Hack your Crypto-Trading with Multiple Time Frame Analysis

Improve your trading strategy by simply taking a bigger picture into account.

Just like traditional assets, cryptocurrency can be analyzed across multiple time frames. These can be as little as one minute or as long as one month. Professional crypto-traders use multiple time frame analysis to get a big picture view of market trends.

What looks like a positive trend over a 1 hour time-frame could actually be negative when viewed over 4 hours or daily time-frame. The big picture view provided by multi-time frame provides traders with knowledge of the overall market direction and helps them avoid any unpleasant surprises.

Trend Divergence in Kattana’s Market ScannerHow to get started with multiple time frame analysis

The time frames you choose will depend on the type of crypto-trader you are. Long-term traders won’t get much value from hourly or smaller time frames, whereas day-traders shouldn’t primarily be looking at weekly or monthly frames.

First, you’ll need to use some sort of crypto-trading terminal or platform. In Kattana, for example, you would go to Market Scanner workspace where you can choose the amount of needed charts and their respective time-frames. In the left-side window you have the option to navigate through connected exchanges and cryptoassets you want to view, as well as add the most interesting ones to the watchlist. Just above the charts, you have controls to help you setup the necessary amount of chart windows with different time frames.

Four Charts Layout in Kattana’s Market Scanner

In most cases, three or four time frames is the maximum amount you’ll ever need. Fewer than that and you could miss important data, but more is likely to be an overkill.

To determine the which time frames to use, you first need to quantify your intermediate period. The intermediate period is how long your average trade is held. Once this is determined, choose a shorter and a longer period based on the rule of 4. That is, the shorter period should be at least 1/4 of the intermediate period, and the longer period should be at least 4 times greater.

Using multiple time frames to find entry/exit points

Time to dive into the technical analysis. Let’s say you’re an intermediate-term trader. In this case you’ll want to have the daily chart (1D) as your intermediate period, the weekly (1W) as your big picture view and the four hour (4H) chart as your shortest timeframe.

Once you have identified advantageous long and mid-term trends, then you can drill down into the shortest time frame to optimize your entry and exit points. This is where you should apply Fibonacci analysis or other techniques using various indicators or drawing tools to optimize your strategy.

PRO TIP: If you’re an active trader, you can add two or one hour time frame (2H, 1H) to the ones you already have to spot divergencies in MACD and RSI. This is useful in obtaining an additional verification of your supposed entry or exit points.

Common mistakes

Many traders use multiple time frame analysis from the bottom up (from the shortest to the longest time frame), but this is far from an optimal approach as it often simply serves to confirm existing biases. A top-down approach (starting from the longest time frame) will result in much more objective decision making.

Top-down approach in Kattana’s Market Scanner

In other words, you should use the longest time frame for big picture analysis, the intermediate chart for setup and the shortest time frame chart to fine tune execution.

IMPORTANT: You should only get to the bottom chart if the first ones show trends that support your trading plan.

Tools for multiple time frame analysis

There is a number of tools that you can use to perform multiple time frame analysis to improve your trading and become more profitable. Our team has combined our trading knowledge with the latest technologies to create Kattana, a feature-packed crypto-trading terminal with Market Scanner, a tool specially designed for multiple time frame analysis. This is just one of the tools that will allow you to easily trade digital currencies on multiple exchanges and improve the execution of your trading strategy.

We are releasing the beta version of Kattana very soon, so be the first to try it by joining our beta waiting list on Kattana’s website. Follow us on Twitter and Facebook for more content like this and product updates.

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The Kattana Team

Hack your Crypto-Trading with Multiple Time Frame Analysis was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.

Publication date: 
10/22/2018 - 17:26

The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.