How do you confirm chart patterns with multiple time frames? (2024)

In conitnuation to this explantaion, there are 2 broad approaches while using multi-timeframe analysis - Top Down approach and Bottom Up approach, each of them serving different purpose. Top down is moving from higher timeframe to lower timaframe. So, by analyzing daily charts and identifying key supports and resistances, one can apply them to intraday trading using 15 mins charts for entry and exit. Bottom up approach is better by looking in the following order as daily, weekly and then monthly charts. Generally helps in decision making of positional trade based on broader trend. Eg: A trader sees bullish engulfing in daily chart but on monthly chart is in bearish trend, then the trader can avoid such a trade or have smaller targets.

Time Frames analysis is the key.To get the bigger picture of price action, think of it as mother Earth.Start with the Satellite view(Monthly and weekly time frames), then come down to Aerial view(Daily candle and 2&3Day candles), then Overhead view(Hourly candles) and then narrow it down to Microscopic view(Short term candles, minutes).It will help to get very specific entry and exit.

The timeframe you choose depends on the type of technical analyst style. If a TA is a small timeframe trader like M15 for a short term trading opportunity otherwise known as scalping then it is advised to go to atleast two upper higher time frames (H1) for analysis.Analyze on higher time frame, and shift two time frames lower for entry opportunity, this is not a constant trade plan for most technical analyst, refinement has hit this narrative severally depends on how best it works for different technical analyst.

Checking various time frames is excellent for trading, but don't fool yourself with the importance of some "magical" ratios: 4:1, 6:1, 2.73:1, it doesn't matter. It just tricks you to over-optimize things that don't matter. Use simple rules. When using intraday bars like 30 minutes use daily as a higher frame (for daily bars, use weekly or monthly), or if you have 5 minutes or less, use something like 4 hours. It is better to use longer frames with shorter, something where much more information is covered. But you can have a strategy with any time frames 5-30 minutes, 1-10, or anything; just don't over-optimize.

Choosing multiple time frames to confirm chart patterns requires a strategic approach. Start with a primary time frame, often daily/weekly, to identify core pattern. Then choose shorter intervals, e.g. Hourly / 15-min charts to determine accurate entry/exit points. Additionally, incorporate a longer time frame, such as a monthly chart, to assess the overall trend. Maintain consistency across these time periods by aligning patterns & indicators. The hierarchy of time frames is crucial; Prioritize higher ones for trend confirmation. Tailor the selection to your trading style & focus on time frames that suit your strategy & risk tolerance. Remember that the goal is to strengthen your pattern analysis & increase confidence in trading decisions.

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At first, on higher time frame, I look for the direction of the trend. Then I watch two time frames lower to find a position in direction of my higher time frame. Price action is the key.

Bullish monthly chart, bullish weekly candle formation and then awaiting for a bullish daily candle is one of the best setups for entering a low risk - high reward trade. Viceversa works for bearish trades as well.

On a daily time frame, market is found to be at a supply zone with obvious rejection and candlestick print of bearish engulfing which signals a sell. And checking a H12 and H6 it is appears to be breaking out of the previous low (support) in bodily closure, and on H4 it is showing three black crows (3 candlesticks formation pattern). This is a sell signal that aligns across time frames, execute such with take profit an stop loss.

Confirming multi-time frame chart patterns requires careful analysis. Start with a higher time frame (e.g. daily or weekly) to identify the primary pattern and prevailing trend. Then move to shorter time frames (e.g. hourly or 15 minutes) to get more precise entry or exit signals. Maintain harmony across these time periods, with patterns, indicators and volume confirming each other. Look for key support and resistance levels as these should line up with the pattern. Recognize the hierarchy of time frames and give longer ones more weight. Tailor your approach to your trading style while keeping risk management in mind. This method increases pattern reliability and strengthens trading decisions.

Pit falls can occur when a technical analyst do not understand the time frame to analyze and take entry.If i see a three black crows candle pattern on daily time frame, i will not take the sell the following day because there is a threshold potential level of retracement which may make the second and third day a bullish move and ultimately sell massively thereafter, which means technical analyst can fall for this trap. Avoid such impulsive reaction in the market.Ensure you see clearly what the outlook is all about on higher time frame before coming to lower time frame to execute. A double bottoms (W) formation on M5 is a buy and on daily, it could be a supply zone on higher time frame, which means it is a mere retracement on LTF.

Most of the candlestick patterns on internet are single candle patterns. Often traders fall into a pitfall without understanding a key nuance that these patterns always requires a confirmation to enter into a safer trade.Eg: Hammer in downtrend. Traders assume, that in bearish trend, bulls defeated bears and ultimately managed to close near to the day's high and would be ready to take on bullish trades. It's a BIG MISTAKE. A trader needs to allow the price to at least sustain above the hammer's high and preferably close above it and then take a bullish trade.Conversely, an inverted hammer has similar rules to be followed in uptrend reversal.Similar confirmation required patterns are Harami, Engulfing, Long legged dojis etc.

Constantly remain active on chart and back test, spot live opportunity, experiment this on demo. Execute and wait for market reaction.Do not assume the formation of a candle is known before its completion. Just because of a market aggressive move to the upside doesn't mean the candle will end up as a bullish marubozu.., it can turn out to be a shooting star. Wait for the complete formation and confirmation of patterns before executing trades.

Simple process to improve trading skills:1. Hypothesize a trading strategy2. Backtest using historical data3. Consider the strategy if the results are at least 75% favourable else discard4. Finetune the hypothesis5. Forward test in using paper trade6. Trade on small quanities7. Increase the capital deployment gradually8. Record the trades over a period and retrospect

More analysis can lead to analysis paralysis!Successful trading does not require numerous indicators or factors or news, it just needs a specific well tested combination of just a few factors like 3 or 4.After years of trading and gaining experience, my favourite combination is Option Chain, NSE Participant wise Open Interest Data, Simple Candlestick charts and moving averages.

Both retail and institutional traders frequently rely on chart patterns, with many aiming to initiate trades even before the pattern fully emerges. Consider using other indicators as confirmation.