How to trade Multi Time Frame with Stochastics

As the name implies, the Multi Time Frame trading method is a type of analysis that utilizes more than one time frame to predict price movements in the market. Usually used 2-3 time frames to analyze. The analysis process by using a lot of time frames is based on Fractal prices (all events that have happened), so that it will continue to recur over time. Because it keeps repeating, these events can be recorded, reviewed, and analyzed to find out which ones are good and profitable.


The rules for using Multi Time Frame trading methods are often used on BBMA OA trading systems. The trading system prioritizes signal validity which can be seen from the two time frames below. For example, if the analysis uses a 4-hour time frame, it is necessary to use a 1-hour and 15-minute time frame to ensure whether or not the signal is good.

On this occasion we will discuss how to use the famous Oscillator indicator, namely Stochastic, which is applied using the Multi Time Frame trading method.



Overview of Stochastics
Stochastics is an indicator discovered by George C. Lane in the 1950s. This indicator is similar to Momentum and RSI because it together displays the speed of price changes in the form of Oscillator. Based on his observations, George C. Lane considered that there was a relationship between closing prices, the highest prices, and the lowest prices, for a certain period of time.


Based on this thought the Stochastics indicator was created with two lines that fluctuated between levels 0-100. Both lines are formed from 3 lines mentioned above. The line is known as% K and% D. Here's how to calculate it:

% K (n) = 100 * ((Closing Price (n) - Lowest Price (n)) / (Highest Price (n) - Lowest Price (n)))

% D (N) = SMA (% K, N)

In its own use, here are a few points to consider from the Stochastics indicator:


  • The area above level 80 is the Overbought zone.
  • The area below level 20 is the Oversold zone.
  • If the line% K and% D intersect upwards in the Oversold zone, it is a Buy signal.
  • If the% K and% D lines cross down in the Overbought zone, it is a Sell signal.
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How to trade Multi Time Frame with Stochastics
Learning how to trade multi time frames Stochastics starts by choosing which time frame to use in the analysis. If you follow other systems that use the multi time frame trading method, usually there are three time frames used. The first time frame as a determinant of the trend and signal, the second time frame as a confirmation signal, and the third time frame as a place of Entry. But in the multi time frame trading method with Stochastics, only two time frames will be used, namely the large time frame and the time frame entry.



Large Time Frame Conditions

In the way of trading the Multi Time Frame with Stochastics, a large time frame will function as a place to determine the trends and directions formed in the market. Based on a large time frame, the opportunities that appear on a small time frame will become more filtered.
Because it aims to see trends in the long run, then in this way of trading can be used various kinds of tools that are often used to determine trends. Some of these methods include using Trend Channel and Trendline on the Chart. Some traders also often use Trend indicators on Metatrader 4 such as Bollinger Bands and Moving Average, to determine the trend.

Because the article will be taught how to trade Multi Time Frame with Stochastics, the Oscillator indicator will also be used to see the trend and direction of the market at large time frames. The way to use it is more or less the same as that described in the previous section. But to see this direction, only crossover from% K and% D will be seen. The rules are as follows:

If the% K and% D lines cross up, then look for Buy opportunities only.

If the% K and% D lines cross down, look for Sell opportunities only.

The rules above are made without regard to the Overbougt and Oversold zones of the Stochastics indicator. This is because in the reality of its use, the arrival of prices in these zones does not mean that prices will soon turn back. The most valid signal is still waiting for the crossover.




Small Time Frame Conditions
After seeing the big picture that occurs in a large time frame, it is time to learn how to enter through a small TF. Broadly speaking, the way to trade multi time frames with Stochastics during Entry is the same as trading with Stochastics in general. You only need to enter when the% K or% D line moves to the Overbought or Oversold area, or if there is a cross between the two. However, not all of these signals can be considered as a valid Entry opportunity.

Because the article will be taught how to trade Multi Time Frame with Stochastics, the Oscillator indicator will also be used to see the trend and direction of the market at large time frames. The way to use it is more or less the same as that described in the previous section. But to see this direction, only crossover from% K and% D will be seen. The rules are as follows:

If the% K and% D lines cross up, then look for Buy opportunities only.

If the% K and% D lines cross down, look for Sell opportunities only.

The rules above are made without regard to the Overbougt and Oversold zones of the Stochastics indicator. This is because in the reality of its use, the arrival of prices in these zones does not mean that prices will soon turn back. The most valid signal is still waiting for the crossover.

Read to Binary Options Hedging Strategy
Read to What is Price Action?

Small Time Frame Conditions

After seeing the big picture that occurs in a large time frame, it is time to learn how to enter through a small TF. Broadly speaking, the way to trade multi time frames with Stochastics during Entry is the same as trading with Stochastics in general. You only need to enter when the% K or% D line moves to the Overbought or Oversold area, or if there is a cross between the two. However, not all of these signals can be considered as a valid Entry opportunity.

The second principle of trading with Multi Time Frame is: movement on small TFs can change the structure and direction of market movements at large time frames. But before going deeper, you need to know that this type of Entry is far more risky than the previous Entry. Why is it more risky? Because the turnover event or trend reversal in the market is not as easy as reversing the Stochastics line from the Overbought to Oversold zone. Prices will sometimes go back and forth before turning around, or the price will rise even higher before actually turning.


Look at the picture above, the image illustrates the example of Stochastics in a small time frame which is a benchmark that the big trend has officially changed. This change was of course initiated by the previous crossover. It's just that, entering the market at these times is very dangerous. Therefore, it is better to wait at the starting point of the trend change at a large time frame. The advantage of this multi time frame trading method is that you no longer need to worry about crossover that occurs in small time frames. You only need to focus on the price movements and the Stochastics indicator at a large time frame. Here's one example:


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How to trade Multi Time Frame with Stochastics is only one of the many strategies that can be applied. There are still many other types of indicators which of course will also be more effective if used by trading multiple time frames. However, keep in mind also requires more patience and perseverance in analyzing. The problem that arises is when for example two time frames that are analyzed are only Sideways market, or when there are differences in movement in two time frames, where a large time frame is Sideways, but the small time frame is actually a trend.

Apart from being considered more valid in assessing a signal, there are also some traders who consider multi-time frame trading as an ineffective and troublesome way. They think by dividing the focus into several time frames at once, the results will not be better. Just imagine if you are accustomed to trading with facing more than 10 kinds of instruments, and that must be multiplied by the number of time frames of each instrument that must also be observed. Therefore, you should just adjust the trading method you want to do with your choice of instrument. In order to be more wise in choosing a trading instrument, you can understand it further in the Forex Currency Pair article and its correlation.

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