one below, since weekly shows the oil trend is going down, then decides from this analysis it's ok to sell.
How to Define A Oil Trading Trend
Using a oil system has 3 indicators – MA Crossover System, RSI and MACD and uses simple rules to define the trend. The rules are:
Upwards trend
Both MAs Moving Up
RSI above 50
MACD Above Centerline
Downwards Crude Oil Trading Trend
Both MAs Moving Down
RSI below 50
MACD Below Centerline
For More explanation about this system read: How to Generate Oil Trading Signals With a Oil Trading System.