Trading is a constant learning experience - as you change as a trader, the markets evolve as well, and so does the technology. My inbox is full of "offers" that will teach me how to make money from the comfort of my home. I frequently laugh at these emails, or delete them if I get annoyed. Then, if I get really irritated by the ridiculous promises made, I will actually take the time to call them out.
Trading is one of the harder things I have done. Emotionally and mentally, it is a very tough endevour. One method I've found that helps me filter out trades and sometimes noise in the market, is a very simple one...using multiple time frames.
How to Use Multiple Frames
Here's an example of effectively using multiple frames: use a 30 minute chart on the mini Russell while daytrading, viewing that as your "longer time frame." Then, look for a trigger using a smaller time frame like the 10 minute charts for example. Another example when I look at swing trades (like the one below of the Lean Hogs market) is to look at a weekly chart and then go down to the daily chart. Both charts are below for your review.
Basically, look for a longer term trend on the longer time frame and then a resumption of the trend after a correction on the smaller time frame. Another set up can be to look for an extreme overbought or oversold condition on the longer time frame and then look for the same condition to happen on the lower time frame.
Some traders will look for certain Fibonacci set ups and pullbacks using the multiple time frames as well. I only look for longer term trades in the lean hogs market. It is not a definite "day trading market" in my opinion. The market has been in a strong downtrend since the top was made in July 2014.
Weekly Chart of Lean Hogs Futures
Daily Chart of Lean Hogs Futures
Notice that the daily chart gave me "double bottom/oversold" signals, as marked by the two diamonds. It then pulled back and gave me a blue square, indicating it's a possible start of a long trend. This was confirmed by the same signal on the weekly chart this Monday morning (May 4th 2015).
My thoughts are that this market is going higher. The big questions as always are: Do I get in? Where do I get in? Do I use futures? Do I use options? Perhaps a combination of both. This is part of the reason why trading is so hard, and so individualized....stay away from all the courses that try to claim they have the crystal ball. Trust me, this crystal ball does NOT exist. Prudent money management and trading size are often overlooked in favor of "signals." Trading is a complex energy, and I think that each trader must find what works for them based on their level of appetite for risk, their risk capital, the time they have for trading, and many other factors.
Many ways to trade any market, many ways to lose money in any market and only very few ways to lock in gains - this one is not different. If you need help creating a trading plan, visit our broker assist services.
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