USDCAD: Multiple Time Frame Analysis

Lets say you have two possible trades coming up on two different currency pairs.

On the first one, both, the long term chart and the short term chart are connected, pointing up.

On the second one however, there is a little bit of discrepancy between the different timeframes, long term charts are pointing up, while the short term chart are pointing down.

Which trade would you feel more comfortable taking?

That’s right… the first one.

It’s all about being in the right side

Why is that?

Because when everything is connected, the market is more likely to continue in the intended direction.

In the other hand, when something is not clear, or there is discrepancy between different timeframes, well… its not that likely to continue in the intended direction.

Is it still possible to continue in the intended direction?

Of course it is possible. Everything is possible, even the: 1m, 5m, 15m, 30m, 1H, 4H, 1D, 1W and 1M are in line the market could move against the intended direction… what is important here is the likelihood, not the outcome of your trade.

Wait a minute, are you saying the outcome is not important?

Thats what I said.

It doesn’t matter if you win or lose one particular trade. What is really important, is to always be in the right side of the probabilities.

For instance, if in the next 10 trades you only trade when both, the long term charts and the short term chart are connected you’ll have better chances than if you only monitor the short term charts.

Makes sense?

Ok, now to the multiple time frame analysis

USDCAD Weekly Chart

Lets start with the weekly analysis. Here is the weekly chart:

USDCAD Weekly Chart

What do you think about this chart?

It’s clear isn’t it? The USDCAD was rejected from the bottom of the range, and it is likely to continue its way up.

Until when? Until it reaches the next LT resistance level which is at 1.0415

Good… weekly chart: check.

USDCAD Daily Chart

And here is the daily chart:

USDCAD Daily Chart

This one is also in line, it’s been making higher highs, so it is more likely to continue it’s way up.

Daily chart: check.

USDCAD Hourly Chart

Here is the hourly chart:

USDCAD Hourly Chart

Great, it just broke through an important resistance level (upper green level around 1.0080).

And this one is also connected with the higher time frames.

Hourly chart: check.

Final Result

Weekly chart: up

Daily chart: up

Hourly chart: up

All of them are in line, so I’m going to look for long opportunities. Which is actually what I’m doing right now.

You can use what ever entry system you choose: indicators, candlesticks, Fibonacci, etc. But please, just look for long opportunities. For instance:

  • Could have been a resistance break out trade
  • Wait for a retracement to the support level at 1.0080
  • Wait for a moving average cross over
  • Etc, etc, etc.

What ever the entry you use, it gives you confidence to know that the USDCAD is more likely to continue its way up, therefore you’ll be safer by only looking for long opportunities.

Makes sense?

Your turn

Do you always perform a multiple time frame analysis before you trade?

What do you think its more important: the analysis previous to your entry or the entry system?

I’m curious about your answer to the second question.

Please leave your answers in the comments below.

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Raul Lopez

I've been trading the markets for more than 15 years. I believe the best way to trade is by adapting to the market conditions. You can learn it too, join our community .

  • Dan

    Good one Raul. Already have a very similar approach on my trading plan. Keep them coming they are sure very good tips. Now trading live so need all the good points I can get.

    • Raul Lopez

      Hey Dan! 

      Thanks for your comment. 

      Using multiple time frames will definitely help you get better results, dont focus on one or two currency pairs, but focus on the ones that have the clearest market condition every day. 

      How is your live trading so far?

      And let me know if I can be of any help. 

  • caswell Les

    Hey Raul. Great work with that analysis. I think is very important to conform with different timeframes, and like you said it gives more confidence. Although the market is not always gonna go your own direction. 

    • Raul Lopez

      That’s right! 

      Thanks for your input!

  • Paul Barron

    Hi Raul , thanks for your information on the chart of the usd/cad. Its very good to have comformation. I think both answers are right in your question. Entry  or entry system, both are important, but on the whole the system gives comformation of the trade. i will be looking at the system for the nzd/usd , the charts lead to good comformation on the 1hour 4hour and day . I can enter the trade with confidance. Yes im in the cad /usd trade as of last night been the 19/2/13, that entry was based on the system been the comformation. Thanks for your email Raul

    Thanks Paul  

      

    • Raul Lopez

      Hey Paul,

      Thanks for your comment. 

      I agree with you, both are important… but which one you think is more important?

      I’ll see what the NZDUS has to say…