Is Using Multiple Timeframes the Secret?
By Dave Mabe
A common question I get from traders is about using multiple timeframes.
One trader I'm coaching put it this way:
What's your view around multi-timeframe analysis? Do you use it in your strategies? The information out there is confusing: others swear by it, other groups say it's useless.
He's right, there are plenty of gurus out there that think using multiple timeframes is the holy grail.
I put this in the category of partial profits - things that make you sound smart, but when you peel back the layers, it doesn't make a whole lot of sense.
Or at the very least, there's more to the story.
When most traders mention multiple timeframes, they mean something like this:
Your system has a primary timeframe.
You get a signal from the system on the primary timeframe.
Then you check some alternate, non-primary timeframe (say, the daily) for confirmation.
If there's "confirmation" on that secondary timeframe, then you can be that much more confident in the signal.
Or so the theory goes.
This is mostly BS, but it sounds smart in a soundbite, which I think is why you keep hearing it over and over.
The reason I don't use multiple timeframes just for the sake of it is pretty simple.
By requiring confirmation, you're guaranteed to reduce the number of trades in your strategy.
Which may or may not be a good thing.
Tomorrow, I'll share the right way to think about this, so you don't eliminate a bunch of profitable trades from your system because some guru told you to.
-Dave
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