Here at the BabyPips.com School of Pipsology, we like using three time frames.
We feel that this gives us the most flexibility, as we can decipher the long, medium and short-term trends.
Determine Main Trend
The largest time frame we consider our main trend – this shows us the big picture of the pair we wanna trade.For example, on the daily chart, EUR/USD is trading above the 200 SMA which tells you that the main trend is UP.
Determine Current Market Bias
The next time frame down is what we normally look at, and it signals to us the medium-term buy or selling bias.Below is a 4-hour chart and it’s clear that EUR/USD continues to have a bullish bias.
Determine Entry and Exit
The smallest time frame shows the short term trend and helps us find really good entry and exit points.
Multiple Time Frame Combinations
You can use any time frame you like as long as there is enough time difference between them to see a difference in their movement.
You might use:
- 1-minute, 5-minute, and 30-minute
- 5-minute, 30-minute, and 4-hour
- 15-minute, 1-hour, and 4-hour
- 1-hour, 4-hour, and daily
- 4-hour, daily, and weekly and so on.
If the time frames are too close, you won’t be able to tell the difference, which would be pretty useless.