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If you combined all three time frame to evaluate a currency pair, you will improve the odds of successful trade. It is the same like combined strategy, you will be more sure and confident of your analysis Performing the top-down analysis encourages trading with the larger trend.
- The largest time frame we consider our main trend – this shows us where market is and where is headed to.
- The medium time frame is what we normally monitoring, and it signals to us the medium term buy or selling bias and how it is compared to largest time frame.
- The smallest time frame shows the short term trend and helps us find entry and exit points by generating signal
We recommend always to take this top down approach. If swing trading is most alike to your personality you should look first daily then 4 hourly and 1 hourly. If a long term trader weekly, dally and 4 hourly. If you like intraday trading you see the overall picture at 4 hourly, than you see medium 1 hourly time frame and enter or exit on 15 or 30 minutes. If there is divergence between time frames you should think for closing your positions and look for convergence in time frames