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Level Up Your Technical Analysis with Multiple Time Frames

Imagine trying to drive across the United States using individual state maps. You might find the best route through each state, but without seeing how everything connects, you probably wouldn’t take the optimal route to your destination.

Traders rely on trend lines, chart patterns, and technical indicators to make decisions, but individual timeframes don’t provide the complete picture. For example, there may be a long-term support trend line that doesn’t appear significant on a short-term chart. The failure to consider more than one timeframe is one of the most common mistakes made by novice traders—there isn’t enough context in a single chart to make decisions.

Let’s take a look at how to use multiple timeframes to improve your trading, and see an example of multiple timeframe analysis in action.

What Timeframes Work Best?

The concept of trading with multiple timeframes is a lot like navigating with multiple maps. When you start a road trip, you should look at a large map to get a rough idea of where you’re headed. You can then look at individual state maps to navigate detours or find places to stop. Similarly, traders should start by looking at long-term charts to find the primary trend before diving into short-term charts to plan out the specifics of a trade.

The definition of long-term and short-term varies based on the type of trade:

  • Day traders often use 60-minute charts to identify the primary trend and then switch to 5-minute or tick charts to make trades.
  • Swing traders often use daily charts to identify the primary trend and then switch to 60-minute charts to make trades.
  • Position traders often use weekly charts to identify the primary trend and then switch to daily charts to make trades.

When analyzing a trade across multiple timeframes, many traders open several charts on the same screen to get a complete picture. TrendSpider makes the process a bit easier by overlaying short- and long-term trends on the same chart. You can automatically apply trend lines across multiple timeframes to instantly understand where key support and resistance levels are, regardless of the type of chart that you’re look at in the moment.

Applying Patterns & Indicators

Many traders use multiple timeframes when looking for key areas of support and resistance, but the same concepts can be applied to chart patterns and indicators.

Day traders can apply long-term technical indicators, such as Fibonacci levels, to see where long-term levels are on short-term 5-minute or tick charts. If long-term Fibonacci support levels lie at the same price point as shorter-term trend lines, traders can be more confident in the support level when placing day trades. The same is true for other overlay or lower indicators, such as MACD or RSI, that provide insight into trend strength and direction.

Multiple Timeframe Analysis Example Chart.
Multiple Timeframe Analysis. Source: TrendSpider.

TrendSpider makes it easy to visualize long-term indicators on short-term charts. In the above example, the platform shows trend lines from the 30-minute (solid) and daily chart (dashed), as well as the relative strength index (RSI) readings from both timeframes (solid vs. dashed).

The same concepts apply to chart patterns. If a swing trader sees a double top pattern on a daily chart, they might have a bearish bias when looking at an hourly chart—even if the hourly chart appears to show a bullish uptrend.

Using Multiple Timeframes in Action

Let’s take a look at an example of multiple timeframe analysis in the SPDR S&P 500 ETF (SPY) that compares the daily and weekly charts.

$SPY MTFA Example Chart.
S&P 500 MTFA Example. Source: TrendSpider.

In the above chart, multiple timeframe analysis would have predicted the rebound at around $235.00 on December 21, where there were short- and long-term support trendlines and Bollinger Band® support. The significant resistance at the $270.00 level from short- and long-term trend lines, as well as short- and long-term Bollinger Bands®, also suggests that the index could move lower from these levels following its high on January 18.

The Bottom Line

Multiple timeframe analysis is a great way to level up your trading by ensuring that you don’t miss the forest when you’re in the trees. While most traders consider trend lines from multiple timeframes, the same concepts apply to technical indicators and chart patterns. TrendSpider makes it easy to visualize all of these timeframes in a single chart rather than analyzing multiple charts before placing trades.