Multi Time Frame Analysis (MTFA) Approaches

 

Multi Time Frame Analysis (MTFA) Approaches

Two common MTFA setups for stock selection:

  1. Higher Time Frame Making New Highs, Lower Time Frame at Support or Turning Bullish

    • The higher timeframe (e.g., weekly or daily) is in a strong uptrend, making new highs.

    • The lower timeframe (e.g., hourly or 15-min) is at support or showing bullish reversal signals.

  2. Higher Time Frame at Support After Correction, Lower Time Frame Giving Breakouts

    • The higher timeframe is at a significant support or after a correction, not making new highs yet.

    • The lower timeframe is showing a breakout or strong bullish momentum.

Other MTFA strategies include:

  • Trend Following: Aligning trades in the direction of the higher timeframe trend, using lower timeframes for precise entries.

  • Confluence Strategy: Looking for agreement of signals (trend, support/resistance, patterns) across multiple timeframes for higher probability trades.

  • Price Pattern Strategy: Identifying patterns (like double bottoms or triangles) on higher timeframes, then using lower timeframes for entry timing.

  • Multi-Layered Breakout: Watching for breakouts on higher timeframes and confirming them on lower timeframes before entering.

  • Macro-Micro Synergy: Combining macro (higher timeframe or economic) trends with micro (lower timeframe) technical signals.

When to Use Each Approach

The choice between these MTFA setups depends on the broader market context, especially the state of major indices:

1. When Major Indices Are Reversing from Lows (Short/Medium-Term Bottoming)

  • Best Approach: Use the higher timeframe at support after correction, lower timeframe giving breakouts setup.

  • Reasoning: At market bottoms or after corrections, the higher timeframe is at or near support. The lower timeframe breakout signals the start of a new up-move, offering early entry as the trend reverses.

  • Application: This approach helps you catch trend reversals early, before the higher timeframe resumes making new highs.

2. When Major Indices Are Making New Highs (Strong Uptrend)

  • Best Approach: Use the higher timeframe making new highs, lower timeframe at support or turning bullish setup.

  • Reasoning: In a strong uptrend, buying on dips (when the lower timeframe is at support or shows a bullish reversal) aligns you with the prevailing trend and reduces risk of buying at short-term tops.

  • Application: This lets you participate in the trend continuation with better timing and lower risk, rather than chasing extended moves.

Summary Table

Market ContextHigher Timeframe SignalLower Timeframe SignalWhen to Use
Indices reversing from lows (after correction)At support, not yet making new highsBreakout or strong bullish moveEarly in new uptrend or reversal


Indices making new highs (strong uptrend)


Making new highs, trend continuation


At support or turning bullish


Buying dips in ongoing uptrend

Key MTFA Principles
  • Always start with the higher timeframe to determine the main trend or key support/resistance.

  • Use the lower timeframe for precise entry and exit timing, aligning with the higher timeframe context.

  • Avoid trading against the higher timeframe trend, as this increases risk and reduces probability of success.

  • Confirm signals across timeframes for higher conviction and reduced false signals.

Conclusion

  • Use the "higher timeframe at support, lower timeframe breakout" setup when markets are bottoming or reversing after a correction.

  • Use the "higher timeframe making new highs, lower timeframe at support" setup when markets are trending strongly and making new highs.

  • For best results, always align your trades with the overall market cycle and confirm signals across multiple timeframes.


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