Introduction To Trends And Time Frames

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Making sense of trends and time frames is an often confusing task. At any one time, in any given time frame, multiple trends can be at play. There are long term secular trends, shorter term primary trends, still shorter term secondary trends and yet shorter still near and short term trends. Adding to the confusion of trends is the time frame. What may be easy to spot in one time frame may not be so easy to spot in another. This article will help to make some sense out of trend and time frame for binary traders. This is an important aspect of trading and one that I highly recommend everyone master regardless of their chosen strategy. The old saying, “the trend is your friend, trade with your friend” is as true today as the day it was first spoken. Likewise, the saying “a rising tide lifts all boats” is equally apt.

A trend is defined as a general direction is which something is moving or developing. In the case of trading financial assets a trend is a measurable direction in prices, usually up or down. Trends can and do exist in every time frame and understanding how they work is one key to avoiding frustration. Imagine this, the tide is rolling in and each wave that comes onto the shore is a little higher than the next. All of a sudden one wave pulls way way back, looking as if the tide may have turned. Is it more likely that the next wave will meet or exceed the previous high water mark or less? This is the essence of trend analysis, determining the direction of the market tide and the probability that the next wave will be higher or lower than the next.

The Secular Trend

The first, and strongest, trend for traders to be aware of the secular trend. The secular trend is one that last anywhere from 7 to 15 years and is usually in synch with underlying economic conditions. A secular bear market is one in which the markets trend down to sideways for a period measured in years. A secular bull market is one in which the markets trend upward for years. In a bull secular market it is more likely for shorter term bear markets to meet support and return to bullishness than they are to result in major correction. The same is true in reverse for a secular bear market. This trend can be observed on a chart of 10 years duration or longer as shown here. I use monthly closing to help focus the chart. Within the secular bear market labeled here there are periods of up and periods of down markets, these are the primary trend.

The Primary Or Long Term Trend

The primary trend is the largest measurable price movement within a secular market. These trends tend to last from 3 to five years depending on strength. You can see that within the secular market I have market there are at least five discernible primary trends ending with the final bull trend that broke the top of the secular bear market range. Take note that during the secular bear market that the bearish primary trends are much stronger and of longer duration than the bullish primaries. This same phenomenon will be true in reverse for secular bull markets. In order to analyze the primary trend I drill down to a 3-5 year chart of weekly closing prices, whichever is needed to include the entire movement. This next chart shows the final primary trend of the 1999-2020 secular bear market. We can see again that on this chart that there are shorter bull and bear markets within this trend but that the underlying primary is in control. Bear markets are not as deep as bull markets are tall. Trades made in this time frame would have an outlook of weeks or even months.

The Secondary Or Short Term Trend

Within the primary trend are secondary trends. These are the near and short term rallies and dips driven by news and events. They are also the trends of most interest to me and other binary traders focusing on weekly and monthly expiries. To view the secondary trends I move down to charts of daily price action like the one below. Signals on this chart would have an outlook of a few days to a week or up to a month. There are even trends within this trend driven mostly be fears and expectations and less by actual news or events.

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Why Is Trend Analysis Important?

It is important to understand trend for several reasons but most importantly to help understand why one trade is more likely to profit than another. If the market is trending lower in the primary trend then it is less likely for a bullish play on the secondary trend to work than a bearish one. Likewise, if a signal in the secondary trend confirms the primary trend then it has a higher chance of profiting than a secondary signal that is counter to the primary trend. One way to line up a great trade is to have as many time frames in confirmation as possible. The secular trend is really too long for binary traders but you can start with the primary trend and move down to the secondary trend and then the near term trend. A signal taken with all three trends in alignment has the most chance of success.

Introduction to Multi-Time Frame Analysis

An Introduction to Multi-Time Frame Analysis

Multi-time frame analysis (also known as multiple time frame analysis) allows traders to focus on the appropriate timing of trades as well as help identify when trends may be reaching exhaustion. This article will explain how to utilize this methodology with the forex pair EUR/AUD.

Benefits of Multi-timeframe Analysis

As explored in previous articles on trendlines and pitchforks / median-lines are used to locate key reaction zones in price. These same principles can be applied to multiple time frames to offer a more complete view of current market trends.

The idea is to, ‘see the forest through the trees’ – in other words, before entering a trade based on a given setup, you will always want to have a broader opinion of where the market is relative to trend. By viewing price action in various timeframes we can identify possible entry points within a given price advance / decline as well as help in timing these moves.

EURAUD Daily

Consider the EURAUD daily chart above- The pair was trading in a clear downtrend off the 2020 highs with a descending channel formation highlighting support into the April lows around 1.3678. As discussed in earlier lessons, the confluence of trendlines & key high / lows in price will often represent more significant areas of support & resistance. In this example, price is testing down-trend support – the focus now shifts to the near-term picture for further clarity on how we would trade this possible rebound.

Just because price is at support, doesn’t mean we can simply assume it will hold. Prices need to establish some form of behavioral change before we can look to trade against the broader trend. As we drill down into the 4-hour chart, an embeddednear-term descending channel formation can be identified (red). A break above channel resistance as price comes off key support would shift the near-term focus higher in the pair and will serve as our ‘trigger’ to get into the trade.

To identify our topside targets, we can derive an ascending pitchfork formation off the most recent low-high-low to construct an up-slope. The initial target on such a trade would be at the median-line (bisector) of the pattern with the focus weighted to the topside while above the lower median-line parallel.

Fast forward a few weeks and the pair indeed broke above down-channel resistance and came back to test that line as support (long-entry). The advance continued into the median-line followed by a break and rally into the upper median-line parallel a few days later. This simple example illustrates how analyzing price action through various lenses of time can help identifying trading opportunities within the context of a larger trend (also called primary trend). Oftentimes secondary (or even tertiary) trends within these patterns will offer near-term setups to trade against the primary trend.

Key Takeaways on Mulit-Timeframe Analysis

Some important aspects to keep in mind when utilizing multi-timeframe analysis

  • Too many time frames render useless – Some fall into the pitfall of trying to time entry/exit when all the time frames line up with a signal- but this will rarely happen.
  • When scaling down in time-frames, utilize a ratio of 1:4 to 1:6 between the trigger and the trend timeframes. For example, if you are taking a trade off the four-hour chart, look for the daily chart for trend analysis. If you are looking for a trade off the one-hour- look at the four-hour for trend analysis.
  • Recognize when you’re counter-trend trading – Often times the near-term picture will offer setups against the primary trend like the EURAUD example above. It’s important to approach these trades with more caution, meaning lower leverage and more conservative stops.

Multi-timeframe analysis allows traders to focus on the appropriate timing of trades as well as help identify when trends may be reaching exhaustion. In the example above, if the EURAUD had stayed within the confines of the near-term descending channel formation, no attempts would have been made on the long-side. With the same respect, had we not viewed the trade within the context of the broader trend highlighted on the daily chart, we may have missed the turn all together. Keeping that in mind, always trade within the context of the primary trend and look for near-term price action to offer triggers in time and price.

Taking sense of trends and time frames is an usually confounding commission. At any one time, in any given time frame, compound trends can be at play. There are long term secular trends, shorter term primary trends, till shorter term secondary trends and yet shorter till near and short term trends. Adding to the confoundedness of trends is the time frame. What may be simple to spot in one time frame might not be so simple to spot in another. This article will help to take some sense out of trend and time frame for binary merchants. This is an important feature of doing business and one that I highly propose everyone master whatever of chosen plan of them. The eaderly talking, “the trend is friend of you, business with friend of you” is as true today as the day it was first spoken. Similarly, the saying “a rising tide lifts all boats” is alike apt.

A trend is expressed as a general supervision is which something is turning or growing. In the situation of doing business financial assets a trend is a reckonable control in prices, offen up or down. Trends can and do exist in every time frame and understanding how they work is one key to avoiding obstruction. Imagine this, the tide is rolling in and each wave that comes onto the shore is a little higher than the other next. All a sudden other wave pulls way way back, looking as if the tide may have changed. Is it more possible that the next wave will meet or exceed the previous high water mark or less? This is the core of trend analysis, finding the direction of the market tide and the possibility that the next wave will be higher or lower than the other next Neo2

The Secular Trend

The firstly and strongest, trend for merchants to be aware of the secular trend. The secular trend is other that last anywhere from 7 to 15 years and is usually in synch with underlying economic situations. A secular bear market is one in which the market places trend down to sideward for a period evaluated in years. A secular bull market is one in which the markets trend upward for years. In a bull secular market it is more possible for shorter term bear markets to meet ratify and reappearance to optimistic than they are to cause in major improvement. The same is true in opposite for a secular bear market. This trend can be watch on a chart of 10 years duration or longer as shown here. I make of using monthly closing to help core the chart. Within the secular bear market labeled here there are periods of up and down markets, these are the leading trend.

The Leading Or Long Term Trend

The leading trend is the largest reckonable price progress within a secular market. These trends tend to last from 3 to five years being influenced by strength. You can watch that within the secular market I have market there are at least five noticeable leading trends end up with the final bull trend that broke the top of the secular bear market scope. Take note that during the secular bear market that the bearish leading trends are much stronger and of longer duration than the bullish primaries. This same fact will be true in opposite for secular bull markets. In order to analyze the leading trend I practice down to a from 3 to 5 year chart of weekly closing prices, whichever is needed to involve the whole movement. This next chart shows the final leading trend of the 1999-2020 secular bear market. We can watch again that on this chart that there are shorter bull and bear markets within this trend but that the underlying primary is in power. Bear markets are not as deep as bull markets are tall.Business made in this time frame would have an outlook of weeks or even months.

The Secondary Or Short Term Trend

In the leading trend are secondary trends. These are the near and short term meeting and dips driven by news and events. Also the trends of most interest to me and other binary merchants emphasis on weekly and monthly expiries. To watch the secondary trends I move down to charts of daily price action like the one below. Signs on this chart would have an outlook of a few days to a week or up to a month. There are even trends in this trend driven almost be fears and expectancies and less by actual news or events.

Why Is Trend Analysis Important?

It is important to know trend for many reasons but most importantly to help know why one do business is more possible to turn a profit than another. If the marketplace is doing business lower in the leading trend then it is less possible for a bullish play on the secondary trend to work than a bearish another. Similarly, if a sign in the secondary trend firms the leading trend then it has a higher option of profiting than a secondary sign that is counter to the leading trend. One way to line up a great business is to have as many time frames in affirmation as probable. The secular trend is very too long for binary merchants but you can begin with the leading trend and move down to the secondary trend and then the near term trend. A sign made with all three trends in alignment has the most option of victory.

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