Aligning higher time frames for trading

One of the main concepts behind the beginner strategy is multiple time frame analysis – using a higher time frame to determine the overall market direction and executing trades on a lower time frame.

By determining the overall direction on a higher time frame and trading in that direction, you make sure that you trade in the direction of the overall trend – this increases your chances of profitable trades. In the beginner strategy, you use the 30 minute chart as the higher time frame, however, you can go a step further and also use the 4 hour time frame to assess an even larger picture.

The following shows how to determine if the 4 hour chart and the 30 minute chart show the same market direction.

You look for the last break of an up fractal and the last break of a down fractal. If the last fractal break was of an up fractal, then the direction is up on the 4 hour chart. Similarly, if the last break was of a down fractal, then the market direction is down on the 4 hour chart.

You can see this demonstrated on the chart below. The last break of a fractal was an up fractal and so the direction on the four hour chart is up.