Multiple Time Frame Price Action - The Greatest Trading Edge Available

Most traders agree that price action is the single most important factor in trading. Trading against price is account suicide and a sure fire way to lose money. If you trade based on the way you believe the market is going to behave and you're trading against price, the market will take your money away. Price action is the most critical fact that you can understand as a trader and the greatest trading "edge" is price action across multiple time frames (MTF).

The typical approach to multiple time frame price action is difficult. Many trading authors teach you to start with a chart, like the daily, and you look at the direction of the price on the daily. For this example we'll say it is in a long trend. Next, you study the hourly chart and look to see if your indicator gives you the signal to make a long trade. After the hourly chart confirms a long trade, you go to the 5 minute chart. You now use the 5 minute chart to refine your long entry point and decrease your stop loss risk. It's on the 5 minute chart that you can see a fine tuned movement of when to make the entry into the long.

So, the decision was initially set up because the daily was in an upward trend. Secondly the hourly gave you the signal to make the trade. The 5 minute was nothing more than a refinement of the long entry to reduce the amount of stop loss risk in your trade. Now, this is a good process, but if you are like most traders you'll find flipping back and forth between 3 different charts is a laborious process - and it's not even necessary.

With the creation of a single MTF price action indicator, you have the ability to see 8 different time frames all in one single indicator. This single MTF indicator shows the interaction of all 8 different time frame price actions. Now, instead of flipping charts, you can look at one single indicator on your trading chart and see the price action direction of 8 different time frames.

Why is this 8 different MTF price indicator such a powerful trading "edge"? First, it eliminates flipping across 3 charts to get a 3 time frame approach in your trading. It gives you access to 8 different time frame's price action right on a single trading chart. Secondly, and this is critical, you might be trading on a 1 minute or 5 minute chart to reduce your stop loss risk when making your entries, yet you are not trading the market noise on this short chart. You are making your trades based on price action of the 7 higher times.

You will no longer have to go look at the daily chart for price direction, and then look at an hourly chart for the entry signal, and then switch to a 5 minute chart to make your trading entries. When you have the MTF price showing on your trading charts, it's easy. All of this information in one single indicator and shown right on your trading charts is a very powerful way to improve your trading. The greatest trading "edge" of all is using multiple time frame price action.



Mark David Johnson is a full time TradeStation programmer, trader, and trading coach. He has personally developed over 60 strategies and over 200 indicators for the TradeStation platform. Mark's passion is to match his client's trading style with the best possible trading tools for them.

Mark started his trading career as a licensed commodity trading advisor in the late 1970s. He was offered a full time position in a medium sized futures broker in Chicago, but chose to take another career path while continuing to use the trading information for his own use. From 1990 through 2005 he did extensive amounts of trading using long term trading with the average trade position spanning from months to years long. In 2005, Mark could see the oncoming financial turmoil and liquidated 90% of his portfolio. Mark spent the next year and a half studying day trading full time, and since 2006 he has been full time trading and programming using the TradeStation platform.