AboutMark Hodge Expertise Questions related to technical analysis, strategies, risk, trading plans, trading psychology and money management. Experience in trading all markets and timeframes with expertise in futures (e-minis, currency futures, commodities, European Markets-DAX) and equity options. Unfortunately I am not allowed to offer any specific trading advice (i.e. should I go long the DAX today).
Experience I have been involved in the industry since 1995 working for Morgan Stanley Dean Witter and American Express Financial Advisors before becoming a full time trader. As Head Education Coach with Rockwell Trading I have coached hundreds of students around the world to achieve their trading goals with simple strategies, a sound trading plan and proper money management for the leveraged markets.
Organizations Currently serving as Rockwell Trading's Head Education Coach www.rockwelltrading.com and moderator for Rockwell's Day Trading Forum at www.rockwelltrading.com/forum
Education/Credentials Formerly licensed as a financial advisor with Series 6, 7, and 63 licenses. B.A. in Organizational Communications with a Business Minor from California State University, Sacramento.
Past/Present Clients I have worked with institutional traders, brokers, proprietary trading firms and private traders but respect their anonymity.
One of the few distinguished World Cup Advisors www.worldcupadvisors.com
Expert: Mark Hodge Date: 5/17/2008 Subject: Multiple Screen Trading
Question Hello:
Hello:
I know that it is common for some traders to use different time frames to analysis a particular currency pair in the currency market.
What are these traders looking at in regards to these different time frames? For example, the weekly, daily, and hourly time frames may be used.
Does the trader look for buy signals on all three screens revealing these different time frames?
If a trader is using a moving average cross-over method, for example, do the three charts need to show a cross over
of these moving averages before a buy order is made?
I thank you for your reply.
Answer Hello Kenneth,
When using multiple timeframes, a trader tries to identify the longer term trend with a larger time frame and possible areas of support/resistance, and an entry with a signal on a smaller time frame.
In general, the longer the timeframe, the fewer the signals. However the signal produced is typically stronger since a lot of the noise and minor fluctuations have been eliminated. With this said, larger profits and larger drawdowns typically stem from long term trends/trades.
A trader using a weekly or daily timeframe will look for strength in the overall trend, THEN a smaller time frame to enter based on a signal. As an example, let's saying a weekly chart shows the EUR/USD in a strong uptrend. On a daily the trend is also up. Using an intraday chart and multiple timeframes, a trader might be cautious with short "trend following" entries and look for a long entry based on a signal within the primary trend.
Using moving average crossovers, you might look for one of two scenarios:
A) A long term crossover to determine the overall trend (say a 50/200). Then look for a short term crossover (say a 5/9 to manage an entry).
B) An entry signal on a smaller timeframe when a short term and intermediate moving average have crossed a long term moving average.
There really are numerous ways to use moving average crossovers in a trading strategy, but most will agree that crossovers are meant to identify an overall trend (short term, intermediate, or long term)and most effective when combined with another signal, not necessarily AS a signal.
