Multiple Time-Frame Analysis in Bitcoin Trading

Multiple time frames analysis equals using 2 chart time-frames to trade BTCUSD - a shorter chart time frame used for trading and a longer chart time frame to check the Bitcoin price trend.

Since it is always good to follow the trend, in Multiple Time Frame Analysis, the longer chart time frame gives us the direction of the long-term Bitcoin price trend.

If the long-term market trend direction supports the direction of the smaller chart time frame then the probability of being profitable is greatly increased when using this setup. This is because even if you make a mistake in opening your Bitcoin trade the long-term trend will eventually save you. Also if you trade with the direction of the market trend, then mostly your trades will be on the winning side, this is what this multiple time frame analysis is all about.

Remember there is a popular saying by many traders and investors that says; "The trend is your friend" - never go against the market trend. It means that trading along the direction of the trend is what will consistently help you as a Bitcoin trader to continue making profit when trading the online Bitcoin market. There are four different types of Bitcoin traders - all these traders use different chart time frames to trade as explained below.

Examples of how each type of Bitcoin trader uses multiple time-frames analysis strategy:

Scalpers

This group of traders holds on to their trades for only a few minutes. The scalper never holds on to a trade for more than ten minutes. With the objective of making a small amount of profits between $30 and $50 per trade.

A Scalper using 1 minute chart time frame wants to go long, checks 5 minute BTCUSD chart, which looks like the one below, since 5 min show trend is going up, then the trader decides from this analysis that it is okay to buy BTCUSD.

Scalper Bitcoin Chart Time frame - 5 Minute BTCUSD Chart

Day Traders

This group of Bitcoin traders holds on to their trades for a few hours but not more than a day. With the objective of making quite a number of dollars in profit, between $50 and $200 per trade.

Day trader trading 15 minute BTCUSD chart timeframe wants to go long, checks 1 hour trading chart, which looks like the one below, since 1 hour shows market trend is going up, then decides from this analysis it is okay to buy Bitcoins.

Day Trader Bitcoin Chart Time frame - 1 Hour BTCUSD Chart

Swing Traders

This group of Bitcoin traders holds on to their trades for a few days to a week. With the objective of making a large number of points in profit, between $200 and $1,000 in profit.

Swing trader using 1 hour BTCUSD chart wants to go long, checks the 4 hour trading chart, which looks like the example below, since 4 hour chart shows the trend is going up, then decides from this analysis it is okay to buy Bitcoin.

Swing Trader Bitcoin Chart Time frame - 4 Hour BTCUSD Chart

Position traders

These are the investors that hold on to their Bitcoin trades for weeks or months. With the objective of making a large number of points in profit of between $1,000 and $2000 per trade.

Position trader using the daily BTCUSD chart time frame wants to go long, checks the weekly trading chart, weekly looks like the one below, since weekly shows the trend is going up, then position trader decides from this analysis it is okay to buy BTCUSD.

Position Trader Bitcoin Chart Time frame - Weekly BTCUSD Chart

How to Define A Trend

As a beginner trader wanting to start trading Bitcoins you may want to learn how to define a trend. You can define the trend using a Bitcoin trading system that has 3 indicators - Moving Average Crossover System, RSI and MACD and using simple rules to define the trend. The rules are:

Upward trend

• Both Moving Averages are Moving Upwards
• RSI above 50
• MACD above Center line

Downward Trend

• Both Moving Averages are Moving Downwards
• RSI below 50
• MACD below Center line

For more explanation about how to define price trend and using Bitcoin trading systems read the article on how to generate trading signals using a Bitcoin trading system, explained on this website.