Multi Time Frame Strategies

PeterPan8

Didn't find much about multiple time frames in discussions. And I have some (basic) questions from a swing perspective.
I have two accounts: Long-term for retirement, and Short-term for one registered small account, what I call my "play" money. The following questions regard the small account:

I use TA for all my transactions. Sometimes I look at weekly charts, 4-hour, 2 hours, and even the 5-min., probably just because it's available! However, I usually trigger my open positions using the daily charts. Maybe I'm looking at too many time frames!

I've watched many of Joe Rabil videos on Stockcharts, and he advocates the Monthly, Weekly, Daily and 60-minute charts with his strategies.

So How to fine tune my approach? Should I be looking at multi time frames? And are they useful for swing traders?

From many months of paper-trading trials and errors, it seems that if I was using the daily to identify potential candidates, then go down to the hourly (or 2-hour) chart for confirmation, and trigger the entry on the 10 (or 15) minute chart, would that be too much, or should I simply stick to the daily chart?

Then, how would I setup the indicators? Would they remain the same regardless of the time frames?
I'm using the basic RSI 14 and PPO 12,26,9 with support-resistance on price action.

What's you favourite system for consistent profits?

Thanks for any insight.

lmkwin

Joe Rabil, like most trend followers, use the longer time frame charts to see if a trend is in place and where a security is in relation to that trend. Then, if that's a go, they review the shorter time frames to look for possible trades in the direction of that trend. So, longer term uptrend and in a good place to consider entries, look for good long entries on the shorter term charts. Longer term downtrend, don't look for good long entries.

As far as indicator settings, keeping them the same keeps your view consistent so your interpretation is also consistent. If you run a 12,26,9 on a weekly and change that to a 5,22,3 on the daily, and 10,20,10 on the hourly, you may end up seeing more, or different, "opportunity" but it may or may not be the "right opportunity" due to sensitivity.

I'm a recovering trader and very glad I gave it up almost 10 years ago. Much happier now using Dynamic CSS Patterns on Point and Figure charts. I've written pretty extensively on those on these boards.

markd

If you are swing trading, you want to be where the trends are strongest.

Assuming you want to trade to the long side, the tried and true strongest sector/strongest industries/strongest stocks method is probably where you want to be. You could use perf charts or heat maps over maybe a three to six month period for identifying the better candidates in each group. Or scans ranked maybe by ROC 63 (three months daily) or 120 (6 months daily) or maybe SCTRs.

You may want to look at more than one sector and more than one industry to maintain the supply of set ups. How many sectors/industries/stocks to follow and trade is a personal choice - time and temperament - for work and for risk - will guide you there.

Choosing your stocks, you want charts that mostly trade smoothly on the longer weekly chart. They look nice, there's something balanced and symmetrical about them - they go up, they go down, but they give some warning before they change direction - on the daily chart, bars overlap more, there are down closes before the final high, up closes before the final low. They look like some one is in charge of keeping things orderly (which is the case). Range should be relatively consistent - especially few or no sudden expansions, including wicks and tails, or wide gaps. Sometimes sudden range change is news, which is ok if its good news, but wide range may mean pros like the stock for stop chasing and it has a lot of easy to scare retail traders in it. Volume should also be relatively consistent. In other words, you want institutionally sponsored stocks on the way up. If volume spikes, price and range should expand commensurately up. When a nicely trading stock begins to break up - price starts getting wild - the sponsors are gone, and you should be, too.

As for charts - weekly is probably as high as you need to go - but for maybe two years to see the resistance above you, if any (none is better). Then daily for maybe 9 months - maybe six - for the same reason. You could go hourly, too, over maybe 5 days to time entries. Changes in direction will show up sooner there, BUT - some signals will be fake.

I can't advise you on the indicators you have mentioned. You could try Fast Stoch %K(10,1) crossing below 20, on the daily, then look for the hourly to cross above its MA (you'd have to play with the length - maybe 13? two days) so that the MA starts to rise, and then make down closes that don't break, or maybe only slightly break the rising MA. That might happen the same day or within a few days of K10 xb (cross below) 20 - sooner the stronger the trend.

For instance, XOM (not an ideal-looking chart, but ok for an example) on Mar 15 broke below Fast K 20 on the daily. On Mar 17, hourly price closed above its MA 15 and the MA turned up. On Mar 18, the hourly price closed down several times but not below the rising MA. The next day it gapped up and extended into a good up leg. This is an example chosen in hindsight but at random more or less following the method suggested above - strong sector strong industry strong stock.

P.S. This method tends to work better when the K10 xb 20 scan gets a lot of hits rather than fewer. The high hit rate stocks are more likely to be moving with the market as a whole. Also, many of these may be only short term trades for a couple of points, or maybe a few more, depending on the stock. Run this scan on several different back dates on strong RS industries to get a feel for what happens after a hit, and what kind of charts work best.

PeterPan8

Thanks Markd! Lots to digest in your post... I may come back with further questions/comments...