Mastering Multiple Time Frames For Emini Futures
September 9, 2012 at 3:56 PM (QQQ)(DIA)(SPY)(GLD)(FB)
All markets can and should be viewed on multiple time frames. Becoming overly focused on just one time frame will result in tunnel vision. Always be aware of what is happening on higher time frames or you may very well stumble into the - Tick Vortex.
Mastering Multiple Time Frames For Emini Futures Trading
Chart analysis works best when several time frames are combined to identify important swing points and breakouts. Although we are using the term "Time" as a point of reference, you will also find that Tick and Volume charts will help you develop a multi-dimensional view of what is transpiring in the market. Once a short-term trader identifies the larger picture of support and resistance, trading opportunities then come from projecting how the next few ticks, minutes or hours of market action will unfold.
As you become skilled at understanding the bigger picture you will be able to locate good setups by reading reversal and breakout patterns inside short periods of cyclical market movement. When we first look at an hourly, daily or weekly chart, we might think, "There is nothing here to help me with my smaller time frame intraday trading“. The indications may not be very clear at first so we need to literally step inside the larger candle and see exactly how it was built. Looking at the same candle or price bar on an intraday chart will give you the missing information you need.
Think of your house. If you fly over it in an airplane, it will appear as nothing more than a speck depending on your altitude. If you stand on the sidewalk out front it looks quite different. Walk up to the front door, press your nose against the door and now tell me what you see. Step inside the door and here you have yet another view. Open a photo album and look at pictures of the raw land before construction began. Unroll the original blueprint on your kitchen table and it doesn't even look like a house does it?
Unless you're a builder or an engineer it looks like mass confusion assembled at right angles. Here's the key, each view really is the place you call "home". Each view is completely accurate and each view peacefully co-exists with all the others in the same moment. Remember, from overhead to street level, from the back porch to the bathtub, even the view you see when you peek out from under your bed, it's all the same. The only difference is the perspective.
The story of the blind men and an elephant originated in India from where it has widely diffused. It has been used to illustrate a range of truths and fallacies. At various times it has provided insight into the relativism, opaqueness or inexpressible nature of truth, the behaviour of experts in fields where there is a deficit or inaccessibility of information, the need for communication, and respect for different perspectives.
In various versions of the tale, a group of blind men (or men in the dark) touch an elephant to learn what it is like. Each one feels a different part, but only one part, such as the side or the tusk. They then compare notes and learn that they are in complete disagreement.
The stories differ primarily in how the elephant's body parts are described, how violent the conflict becomes and how (or if) the conflict among the men and their perspectives is resolved.
In some versions, they stop talking, start listening and collaborate to "see" the full elephant. When a sighted man walks by and sees the entire elephant all at once, they also learn they are blind. While one's subjective experience is true, it may not be the totality of truth. If the sighted man was deaf, he would not hear the elephant bellow. Denying something you cannot perceive ends up becoming an argument for your limitations.
Back To The Future
Looking at the intraday price action from yesterday, will potentially give you a much clearer view of whether today's trading will be bullish or bearish. In the same way, a weekly chart may provide you with insights not immediately apparent in the daily chart. Intraday traders mostly stick to hourly or shorter time frames, rarely looking at the larger picture, while position traders would consider hourly charts of little value to them. Both attitudes are counter-productive and are much like the men arguing over the elephant.
Intraday charts are useful to position traders, as they often highlight indications of strength or weakness, marking the day as a bullish or bearish day, which then gives a very strong indication of how to trade the following day. In turn, intraday traders can benefit significantly from the wider picture offered by daily or weekly charts as they often have their nose to close to the door and invariably stumble into the dreaded tick vortex.
We invite you to join us in our Live Emini Trading Room and we will show you real time examples of how we find balance in the market through the use of multiple time frames.
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