As an active digital asset trader, part of your goal is to find means that can help you perfect your profit. Due to the volatility of bitcoin and other altcoins, many analyses have been developed for traders to take advantage of. When you can take advantage of the rise and fall of cryptocurrency prices, you won’t be caught unawares by market trends. Tracking price movement trends is a good analysis for trading cryptocurrency. Let’s discuss the time frame analysis
Time Frame: what is it?
The time frame analysis allows digital asset traders to know the price trend of the digital assets they are about to trade. A time frame is the price movement of particular digital assets over a period of time. It is a period that indicates the price movement of a digital asset. Crypto traders use Time Frame analysis to bring-up decisions about the strength, weaknesses, and resistance of the crypto trading pair they are about to open. When you study an hour trend of BTC price before opening your trade, you’re using time-frame analysis to strategize your trades. So when you use more than a one-time frame trend to strategize your trade, it means you’re using Multiple Time Frames.
What is Multiple Time Frame Analysis?
Multiple time frame analysis is the method of observing a particular digital asset pair at different times. When you’re monitoring the same currency pair across many time frames, it means you’re using multiple time frame analyses. Multiple time frame is used to gather ideas about what the market is trying to indicate at a given time, through different time frames. For example, when you use a 24-hour price chat to see long-term price trends and use 4 hours price chat to check the entry and exit point, you’re using a multiple time frame analysis to strategy your trade. A trader can use two or three different time frames to track market price trends before coming up with their strategy.
Why Do Traders Use Multiple Time Frame Analysis?
- Multiple time frame is used to increase the possibility of getting into more winning trades. The probability of entering high-profit trade when placed on a long term is higher than executing instant or short-minute trade.
- Multiple time frame helps traders look at the big picture of that trade. It helps to know the up, down, and resistance point.
- Multiple time frame shows the details behind price action. When you want to see the big picture of a price trend, go to a higher time frame. When you want to see the details of a trend, go to the lower time frame.
- Using time frames that are too short is risky and it can jeopardize your capital if care is not taken. A longer time frame is ideal than a shorter time frame. Using a short time frame gives a lot of stress unless you are very good at using the strategy. A short time frame gives you an urgency to take action for each movement.
What are the factors to consider when picking a Multiple Time Frame?
Before using multiple time frame analyses, you need to understand your personality in trading. Are you the conservative type or a high-risk taker? A high-risk taker is comfortable with smaller time frames. A conservative trader will preferably go for a higher time frame. In a nutshell, you must know your risk appetite.
Another thing is your patience level. If you want quick, sizable profits, go for shorter time frames. If you can be patient, go for a longer time frame. The larger time frames often take more time to gain profit than shorter time frames.
The amount of time you can spare for monitoring trends is crucial. If you’re busy, using higher time frames will suit your personality. The higher the time frame, the lesser the threat.
How many time Frames is Good To Consider When Using Multiple Time Frame Analysis?
The minimum time frame allowed in multiple time frame analyses is 2-time frames. For long time frames, you can use a day trend to check the big picture of the trade and use 4 hours trend to spot entry and exit points. You can also use more than two-time frames to derive your strategies. You can use month, week, and day trends, Depending on your choice and how lovely the market is.
How to trade ADA/USDT using Multiple Time Frame Analysis
Let’s say you want to use Multiple time frames to trade a cryptocurrency pair of ADA/USDT. You will open the usual time frame you normally use, and open another chart of ETH/USDT that is higher than what you normally use. Let’s say you normally trade 4 hours time frame before, you can use a higher time frame that is equivalent to a day. This means you now have two-time frames
So from this higher time frame, you will be able to have a clear picture of what the trends look like before opening your trade for ADA/USDT. You will use the higher time frame to see if the ADA/USDT is going uptrend, downtrend, or facing resistance. Knowing this will enable you to make a decision.
The lower time frame will allow you to fill in your entry and exit point for the ADA/USDT trade. Multiple time frame is used by traders that do not want their trades to be a bubble. This analysis will prevent traders from entering trade head-on without knowing the scenario around the trend.
From these guides, I have been able to put you through what multiple time frame means and how to trade using multiple time frame. I want you to also understand that not all time frame needs to be in the same direction. The duration you are holding your trade is crucial, don’t choose the time that you won’t be able to monitor. Note that a longer time frame is more significant than a shorter time frame. You can use multiple time frames for positioned trading, day trading, or swing trading. Everything relies on your personality and the strategies you concluded on.