The Benefits of Multi-Timeframe Analysis in Financial Markets

When uncertainty grows across asset classes, analyzing markets from different angles can help you remove some of the noise and focus solely on the details that matter. There are many ways to do that, but multi-timeframe analysis remains one of the most efficient methods to conduct technical analysis.

Following the latest United States job report, correlations between assets have weakened, given markets perceive numbers published in different manners. The US dollar is weakening, even though Treasury yields climbed above 2021 highs, while stock markets are being influenced by stronger selling in tech names.

Ability to view the bigger picture

This can be relevant for the short term, but you should be able to view the bigger picture as well. When studying larger time frames such as daily, weekly, or monthly ones, you can see trends extending over years and any corrective move that looks dramatic on a small time frame, is merely a blip in the long run.

Short-term trading is suited when volatility is high, but more often than not, it keeps traders stuck looking at markets day-by-day, which keeps their vision narrow. Even if you are scalping or day trading, looking at larger time frames can reveal details that don’t show up on the 5 minute or hourly charts.

Accurate trade placement

On the other side of the spectrum, smaller time frames are useful when you are striving for higher accuracy in terms of trade placement. Traders can use the TradingView platform, via supported brokers like Easy Markets, where they can find numerous technical analysis tools, as well as tens of different timeframes, depending on what suits their needs best.

You don’t just have to be correct, you must have good timing as well. Maybe at some point in the future, the market will perform as expected. If timing is not part of your regime, you might miss the point when your projections reach high accuracy.

Combining long-term vs. short-term analysis

Having the flexibility to use both smaller and larger time frames enables you to blend the information found when analyzing an asset from two different perspectives. Professional traders start by determining the market context, which implies using larger time frames. Once they decide on that, they can switch to small time frames and see how the price action is unfolding, especially around areas of support or resistance.

A good example is tech stocks such as Apple, Amazon, or Google. Although these assets are under pressure, mainly due to rising interest rates, the long-term picture has not been altered when looking at the higher charts. On top of that, favorable technical conditions are backed by fundamentals, given these are some of the most profitable companies, some of which have also announced record buybacks for 2022.

Noticing subtle changes in the price action

Last, but not least, by looking at different time frames you are able to see changes in the price action context from an early stage. That way you can adjust market exposure accordingly, without having to sacrifice returns. At the same time, the ability to get in or out at an optimal price improves. Technical analysis does not have to do with analyzing candles or bars individually. You need to put everything into a greater context.

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