How Time Frames Identify Forex Profits

This post is for a large number of people now trading a second evolution of my system that I call "Two Variable Trading" -- or no stop/no limit trading. (www.FXPowerHedge.com).

This is about opening a hedge (although the hedge is not essential), and using the combination of price movement and time frames to make decisions as to when you capture profits.

What's important to remember is that long term time frames from H1 and up through daily, weekly and monthly -- these are very important time frames. Far too many traders focus only on the short term time frames. They overlook the most painfully obvious fact of time frame analysis.

The short term time frames from M1 - M30 CREATE the long term time frames. It's kind of a major "duh", but I keep hearing from so many traders "Why bother looking at the long term beyond H1?" The reason is that daily, weekly and monthly trends tend to have a gravity that pulls the short term time frame movement back to their direction. So when you see a consistent and strong move up or down in day, week and month time frames, you can usually trust that the short term time frames will (sooner or later) come back to that movement -- assuming it's strong over many months.

By the same logic, if you see day, week and month trends that are up and down, like a trend on the monthly chart that shows strong downward movement, BUT it was going upward two months ago, and downward two months before that -- well, then you have long term sideways movement.

THIS is a powerful indicator that EVERY time frame shorter range than monthly is vulnerable in terms of indicating a strong trend. Or, if you are shooting for profits on both sides of a sideways movement, then you can close only profitable trades in your power hedge, open new power hedges at mid-points in the sideways sequence of moves, and rack up profit after profit.

But, with trends, you need to scan ALL time frames and watch for inconsistencies. This is trouble. You will first see a trend coming to an end in tick chart and M1 time frame. Then, M5, M15 and M30 will start to show you a retrace "could" be more and become a reverse if it continues. Finally, if the move against a long term trend shows up strong on H1, then you are looking at what might be a trustworthy trend for profit making over a reasonable period of a day or two.

This is all part of training I provide in more depth with my system, but I want to make the point for all my traders who read this blog as part of the program I sell. Please remember to look at ALL time frames. Please remember to give very much attention to the longer time frames. They are very important.

NEVER trade only on the short term time frames. Far too many people try to scalp profits by looking only at M30, M15, M5 and M1 time frames. It seems appealing. It seems like a good way to make many small profits on a daily basis. But it is VERY risky if you are not ALWAYS looking at longer term time frames.

As well, you must take into account the SPEED of price movement. This is indicated in the shorter term time frames also. The faster a move, then the more momentum the move has and will likely continue. So when people ask me if a 30 pip move indicates a trend, even a short term trend, I must again refer them to the TIME FRAMES.

A 30 pip move that happens over a period of six hours is not nearly as strong as a 30 pip move that happens in one hour. That is an extreme example, and you must watch for something like a 30 pip quick retrace. But, again, this is all about looking at all the time frames and making sure you are seeing movement that is more a trend and not a momentary blip.

I believe technical analysis causes people to disregard time frame, momentum and true trajectory of price movement. These variables can all be clearly identified when you incorporate true and comprehensive time frame analysis. So never base trading decisions only on short term time frames. Take into account all time frames, and learn the full scope of what I call "Two Variable Trading". It's part of the FX Power Hedge System (www.FXPowerHedge.com), and essential to transcending the voodoo analysis taught by technical traders. Never try to predict the future. Trust only real time data, because your trades are surely going to produce either real time profits or real time losses. The one thing we know about forex is that you can make money very, very fast...or lose money just as fast. Real time data is the ONLY way to trade. That's how my system works. It's all in the numbers. No speculation is allowed.