Many traders rely on technical analysis to make profits in the financial markets. However, with so many chart patterns and indicators, it is easy for traders to get lost when coming up with a trading strategy. They don’t understand how important it is to opt for multi-timeframe trading analysis to identify trends and trading opportunities in the crypto market. A common example of this is looking at a single crypto trading timeframe for specific entry and exit points. In addition to this, this particular trading analysis also helps you determine the best trading hours to trade crypto. If you are looking for the best crypto exchange platform to trade crypto. Check out coinmama review by real traders to finalize the best platform.
Meaning Of Multi-Time Frame Analysis
Multi-time frame analysis is the process of viewing the same trading asset under various timeframes. For Example, a swing trader might utilize a daily chart to check the long-term trend and, after that, a 4-hour chart to identify specific entries as well as exit points. The best time frames to identify trends and entry points are based on the trade type as well as the holding period. Generally, traders use ratios such as 1:4 or 1:6, like a 1-hour chart for entry and a 4-hour chart to spot trends. While it is possible in the crypto world to use more than two timeframes, traders might feel certain complexities which minimize your returns.
But how should traders determine the best hours to trade crypto? Most traders stick to two-time frames when traders start out and perhaps diversify to a maximum of three timeframes whenever needed.
How To Use Multi-Time Frame Trading?
You can find numerous ways to utilize multi-timeframe trading analysis to figure out the best hours for crypto trading. Many traders interested in crypto trading can simultaneously display two charts in separate monitor screens. In this manner, they can instantly look for references in the long-term trends prior to entering or exiting short-term trading positions. This ability to view across multiple time frames is the main reason why professional traders use multiple monitor screens at trading stations.
Many beginners concentrate on a single time frame while overlooking stronger underlying trends when choosing the best hours to trade crypto. There are several software solutions available in the market which can help streamline the multiple time frame analysis trading. For instance, certain technical analysis platforms allow traders to check technical indicators across multiple timelines using one chart. KuCoin is a crypto exchange platform that offers a wide range of features to analyze pricing trends. Learn everything about technical tools and features, read kucoin review & ratings for a better trading experience. Once the traders establish the fundamental trend, they can define the intermediary trends within the desired time frame.
As a general rule of thumb, in leverage trading, leverage and crypto trading are inversely related with each other. For Example, a scalper with 1-minute charts might select 10X or even more leverage. On the other hand, a swing trader is a bit conservative and restricts the leverage to 2X or a maximum 4X. The inverse relationship between the two is quite common because it brings the best risk-to-reward ratio for both swing traders and scalpers.
Scalpers Utilize High Leverage: Short Timeframes
Scalpers are the forex traders who mainly trade using 1-minute or 5-minute charts. They could determine entries and exits just by searching for higher volatility in a short time period. By increasing the leverage, scalpers can minimize the gap between the liquidation price and the entry price. Therefore, scalpers are able to enter and exit a particular trade in a quick timeframe so as to minimize the time in a trading position as well as the exposure to such high volatility.
Swing Traders Utilize Low Leverage: Long Timeframes
Swing traders are attracted to timeframes between 4-hour and 1-day. Such individuals like to trade mid and long-term trends with lower or no leverage. A swing trader with $5000 capital and 2x leverage has the potential to manage a position of $10,000 position. Additionally, a price move of 15% can lead to a profit of $1500, which means 30% profits for the forex trader. Swing traders tend to be in the same position for days and even weeks at a particular time period. Therefore, it’s vital for them to stick to lower leverage so as to prevent unexpected liquidation from ordinary market liquidity. Evolve Markets offer high leverage for those interested in leverage trading. Read evolve markets review in detail to make finalize decisions.
Crypto markets can swing up to 5-10% on a regular basis. Thus, in case you are a swing trader, you don’t want to get trapped in a situation where the liquidation price is within a few percentage extremities of the entry price. Last but not least, leverage trading has some additional funding costs in the form of routine interest rates that could quickly add up.