Combining Time Frames
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When a trader is asked, “What do you think about the market outlook?” the trader has to know the degree of time or trend the person is talking about. Is the outlook for the next six months, the next month, the next week or the next six hours? If it is for the next six months, the trader will analyze the weekly time frame chart. If the outlook is for the next week, then the weekly chart is quite useless, an hourly or daily chart would be appropriate. If we think about it in trend-following terms and say a trend is analyzed by the slope of a moving average in which case, a market can be in an uptrend in the monthly time frame, a downtrend in the weekly frame, an uptrend in the daily frame and a downtrend in the hourly frame. On each degree of time and trend, therefore, the outlook of a market can and does show different conclusions.
However, for a day trader knowing the market structure from weekly to hourly time frame will help to know the cycle in which the market is in each of these time frames. The higher time frame trend will dominate the lower ones but not to discount the fact that the first signal of change in the trend of a higher time will appear on a lower time frame.
Know the weekly market structure whether in correction or trend. If correction which leg of correction it is, 1st wave, 2nd wave, 3rd wave?
The best setup is to trade the end of wave C of a corrective wave 2 or wave 4 for the next Motive wave which is wave 3 or wave 4. So for e.g. if weekly is in a 4th wave of an impulse, we would like to trade the 5th wave of the same impulse: we analyze the shorter time frames to know the end of the wave C of wave 4 of weekly since the wave 4 must have 3 legs (ABC), we check if the wave C is running, if yes then we analyze the wave C on daily and count the waves within this leg, if this wave C shows 5 waves inside it on daily then check for divergence between the 3rd and 5th, if yes , go to h4 time frame and check waves inside the 5th wave, if there are smaller waves then check for divergence between the last two impulses, if yes then go to h1 and draw a trendline, wait for price to break the trendline or the last swing high/low. When there is a change of trend, check if the last wave is impulsive (sharp and fast), if yes then draw fib of the impulse and wait for a correction to touch 61 or 78 pc where you can plan to enter. (Trade setups steps will be explained in details in further slides.)
The below picture shows how you can analyze every last leg of the time frame in the next shorter time frame. First, analyze the whole of the monthly chart then take the last leg of the monthly (as shown by a yellow circle and move on to weekly to analyze that leg. Once you have analyzed the yellow circle weekly, take the last leg of weekly and move on to Daily to analyze it. This way you continue moving on till the shortest time frame that you want to have your trade set up on. We suggest keeping H1 as the trade set up time frame.
monthly - M
weekly - W
Daily - D
4 Hour - H4
1 Hour - H1
