Introduction to multi-time framework analysis
Multi-period analysis (also known as multi-period analysis) allows traders to focus on the appropriate timing of transactions and helps identify when trends may be exhausted. This article explains how to use this methodology with a Forex pair EUR / AUD.
Advantages of multi – period analysis
As explored in previous articles trend lines and forks / centerlines is used to find the main reaction zones of the price. These same principles can be applied over several time periods to provide a complete picture of current market trends.
The idea is to “see the forest between the trees” – in other words, before you start trading based on a specific setting, you always want to get a broader view of where the market is compared to the trend. By looking at price operations in different time periods, we can identify possible entry points within a given price development / decline as well as assistance in timing these movements.
EURAUD every day
Weigh EURAUD daily chart above the pair traded at a clear downward trend during the peaks of 2015, descending to the formation of channels, highlighting support for the lowest points in April at around 1.3678. As discussed in previous lessons, the coincidence of trend lines and key high / low prices are often the most important areas of support and resistance. In this example, the price is testing downward support — now focusing on the near-term picture to get more clarity on how we would trade with this possible return.
The fact that the price is supportive does not mean that we can simply assume that it will remain. Prices need to introduce some kind of behavioral change before we can start trading on a broader trend. As the 4-hour schedule progresses, it has been administereda decreasing channel formation (red) can be detected in the near future. A pause that exceeds the channel barrier if the price falls from the key support would shift the focus in the near future a couple of times and would be our “trigger” when entering the trade.
To identify the top targets, we can derive an ascending ascent fork formation out of the last low-high-low to build up the rise. The initial target of such a trade would be the centerline of the pattern (bisector), the focus would be weighted on the top, while the bottom centerline would be parallel.
Rewinding for a few weeks and the couple did break the resistance of the downstream channel and came back to test this line (with a long entry). Progress continued to the midline, followed by a pause and a few days later concentration on the upper midline parallel. This simple example illustrates how analyzing price transactions across different time periods can help identify trading opportunities in the context of a larger trend (also called the primary trend). Often, secondary (or even tertiary) trends in these patterns will soon provide settings for trading the primary trend.
The main keys to mulit-schedule analysis
There are some important aspects to consider when using multi-time analysis
- Too many time periods become useless – some fall into the trap of trying to enter / exit time when all time frames are in line with the signal, but this rarely happens.
- When reducing intervals, use a ratio of 1: 4 to 1: 6 between the shutter speed and trend times. For example, if you are off the four-hour schedule, look for a daily trend analysis chart. If you’re searching by the hour, check out the four-hour trend analysis.
- Identify when you are trading in the opposite trend – often the near-term image offers settings with the primary trend, as in the EURAUD example above. It is important to approach these transactions more cautiously, which means less leverage and more conservative stops.
Multi-period analysis allows traders to focus on the appropriate timing of transactions and helps identify when trends may be exhausted. In the example above, if EURAUD had remained within the framework of a shrinking channel in the near future, no long sides would have been made. With the same respect, if we had not looked at trade in the context of the broader trend highlighted in the agenda, we could have left it all together. With that in mind, always trade in the context of the primary trend and look for upcoming pricing to provide time and price triggers.