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The Power Of Multiple Time Frame Futures Trading Charts

by Daniels Trading| Tips & Strategies

As any technical trader will tell you, futures trading charts are indispensable tools because they’re essential to the study of price action. One way to optimize their utility is with multiple time frame analysis. Let’s look at how combining charts with different periodicities can take your analytical game to the next level.

Multiple Time Frame Analysis

Multiple time frame analysis is the process of scrutinizing price action for the same security using different periods. This technical approach is executed by studying charts with durations ranging from one month to one minute, side by side.

In practice, there are several advantages to multiple time frame analysis:

  • It is user-friendly: If you can build one chart, then you can build them all! Once you have selected your type of chart and ideal indicators, modifying the chart’s period is the only task necessary. Fortunately, your software trading platform will offer automated functionality in this area.
  • It contextualizes price action: In live market conditions, it is easy to get swept up in seemingly chaotic price action. Short time frames often give traders conflicting data. However, by referencing charts of different durations, you can separate meaningful pricing moves from the random noise.
  • It identifies key areas of support and resistance: Support and resistance levels are price points that may restrict future market behavior. They can be derived in any number of ways and often prove relevant on short, medium, and long durations. By establishing the presence of support and resistance levels on multiple time frames, traders can identify potentially important technical areas.

Multiple time frame analysis can help improve the efficiency of your futures trading charts. It is a user-friendly way of identifying relevant technical levels, eliminating the noise, and placing evolving price action into a manageable context.
Download our free guide, Futures Trading: Technical Analysis for Beginners, today!

Working Long-to-Short

One of the key principles of multiple time frame analysis is the idea of charting seniority. As a general rule, the longer a chart’s time frame, the greater its relevance. Although the importance of this rule varies according to strategy, it is valuable when attempting to align yourself with the strongest prevailing price action.

To illustrate this point, assume that Terry is a day trader interested in E-mini DOW futures. Terry’s goal is to find early-session trades that provide at least a 1:3 risk versus reward payoff. Multiple time frame analysis can help Terry spot and capitalize on opportunity in the following ways:

  1. Identify trends: One way that many traders turn risk and reward in their favor is to engage trending markets. To spot macro-trends in the E-mini DOW, Terry may find it useful to view price action on monthly, weekly, and daily time frames.
  2. Quantify evolving price action: Upon confirming the presence of a trending market, Terry can then reference four-hour, one-hour, and 30-minute E-mini DOW charts to quantify market direction in the micro-term. If the micro and macro tendencies line up, a trading opportunity may come to pass. If they conflict, Terry may be well-advised to search elsewhere for viable trades.
  3. Pinpoint market entry/exit: Upon the recognition of a trade setup, it’s time for Terry to enter the market. To optimize precision, Terry may clearly define market entry/exit points using technicals on shorter intraday charts (30-minute, 15-minute, and five-minute durations).

By studying price action on intraday, daily, weekly, and monthly futures trading charts, Terry is able to gain a deep understanding of the E-mini DOW’s market structure. Accordingly, the identification of longer-term trends and key short-term technical areas may help Terry optimize rewards while avoiding undue risks.

Want to Learn More About Futures Trading Charts?

Pricing charts come in all shapes and sizes, each with an ideal application. A great place to learn how to use futures trading charts successfully is Daniels Trading’s Technical Analysis Learning Center. Featuring the e-book 12+ Candlestick Formations Every Trader Should Know and an interactive study list, the Technical Analysis Learning Center can help you enhance your analytical game quickly.
Read our guide, Futures Trading: Technical Analysis for Beginners

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

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The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

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