How To Improve Day Trading Entries (Timeframe Alignment)
Summary
TLDRThis video script delves into the concept of multiple time frame analysis in trading, which significantly enhances the probability of successful trades. The speaker emphasizes the importance of aligning multiple time frames to identify trends and momentum, akin to betting on the winning team in a basketball game's final moments. They discuss using moving averages to quickly gauge trends and highlight the significance of waiting for time frame alignment before entering trades. The script provides practical examples of how to apply this strategy for both intraday and swing trades, illustrating how it can help traders avoid unnecessary risks and manage their trades more effectively.
Takeaways
- π Multiple Time Frame Analysis is a trading technique that involves analyzing charts on more than one time frame to increase the probability of successful trades.
- π Before entering a trade, the speaker checks both higher and lower time frames to ensure there's no conflict that could affect the trade negatively.
- π The concept of 'time frame alignment' is crucial; the speaker looks for multiple time frames to all indicate the same directional bias for a stronger trade setup.
- πββοΈ A common saying in trading is 'it's easier to swim with the current than against it,' which translates to trading with the trend rather than against it.
- π The speaker uses specific time frames for intraday trading (1, 2, 5, 15-minute, and hourly) and larger time frames (daily, weekly, monthly) for analyzing stocks.
- π The speaker relies on moving averages, particularly the 20-period and 200-period moving averages, to identify trends and time entries.
- β° Patience is key; the speaker waits for a secondary entry when time frames align, which can provide a better momentum and increase the chances of a successful trade.
- π The speaker avoids trades where there's a conflict between time frames, as it can lead to a 'tug of war' that may result in unnecessary losses.
- β« Time frame alignment aids in trade management by providing early signals if the trade starts to fail, allowing for better decision-making on when to exit or adjust positions.
- π« Despite time frame alignment, there are no guarantees in trading, and the speaker acknowledges that some trades may not work out even with a well-aligned setup.
Q & A
What is the main concept discussed in the video script?
-The main concept discussed is 'multiple time frame analysis' in trading, which involves analyzing charts on more than one time frame to increase the probability of successful trades.
Why is multiple time frame analysis important in trading?
-Multiple time frame analysis is important because it helps align trades with the momentum of the market, making it easier to 'swim with the current' rather than against it, thus increasing the likelihood of a profitable trade.
What does the speaker mean by 'time frame alignment'?
-The speaker refers to 'time frame alignment' as the situation where multiple time frames all indicate the same directional bias, which provides more confirmation and momentum for a trade in that direction.
Which time frames does the speaker typically use for intraday trading?
-The speaker uses the 1-minute, 2-minute, 5-minute, 15-minute, and hourly time frames for intraday trading.
How does the speaker use moving averages in their trading strategy?
-The speaker uses the 20-period moving average (blue line) to quickly identify the trend direction and the 200-period moving average (orange line) for broader trend analysis. An uptrend is indicated when the 20-period moving average is moving upwards with candles trading above it, and a downtrend is indicated when the 20-period moving average is moving downwards with candles trading below it.
What is the significance of the 20-period moving average in the speaker's strategy?
-The 20-period moving average is significant because it helps the speaker to quickly determine the current trend direction, which in turn influences the type of trading setups they look for and the timing of their entries.
Why does the speaker wait for a secondary entry in some cases?
-The speaker waits for a secondary entry when there is a conflict between time frames, allowing the market to resolve the conflict and achieve time frame alignment before entering a trade, which can provide a better risk-reward setup.
How does time frame alignment help with trade management?
-Time frame alignment helps with trade management by providing early signals of a trade's potential failure, allowing the trader to adjust their stop losses and manage their positions more effectively.
What does the speaker mean when they say 'let Mommy and Daddy fight it out'?
-This is a metaphorical expression used by the speaker to describe waiting for conflicting time frames to resolve their differences before making a trade, ensuring that the trader enters a trade only when there is agreement among the time frames in the desired direction.
Why might the speaker pass on a trade even if there is a buy setup on a certain time frame?
-The speaker might pass on a trade if there is a buy setup on a certain time frame but the lower time frame is in a conflicting downtrend, as this could indicate a tug of war between the time frames, leading to a higher risk of loss.
Outlines
π Multiple Time Frame Analysis in Trading
The speaker discusses the concept of multiple time frame analysis, which significantly improved their trading by increasing the probability of successful trades. They liken it to betting on the winning team in a basketball game's fourth quarter, emphasizing the importance of momentum. The speaker explains that this analysis involves looking at charts on more than one time frame to identify potential conflicts that could affect a trade. They focus on the idea of time frame alignment, where multiple charts should indicate the same direction for a stronger momentum. The speaker uses moving averages as indicators, with the 20-period moving average (blue line) helping to identify the trend direction. They provide examples of how waiting for time frame alignment can lead to better trading entries and how it can assist with trade management by providing early signals of a trade's potential failure.
π Waiting for Time Frame Alignment
In this paragraph, the speaker further elaborates on the strategy of waiting for time frame alignment before entering a trade. They explain that even if a buy setup looks promising on a 15-minute chart, they will pass on the trade if the 5-minute chart indicates a conflicting downtrend. The speaker prefers to wait for a secondary entry that aligns with the direction they want to trade, which provides better momentum and reduces the risk of getting caught in a tug of war between conflicting time frames. They also mention that this approach helps with trade management, allowing for more informed decisions on whether to exit a trade early if the time frames start to show a downtrend. The speaker concludes by emphasizing the simplicity and effectiveness of this strategy, which has become an integral part of their trading approach.
Mindmap
Keywords
π‘Multiple Time Frame Analysis
π‘Probability of Trades
π‘Momentum
π‘Support and Resistance
π‘Time Frame Alignment
π‘Moving Averages
π‘Intraday Time Frames
π‘Swing Trades
π‘Trade Management
π‘Secondary Entry
Highlights
Multiple time frame analysis is key to increasing the probability of successful trades.
It's like betting on the winning team in the fourth quarter of a basketball game, with momentum on your side.
Multiple time frame analysis involves looking at and analyzing charts on more than one time frame.
Checking lower and higher time frames can reveal conflicts that may affect trade performance.
Time frame alignment is crucial; it means multiple charts should all indicate the same direction for a strong trade setup.
The saying 'it's easier to swim with the current than against it' applies to trading with the trend.
The speaker uses one, two, five, fifteen-minute, and hourly charts for intraday trading, and daily, weekly, and monthly for larger time frames.
For day trades, alignment of one, two, five, and fifteen-minute charts is preferred, and for swing trades, hourly, daily, weekly, and monthly.
Only moving averages are used as indicators, with the 20-period moving average indicating the trend direction.
A buy setup on a 15-minute chart is checked against the five-minute chart for time frame alignment.
Waiting for a secondary entry with time frame alignment can provide a better momentum for the trade.
Time frame alignment helps in trade management, allowing for early signals of a failing trade and the opportunity to cut losses.
Even with time frame alignment, there are no guarantees in trading, as markets can be unpredictable.
The speaker emphasizes the importance of always checking multiple time frames before trading.
The concept of time frame alignment is simple yet powerful, and it has become an integral part of the speaker's trading strategy.
The speaker invites viewers to like, comment, and subscribe for more content, highlighting the interactive nature of the trading community.
Transcripts
so recently I had a great discussion
about how I use multiple time frame
analysis in my trading and I thought I'd
share some of it here too because this
concept is what took my trading to that
next level and it immediately helped
increase the probability of my trades
following through it almost feels like I
have the power to bet on the winning
team in like a fourth quarter of a
basketball game because I'm just getting
much more momentum on my side to where
price is heading now that doesn't
necessarily mean it's a guaranteed win
because we all saw Tracy McGrady hit 13
points in the last 33 seconds to win the
game so anything can happen especially
with trading but increasing the
probability is what I'm looking for so
what is multiple time frame analysis it
is looking at and analyzing charts on
more than one time frame so let's say I
come across a stock I'm looking to trade
and it has a pretty buy set of pattern
off of whatever time frame I'm looking
at but before I do anything else I ask
myself what is the lower and higher time
frames also doing because even though
it's a buy setup and looking higher on
this time frame it may also be setting
up a cell setup and looking lower on
another time frame so there may be some
conflict there that may cause my trade
to struggle if I were to get into it now
there's many aspects to analyzing
multiple time frames like finding
support and resistance trade management
determining your targets but what I want
to focus on in this video is looking for
time frame alignment meaning if I want
to play something long I want not just
one chart but multiple charts to all
look higher I want to see them all
aligned with the direction I want to
play because when I get multiple time
frame alignment there's much more
momentum in that direction there's more
confirmation there's a common saying
it's easier to swim with the current
than against it which means it's easier
to trade with the trend than against it
so when I have not just one but multiple
currents all pushing into One Direction
it just makes it that much stronger when
you think about it it seems like such a
simple and effective concept but it's
something that is often overlooked so
then the next question is what time
frames do I look at if you watched any
of my live training videos you know I
use the one two five fifteen minute and
the hourly for my intraday time frames
but I also have the daily weekly monthly
for my larger time frames so anytime I
pull up a stock those are the only eight
time frames I'm looking at and analyzing
before I take any trades now I'm not
looking for alignment on all eight of
them but for my day trades I like to see
the one two five fifteen minute aligned
and for my swing trades the hourly daily
weekly and monthly aligned so let's get
into some real examples so first notice
on my charts that the only indicators I
use is the moving averages the blue line
is the 20 period moving average and the
orange line is the 200 I'll definitely
make an in-depth video on how I use them
but one of the ways I use the 20ma is to
quickly identify the trend if the blue
line is moving upwards with candles
trading above it it's in an uptrend
which is when I focus on buying
opportunities and if the blue line is
moving downwards with candles trading
under it it's on a downtrend where I
focus on shorting opportunities it helps
to know what setups I look for which
I'll link on the screen right now if you
want to check it out so here I have a
buy setup of the 15 minute I see a nice
pop from this morning with a clean
pullback into the rising 20ma which I
also use to time my entries but before I
jump into this trade I want to check on
my other time frames to make sure that
they're aligned with the direction I
want to play which in this case is for
the price to move higher again I use the
one two five fifteen minute for my
intraday also have the hourly on there
but let's focus on these for now and
have a look so usually I just need to
look at the one time frame lower because
if that is aligned it will mean even the
smaller time frames under that should be
aligned as well or if it's not then
there's no trade for me anyway yet at
least so for that reason and also to
make it easier to follow along let's
focus on the time frame I'm trading and
the one time frame underneath that in
this case we can see that the one time
frame lower the five minute is actually
in a downtrend right the 20ma pointing
down with candles trading under it so we
do not have time frame alignment and no
matter how clean this 15 minute buy
setup is there's going to be a bit of a
fight coming from the five minute
downtrend and that's a problem for me
because if I get triggered in on this
buy setup and the five minute downtrend
decides to follow through and continue
then I'm going to take a loss now that
doesn't mean I should completely pass on
this trade it just means it's not ready
yet so what I like to wait for is to see
if that five minute downtrend fails so I
let that first meta buy setup go and now
I see that the five minute is ending the
downtrend and transitioning into an
uptrend the 20ma is starting to curl up
with the candles trading and holding
above it and I can see that the momentum
is Shifting to the upside so by just
waiting for that secondary entry tree
waiting for my time frames to get
aligned gives me an entry with better
momentum in the direction I'm trading
and off it goes here's another 15 minute
buy setup but before I do anything let's
take a look at the one time frame blower
on the five minute and it looks like we
have the same situation here I see that
we have a declining 20 with candles
trading under it so again I'm gonna pass
on this initial buy setup because if it
triggers I don't want to sit through
this tug of war that's going to happen
between these two time frames and make
me sweat through this trade before it
decides which direction it wants to go
I'd rather just wait for more
confirmation skip through this chop and
see if that five minute downtrend can
fix itself first and get in on this
secondary entry when I have time frame
alignment on my side and look at the
move it makes once we have time frame
alignment now sometimes they don't give
a secondary entry and just work right
away and go without me which I'm okay
with because a lot of times they don't
work either so if we look here on this
15 minute cell setup that's triggering
while the five minute is on an uptrend
this time the five minute is the
dominant one and continues to move
higher which would have stopped me out
so this keeps me out of trouble and
avoids unnecessary chop pests it also
helps with my management if I decide to
do this 15 minute buy setup while the 5
minute is in Conflict I can't do
anything but leave my stop at the pivot
and hope that the five minute fails the
downtrend whereas if I wait for another
entry where my time frame is aligned I
have a better idea if the trade doesn't
look good anymore I can get early
signals of the trade failing and can
raise my stop and cut my losses by
noticing if the other time frames start
to go on the downtrend again keep in
mind just because we have time frame
alignment doesn't guarantee it'll work
right let's look at one more here's a 15
minute cell setup with the 5 minute
being a bit too strong and turning into
an uptrend so I'm going to wait and let
it go and now I see a buy setup has
formed and triggered on the smaller time
frame so actually now I don't even
really need to wait for this to turn
into a downtrend I can actually put my
order in under this tail because if it
triggers it means that the five minute
buy setup failed and will turn into a
downtrend giving me the time frame
alignment in this case it took a bit of
time before triggering also given a one
two three but look at how trades tend to
flow in its direction a lot better when
I have time frame alignment so hope this
is making sense it's such a simple and
Powerful tool to have in my trading it's
engraved in me now to always check
multiple time frames if I see conflict I
let Mommy and Daddy fight it out until
they are in agreement in harmony with
the direction I want to trade and go
from there alright if you found this to
be helpful all I ask is that you take a
second of your time to like the video
leave a comment feel free to ask
questions subscribe if you want more
content like this one as always I
appreciate you for being here and I hope
to see you on the next one
[Music]
[Applause]
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