Swing trading by itself is the most effective trading style that traders have available at their dispose. Swing traders make their money by taking chunks of swings that price makes as it moves up and down in the market. They are typically trend traders and the majority only trade in the direction of the major trend. This is the key to why and how swing traders typically out perform all other kinds of traders. However, there are a few ways that you can make or fine tune swing trading so that it produces even better results. One way that you can push swing trading to the edge and give yourself an even larger edge over all other market players is by trading with multiple timeframes. Using multiple timeframes allows you to fine tune your entries and exits to potentially maximizing the returns on each trade you place.
Just how can you use swing trading and multiple timeframes to increase your trading edge? The first step is to make sure you pick the right kind of timeframes before you even begin trading. Using multiple timeframes is only effective when the two timeframes you pick are compatible. Just what does it mean? One timeframe should be the overall or trend timeframe and the second timeframe is smaller than the first. These two timeframes must not be too close and yet at the same time they shouldn t be too far apart. A good example of timeframes that won t help you with your trading are the four hour and 15 minute timeframe. These two timeframes are too far apart to give you any kind of trading edge. Likewise using the daily and 12 hour timeframe are too close to be of any use. The two timeframes must be just right. This includes using the daily with the four hour chart or the four hour with the hourly chart. These are considered by many traders to be most suitable timeframes for multiple timeframe trading.
Once you ve decided on the timeframes you need to understand how they are used. The larger timeframe is used for trend or market observation. This is the timeframe you mostly use. You observe the market, look for changes in trends and make decision on where to enter and exit based from this larger timeframe. Just what is the smaller timeframe used for then? The answer is simple, entries and exits. When you have decided that a possible market setup is approaching, you switch to your smaller timeframe and basically try to fine tune your entry. The smaller timeframe allows you to view with greater detail the current state the market is in. If you are looking to go long, you may be able to use the smaller timeframe to time your entry once you have decided that any retracements or selling movement is gone and the market is getting ready to go up or long. The same can be performed when you have a trade open and you have decided it is time to get out of the market. The smaller timeframe may allow you to pinpoint with more accuracy the best time to close a trade.
Swing trading with multiple timeframes isn t necessary but when done properly it can give any trader better market odds. The most important thing when using multiple timeframes is that you pick two timeframes that are compatible. They must not be too far apart and at the same time not too close. Picking timeframes that are too close or far apart will not help you with your swing trading and will most likely only increase the number of losing trades.
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