Today I want to discuss the importance of higher time frame analysis. Doesn't matter what type of trading strategy, method or style you use, the higher time frame often will help us to strengthen our bias overall and give us a good perspective of the possible direction for the price to go. In addition, it helps traders to avoid unnecessary losses and mediocre entries that will eat up your profits.
More often I hear traders will execute trades on the lower time frames, and not factor the overall higher time frame bias and perspective. Although entering on the smaller time frame can potentially give you more Risk:Reward, it's often more risky and trades can easily reverse, then hit the stop loss. This often creates stress, negativity, and revenge trading psychology for traders which ended up blowing accounts.
I want to give a few examples of higher time frame analysis, how they can help traders to avoid “traps” on the lower time frames, avoid unnecessary losses, and keep the emotion at bay to trade another day.
When having a bullish bias on the HTFs, its good risk management to not consider any short term, bearish sell setups. These sell setups may form on the LTFs, but they can easily not continue to your desired target, and reverse up before you have time to react. In addition, traders hate to see profit come and go. So if a trader has a short position running in some profit, but decides to hold onto the trade, and once the position reverses, traders don't want to exit, and then end up holding a losing position to its SL.
Examples:
AUDUSD: HTF: Overall bias and perspective in bullish
LTF: Many LTF bearish setups/development, but due to going against the HTF, they ended up with losses
NZDUSD: HTF: Overall bias and perspective in bullish
LTF: Many LTF bearish setups/development, but due to going against the HTF, they ended up with losses
AUDCHF: HTF: Overall bias and perspective in bullish
LTF: LTF bearish setups/development, but due to going against the HTF, ended up with loss
NZDCHF: HTF: Overall bias and perspective in bullish
LTF: LTF bearish setups/development, but due to going against the HTF, ended up with loss
NZDCAD: HTF: Overall bias and perspective in bullish
LTF: LTF bearish setups/development, but due to going against the HTF, ended up with loss
SILVER: HTF: Overall bias and perspective in bullish
LTF: LTF bearish setups/development, but due to going against the HTF, ended up with loss