Before we explain how to perform a multiple time frame analysis, we feel it is necessary to point out why you should actually have a general understanding of different time frames.

After all, isn’t it enough to analyze a technical graph?

Before solving your doubts, let us first play a game called “go long or short”. This game will show you why you should analyze the graphs of different time frames.

The rules of this game are simple. You look at the graph and decide whether to go long or short. Very simple, right? So, let’s get started!

Let’s look at the 10-minute chart of GBP/USD on July 1, 2010, which was taken at 8:00 AM GMT. We selected the 200 simple moving average on the graph, which seems to be stable as a resistance level.

But what happened next?

GBP/USD closed above the resistance of the moving average and rose further by 200 points.

You may be thinking, this is terrible!

What happened? Let’s take a look at what happened to the exchange rate on the 1-hour chart.

If you have been watching the 1-hour chart, you may have noticed that GBP/USD is actually at the bottom of the ascending channel.

More importantly, just above the support line of the lower rail of the channel, a doji pattern has been formed. This is a very obvious buy signal.

This ascending channel is more obvious on the 4-hour chart.

All these graphs show the same data at the same time. They differ only in the time frame chosen.

Now, you understand the importance of observing multiple time frames?

We only traded through the 15-minute chart before, and we may never understand why when everything looks very good, the market trend suddenly stops or turns. We never changed our minds and turned our attention to a larger time frame to see what happened.

When the 15-minute chart shows that the market is indeed stagnating or reversing, it is usually because the exchange rate has encountered resistance or support on a larger time frame.

We learned after paying a lot of tuition fees that the larger the time frame, the greater the chance that the exchange rate will remain stable at a certain support or resistance level.

Trading on multiple time frames is likely to allow us to avoid more losses caused by transactions in a single time frame. It allows you to gain a firm foothold in the transaction longer, because you have the ability to identify where the exchange rate is in a short time frame compared to a larger time frame.

Most beginners only focus on a single time frame and then ignore other time frames.

The problem with this is that when a new trend is formed under a larger time frame, traders who only focus on a smaller time frame are likely to suffer losses.