Multiple Timeframes
By Cliff Clark
A common error I see a lot of you making is not using your timeframes correctly. You are switching timeframes for the wrong reasons. This happens to many of you because you lack a proper trading plan or the discipline to follow it. You enter a trade from one timeframe and almost immediately begin making trading decisions based on another timeframe.
You should have one and only one timeframe from which you will take your trades. As day traders that is likely the 5 or 15 minute chart. These are the timeframes from which we take and manage our trades. Did you get the “manage” part? You can look to higher timeframes (perhaps that daily) to find support or resistance but you should never drop to a lower timeframe to manage your trades.
I see a lot of traders entering trades from one timeframe and then dropping down a level to manage their trades. This is all wrong, you will find yourself being shaken out of your trades a very high percentage of the time. The correct way is to manage from the timeframe that you enter. The only time it's OK to drop down a level to manage a trade is if you have something documented in your trading plan to allow you to do this. For me it's if I have to leave early. In that case I am allowed to drop down to the 2 minute chart and trail stop out.
If you want to improve your trading try trading this way. You will likely find yourself getting stopped out far less often. For all you new traders out there. Take the one minute chart off your platform. It can do you no good!
2 trades for me today with +1.5R total
1st Trade QCOM +2R
148.39/149.97 exit 143.25
12% gap down under pivot support and 50ma after a strong daily double top rejection,. I took it on a congestion breakdown with a fairly wide stop, leaving my 2R target 50c over its ATR, slow but consistent move down with great RW, hit my target on the penny before it bounced.
2nd Trade AQB -0.5R
9.40/9.70 exit 9.56
I rarely trade stocks under $10 and even more rarely short them. I liked this daily chart as it broke its uptrend channel and stayed under a strong 9.50 support line enough room to its daily 50ma. I entered after a pullback with a fairly wide stop but only 1/3 of its ATR used at the time. It failed to break down with the strong market open and stayed in a narrow range.
I actually broke my plan with this trade as I lowered my stop to a pivot where price made a big bounce earlier at 11am with a large seller sitting there. My thought was that if it breaks that level again then it will likely...
1 trade for (-1R)
I took a BD on QCOM. I was worried about the target being close to the daily range, so I took a tighter stop on the 2 min chart. I am looking through PTS right now, most of the examples have 2 options for where to put your stop. It looks to me like one of the stops would be at the bottom of the main consolidation area, and the other at the bottom of where there has been a shakeout or turnaround bar (if there has been one). Due to the daily range I took the tighter one on this. In hindsight it seems obvious to take the wider stop, but in the moment it looked ok.
I was then looking at the 15 min 3BP on QCOM, but the reason I used a tighter stop in the first place was because of the range. The 15 min 3BP would have needed to have gone even further than the wider stop on the 2 min BD, so I didn't take it.
