How To Use Multiple TIme Frames To Plan A BetterTrade
I
encourage everyone that I run into to always understand what is
going on at least one to two time frames higher than the time frame in which the
set up occurs. If there is a conflicting story on the higher time frame it will
obviously either encourage the trader not to take the trade or to use very tight
stops. Let’s look at an example of what I’m talking about with the
Nasdaq.
First, take a peak at the Nasdaq
100 Tracking Stock (QQQ) on the MONTHLY time frame. On this
time frame we have run into two very key Fib ratios in January. We hit the .618
retracement of the May 2001 high to Oct 2002 low. QQQ also hit the .786 retracement
of the Dec 2001 high to Oct 2002 low. There are also two other ratios that come
into this zone from 37.80 to 39.70.
src=”https://tradingmarkets.com/media/2004/Hobbs/dh012904-02.gif” />
Now, if you take trades
off of daily setups, look at the chart below of the Nasdaq
E-mini contract. As I look at this chart below, there is a common
theme since October ’03. That theme is an 80-100 point corrective move
then a continuation of the rally. Well, if I take the size of each decline since
Oct of last year and project those from the January 20, 2004 high, I find that
the price zone from 1455-1485 is of paramount importance. This is a critical
“symmetry†zone. It is within this price area where previous declines
have stopped and reversed. Today, NQ hit this zone. If you’re a daily
trader then considering longs is probably where you’re at against this
Fibonacci support zone. However, knowing what the higher time frame looks like,
I would be sure to keep very tight stops on any lon g trades that might trigger
against this daily zone. Another option would be to wait for this symmetry zone
to be broken, then short the first rally. As you can see, simply knowing two
things here allow you to create a game plan to fit you. Those two things are:
1) Higher time frame (monthly)
resistance and/or patterns
2) Daily Fibonacci/Symmetry support zone.
src=”https://tradingmarkets.com/media/2004/Hobbs/dh012904-01.gif” />
To follow up on previous discussions:
A) Homebuilders:
Still like ‘em
B) Yahoo!
(
YHOO |
Quote |
Chart |
News |
PowerRating): We got
a nice swing trade out of it. Today’s reversal to the upside after trading
down almost two points gives me pause, and at this point I’ve taken ½
the trade off and trailed my stop to just above Wednesday’s high.
C) Symantec
(
SYMC |
Quote |
Chart |
News |
PowerRating): Boy that
set up stunk! Throw that one into the scrap pile.
Have a great night!