Crypto trading is a volatile market. If you're going to trade Bitcoin, Ethereum, or any other cryptocurrency, you must understand the tools and time frames available to use when deciding when to buy and sell.
In this blog post, we'll go over what you need to know before making your next move in the crypto markets so that you can make informed decisions for your future trades.
What is Multiple Time Frame Analysis?
Multiple time frame analysis is a way of looking at a crypto chart that takes into account multiple frames, usually ten or more. This helps us get a broad idea of what the market is doing over a stretch of time and can allow you to make better trading decisions going forward.
When using multiple time frame analysis on your charts, it's important to keep the following things in mind:
- There is no magic number of time frames you should be looking at - we use as many as we need to get an idea of the market's behavior over a given period.
- Time frames do not correspond to specific time intervals - they are relative. The 1-hour frame is always 10x faster than the one-minute frame, and that holds true for any combination you like.
- The direction and duration of patterns, moves, and trends are more important than specific levels or set-ups.
- You do not have to use ten-time frames - you can use as many or as few as you want in your analysis since the fundamental principles remain the same.
Identify Trend Changes by Viewing Multiple Time Frames
It's important to note that with more time frames comes more volatility, therefore the need to spot changes sooner. If you're watching a one-hour chart and prices move abruptly, you will have missed out on a significant portion of your chance to get in or out of the market by only checking once an hour.
With multiple time frame analysis, you can better understand the market and where it's headed much sooner than if you were just using one chart.
Filter Out Lower Probability Trades
When watching multiple time frames, you will get more opportunities to take trades. However, it's also important to understand that not all these trades will be in your favor! By using multiple time frame analysis, you can filter out some of the lower probability trades and focus on ones that have a higher chance of success.
Identify Entry Points and Exit Trades Sooner
To be a successful trader, you need to have good entry points and exit trades - if you can't get in at the right time or out when your coin is starting to dip, how will you make any money?
Using multiple time frame analysis makes it easier to spot these entry points since you're able to see where the larger players are entering the market and where they're exiting. This leads to more profitable trades since you can get in at better prices with less risk.
What Time Frames Should You Use?
In our experience, we use many different time frames when trading cryptocurrencies, including 1-minute, 5-
minute, 10-minute, 15-minute, 30-minute, 1 hour, 4 hours, and daily.
The number of timeframes you use is entirely up to you - for example, if you are using one conversation per day but want to increase your trading performance, you can add another longer-term chart like the one-hour or daily chart.
The key takeaway here is that once you start using multiple time frame analysis, we recommend you view as many as possible - this will help give you a better idea of the market and improve your trading performance over time!