Why do we need to Trade Using Multiple Timeframes?
To improve the efficiency of our trading strategy. We see the major Trend using a higher time frame than what we intend to use & a lower Time frame to enter a trade.
Say we want to trade using the Daily Charts. We take the Weekly charts to see the major trend. Suppose its an uptrend in a Weekly chart. We will tend to trade only long positions. We will use entries in the daily charts to enter long positions only. When sell signals are generated we will just exit our long positions. I.e. we dont short sell.
Suppose its a downtrend in a Weekly chart. We will tend to trade only short positions. We will use a entries in the daily charts to enter short positions only. When buy signals are generated we will just exit our short positions. I.e. we dont enter long positions.
Now that we are using two timeframes. Now coming to timing the entry of trades or adding additional positions. (Pyramiding) We can further use a Hourly chart to time our entries. Supposethe weekly & daily charts are in a uptrend. We will enter a long position or an additional long position when a hourly chart gives us a...