Trading Systems and Methods, 6th Edition

CHAPTER 19Multiple Time Frames

In Chapters 8 and 9, combinations of two trends and two momentum periods were used to create well-known systems and indicators such as Donchian's 5- and 20-day Moving Average, the 2-trend crossover systems, double smoothing, the MACD, and the Turtle method, among many others. Each of those methods used daily data for all calculations. This chapter looks at systems where the components use a combination of intraday, daily, and/or weekly data in order to improve both timing and results.

The first Triple Screen trading is attributed to Barbara Diamond in 1981, a member and floor trader on the CME, who developed it after CQG made multiple time frames possible in their charting system. She presented her own trading approach to CQG clients and later to the MTA. Although the use of multiple time periods by professional traders has now been popular for decades, it is only since there are better trading platforms and faster data access that the use of multiple time fames has exploded for the at-home trader. The combination of multiple time periods allows the trader to time entries into the market using very short-term data, such as 10-minute bars, while watching the longer-term picture for the daily or weekly trend.

The way three time frames are used seems to have solidified into:

• Very short bars for timing
• Medium bars for the primary trading signals
• Longer bars for the overall trend or the big picture

A sampling of various systems available online gives ...