If you’re into crypto trading, you’d probably know that traders use different types of technical analysis for trading. However, with so much information to keep track of,  it is not uncommon for many investors to find themselves confused at times. As a result, they may end up making costly mistakes, such as focusing on trading entry and exit points using just one timeframe.

In this article, we will discuss what multi-time frame analysis is in the context of crypto-trading, and how it can help you develop a more sophisticated trading plan.

Introduction to Multi-Timeframe Analysis:

As the name suggests, the multi-timeframe analysis involves assessing a single coin or currency across multiple timeframes. For instance, you might use daily charts to identify trends, but turn to 2-hour charts to determine the entrance and exit points.

Generally speaking, the ideal timeframe for analyzing the trends and entry/exit points will depend upon your holding period and trade type. Although you can use three or more timeframes, it may lead to unnecessary complexity, thereby diminishing your tangible returns. For this reason, most crypto traders –especially those who are new to this world – should adhere to two time frames, and at most, go up to three if required.

How to Use the Multi-Timeframe Analysis?

We have discussed the theoretical aspect of multi-timeframe cryptanalysis. Let us now talk about the different ways you can implement this analytical approach:

1)  Using charts in separate, side-by-side computer windows:

The most common way of executing the multi-timeframe analysis is by opening up two windows at the same time. These side-by-side windows will allow you to swiftly analyze short-term trends before proceeding to long-term trend analysis and vice versa. The ability to view either chart simultaneously enables traders to make quicker and more accurate analyses, which, in turn, allows more time for decision-making.

2)  Assessing the values of technical indicators across multiple timeframes:

Another way to apply the multi-timeframe analysis is by assessing the values of technical indicators across multiple timeframes. Even though this can be performed manually, many traders make use of cutting-edge software and other digital tools to make the process faster and simpler. In addition, these tools allow traders to develop customized directional indicators by extracting data from multiple charts.

3)  Monitoring micro-movements across smaller timeframes:

Newcomers to the crypto universe might find the multiple-timeframe analysis a bit overwhelming. Several new traders often spend multiple hours trying to identify trends and points, which can prove rather counterproductive. For such cases, taking a more methodical route might be more beneficial. For example, you can start your analysis by monitoring micro-movements across considerably smaller timeframes. This approach is particularly helpful during times of volatility since it enables you to obtain a more vivid picture of the ongoing market performance.

What to Consider While the Using Multi-Timeframe Analysis

Even though the crypto markets have a lot in common with traditional markets like the stock market, there are certain things that traders need to be wary about.

For example, some crypto assets are considerably less liquid than traditional assets. This means certain time frames might not be very helpful.

For example, if you want to track an asset that is only traded after a certain number of days, it is better that you avoid using 1-hour or 1-minute charts.

Final Word:

The multi-timeframe analysis is an excellent tool for all kinds of crypto-traders, be it newbies or experienced traders. After all, it allows you to view the bigger picture and make smarter decisions. To know more about strategies that can help you enhance your crypto profits, please feel free to visit ethereum trader.