The fallacy of multiple timeframes

It’s often during a consolidation that a trader usually flips to many different timeframes, and to no one’s surprise, the consolidation looks perfect on one of the timeframes.

It’s the structure that the trader loves, the one that he is sure will break out soon, and the trade will be a success.

However, the overarching reality is that the price is simply consolidating, and finding that perfect-looking setup on one of the timeframes doesn’t change that. A little more consolidation on that same timeframe, and the chart won’t look as perfect anymore. In their impatience, though, most traders, after seeing their perfect setup, have already pulled the trigger and gotten themselves in a pickle.

Besides, unless one has traded a timeframe consistently, they are not even fully aware of its character.

Pull out the daily chart of any stock and compare it to the weekly chart. You will see that the weekly chart is much cleaner. In the same way, if you’re only looking at regular trading hours intraday, you will see that the 1-hour chart is a lot cleaner than the 4-hour chart. You just can’t trade the two in the same way.

If you’re playing options, you won’t know the ideal expiration to take on that new TF or what kind of move ranges you can expect. You won’t even know if your regular trailing stop is respected on this timeframe.

So, why am I telling you all this? To remind you that it’s a lot easier to have one or two timeframes that you consistently trade. Say one for swings and one for scalps. It’s easier to fully understand the chart personality of those timeframes and only look for setups that are ready on those timeframes. You will avoid a lot of pain that comes with choosing a stock first and then flipping around timeframes to find a setup. You will be more confident putting on a position, managing your risk, and riding such positions.

Test it out for yourself, and good luck trading!

Cheers,
AAYWHOOSH