3 Time Frame Question

[TraderNorm]

Hi,

In the 3 Time Frame system, one manages a trade in the middle frame and enters in the lower frame. I've just looked at a potential trade. The ADX indicator in the middle frame says the price is ranging, and the ADX in the lower frame says it's overbought. Which should I go by, the middle frame ADX where I'm managing the trade, or the lower frame ADX where I execute the trade???

Please answer only if you really know.

Thanks

 

[NVP]

If we all could only ever post/answer if we really know then trade2win like,every other,trading forum would cease,to,exist,my friend

N

 

[TraderNorm]

Not true, NVP. It's a system that's been used for decades, and there are specific rules to it. I did not ask for guaranteed wins, but for the recognized rules.

 

[forker]

A 3 time frame system won't give a trader any more edge than trading off a single time frame.

 

[TraderNorm]

Hi Forker,

Many very profitable traders swear by it. I'm just learning it. Not sure you understand the basic principle, so if you do, please bear with me: If, for example, a 60SMA shows sell on a 4H, 1H and 15M frame - on all three frames - then if one launches a sell, there is much less chance of running into resistance before the trade turns profitable. Same for buy.

Thanks for the input.

Norm

 

[forker]

I only need to open a recent example to show why charts and indicators on their own is worthless to most traders. If you trade off charts alone you have no idea what is really happening. You just see a set of parameters that define an entry based off historical price. Its like driving a car while staring in the rear mirror.

In this example price pushed up the 60 minute MA on the 15m on the 30th at about 16:46. An hour later it did this on the 1 hour and the 4 hour closed above at around 20:00.On Monday price closed below the MA on the 15m and closed above it showing support on the MA. While this was happening data for EU was coming out and it wasn't looking great. The charts didn't tell you this so the signal to buy is effectively the opposite to the data being released. Later in the day better than expected data for the USA came out (a growing trend in the $) which reversed the signal stopping the trade out.

Now if you used this 3 time frame method in conjunction with knowing whats going on then you would have stayed out that signal and taken the sell instead. My point in all this is that you cannot rely on charts or indicators to give you an idea of whats happening to make better trades. This is why i say it wont give you any edge regardless of how you configure it or what indicator\s you use.

its these sort of trades where a signal is false that eats away at the profits you have leaving you break even at best.

 

[tomorton]

You should understand that any indicator has a certain sensitivity, which means that they all work in general correctly and show the actual data - only some indicators show the strongest levels, and some of them show the weakest levels or some of them. And this means that you can use both to work - but a lot more depends on the order size, the choice of stop loss and the time frame you use in your work. That's probably why it's a little easier to work with long-term positions - it's more and more stable. And maybe if you don't understand exactly what to do at this point, you should try something else - a strategy or an asset.

What's your favourite trading strategy?