Full Review of the Multiple Time Frame Power Strategy
The financial market is so complicated sometimes with all the trends, higher lows, lower highs, interest Rates, Earnings reports…that sometimes I wonder why I chose this line of work. And then it immediately hits me: big profits – financial freedom – I can do it from my home or from a beach…ok, I’m going to keep doing this. But to continue I need a good strategy, right? I can’t just go placing Calls and Puts all over the place, hoping they will eventually end up In the Money. One generally accepted rule is that the higher time frames filter the noise coming from the lower time frames and a trade that agrees with the higher time frame has more chances of success even if it’s taken in the shorter time frame. With that in mind, I will start explaining the strategy:
How to use the Multiple Time Frame strategy
This system takes advantage of the power of two classic indicators that I already talked about in my “Simple Balanced System” review. I am referring to the Relative Strength Index (RSI) and Stochastic Oscillator; you can find them as built in indicators for the Meta Trader 4 platform. But the most interesting thing about this strategy is that it uses the two indicators on different time frames: insert the RSI (use default settings of 14) on the four hour chart (H4) and the Stochastic Oscillator (settings 15, 3, 3) on a 15 minute chart of the same asset. The RSI on the four hour chart will show us the main price direction and the Stochastic will give us the actual trade signal. Here are the Call/Put entry rules:
- RSI on 4 hour chart is above the 50 level (add manually)
- Stochastic on the 15 minute chart crosses upwards, in Oversold territor
- RSI on 4 hour chart is below the 50 level (add manually)
- Stochastic on the 15 minute chart crosses downwards, in Overbought territory
That’s it, just two conditions to enter a trade but by trading only in the direction of the higher time frame, we know we always go with the prevailing trend. Here’s a picture of some valid Call entries:
The red vertical lines on the 15 minute time frame are all Call signals and they are all taken during the period when the RSI was above the 50 level on the H4 time frame. Actually the RSI stayed above 50 for about 14 days and many good Call opportunities presented during that period, but of course, I cannot show them all because I would have to zoom out the 15 min chart too much and you wouldn’t understand anything from the picture.
Why does the Multiple Time Frame Power system Suck?
Although the principle behind the system is one of my favorites, the Stochastic signal can be sometimes late or even false; same thing is true for RSI: it can go above/below the 50 level just for a short while during ranging periods and then reverse, leaving us with money on the bad side of the market. The system could be hard to grasp for a beginner because it takes a lot of discipline to wait for the H4 RSI to line up and only trade in that direction.
Why the Multiple Time Frame Power system doesn’t Suck?
It doesn’t suck for a simple reason: all entries in line with the higher time frame price direction have a greater chance of success. I don’t want to sound like a broken record, but…the trend really is your friend and you have to know how to take advantage of it. This system makes us pay attention to the big picture, to what happens on the higher time frames and filters out a lot of noise. The Stochastic settings and even the ones for the Relative Strength Index can be adjusted to suit your own style and increase the amount of signals or decrease them.
Wrapping it up
No system is perfect and neither is this one. Constantly searching for the Holy Grail will just make you lose money, get frustrated and end up buying stupid software/systems provided by scam artists and false “gurus”. I think all you need is a decently performing system that fits your style and one that you can follow with discipline. The ultimate “Eureka!” moment will come when you realize the system is not so important and you had the Holy Grail all along: it’s your mind.
For more information about the multiple time frame system visit our forum here.