There are a lot of timeframes at your disposal, from the one day and four hour down to the one minute, and higher ones like the weekly and monthly for position traders.
Most traders keep positions within a few days to a few minutes. For that, the best timeframes are the one day, four hour and one hour, and maybe the 15 minute. This is where day traders and swing traders live.
Key takeaways
Day traders and swing traders work best on the one day, four hour, one hour and sometimes the 15 minute.
Do a top down analysis, beginning on the one day and dropping down to the lower timeframes.
A higher timeframe candle packs in far more data, and more data means more accuracy.
Use the daily and four hour to highlight the major areas in your analysis.
Drop to the hourly, four hour or 15 minute to set your exact entry and exit points.
Let price and candlesticks make the decision, then use indicators to confirm or reject, never for the signal itself.
Why top down analysis works
The chart is just data, a collection that forms a visual representation in candles, and a lot of candles show you patterns. There is a lot of underlying information behind it.
You go from the one day and drop it all the way down to lower timeframes. That is how I trade.
A one day candle combines a lot of one minute candles into one, so there is far more data and far more accuracy on it. The more data you have, the more accuracy you get.
“All the chart is, is data. The more data you have, the more accuracy, and that’s why top down analysis is great.”
High timeframes for zones, low timeframes for entries
Patterns are more accurate on higher timeframes, so use the daily and four hour to outline the major areas you highlight in your analysis.
It is difficult to use those for exact entry points. You cannot use a one day chart to enter a trade you plan to exit in a few hours.
If you are exiting in a few hours, use the hourly, four hour or 15 minute chart. Use the high timeframe for the zones and the low timeframe for the actual entry and exit prices.
Where indicators actually fit
Price action works very well because price tells you what is happening right now, which you can act on. Indicators move your focus away from price and show you what already happened.
I am not saying never use indicators, because they do help. But you cannot rely on them, and they can never be used to signal you to buy or sell.
Use them as confluence. Price and the candlesticks make the decision on whether to buy or sell, then the indicator confirms or rejects it. You can also use them to set your stop loss and take profit.
A simple example: the NZDUSD trade
The analysis I did today was simple. It was an uptrend on NZDUSD and I was just looking for positions to buy. Price was already going up, so my only job as a trader is to join it.
My job is to find the perfect area to join and the perfect area to exit, as best I can. The area I joined was one where price was already reacting, and my profit target was the next supply level.
The stop loss goes where the trade would be wrong. Here that was if price broke its upward structure, which had been going for two or three days. If it breaks that, the chance of it continuing down is much higher.
Once your timeframe and analysis are set, compare prop firms on Propvator and pick one to trade with.