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Trading Timeframes: Measured Moves and Context
In the previous post, we introduced the concept of measured moves, a structured framework for estimating future price behavior. This method is based on the observation that each swing move tends to be similar in size to the previous one, assuming average price volatility remains consistent. While not exact, this approach offers a practical way to approximate the potential extension of a swing move.
A common question that arises is: which timeframe should you use for measured moves, and how do you choose the correct swing move? These questions open up a completely different and important topic.
Imagine analyzing a chart across three timeframes: daily, weekly, and monthly. You’ve projected a viable measured move on each chart. Now, ask yourself: which projection is the correct one? Where is the move most likely to play out?
Daily
Weekly
Monthly
The reality is that there is no singular “correct” answer. The appropriate measurement depends entirely on your purpose as a trader, the timeframe you operate in, and trading style.
The Fractal Nature of Price Action
Price action is fractal by nature. Regardless of whether you’re observing a 30-minute chart, a daily chart, or a weekly chart, the price displayed is the same in real time. However, the purpose of charts is to provide context. Each timeframe offers a unique perspective on how price has developed. For example, a 5-minute chart may reveal details about intraday movements while a daily chart condenses those details into broader a broader structure and context.
These perspectives may align or contradict one another, they can confirm or challenge your biases. The key takeaway is that charts and timeframes are tools to contextualize price, not definitive answers.
Defining Your Trading Timeframe
To navigate the apparent contradictions between timeframes, start by defining your trading timeframe. This is where you analyze price structure, execute trades and define holding periods. This will answer the opening question: measured moves and other tools should in preference align with your trading timeframe.
In case one wants to consider context, for various reasons, then multiple timeframes can be utilized. These act as a complement, not replacement.
Here’s how different timeframes can be used for context.
The balance between these components should match your trading style. Without a clear and defined approach, there is a risk of confusion and contradictory biases.
The Concept of "Moving in Twos"
Another, more anecdotal observation in price movement is the idea of “moving in twos.” This concept suggests that price often moves in sequences of two swings: an impulse move, followed with a pullback, which then repeats.
There tends to be some price disruption after this has played out, but does not always imply that trend movement must stop after two moves. However, measured moves tend to align more reliably with these sequences.
While not a scientifically validated principle, this concept has been discussed by traders such as Al Brooks, Mack and more. It provides a practical heuristic for applying measured moves more consistently.
Practical Application
To apply these ideas, consider the following:
This post was about the relationship between timeframes and the fractal nature of price action. The focus is on our role as traders and how we decide to operate, rather than absolute answers. This might be clear to most, but if not, take some time to think about and define your trading style.
A common question that arises is: which timeframe should you use for measured moves, and how do you choose the correct swing move? These questions open up a completely different and important topic.
Imagine analyzing a chart across three timeframes: daily, weekly, and monthly. You’ve projected a viable measured move on each chart. Now, ask yourself: which projection is the correct one? Where is the move most likely to play out?
Daily
Weekly
Monthly
The reality is that there is no singular “correct” answer. The appropriate measurement depends entirely on your purpose as a trader, the timeframe you operate in, and trading style.
The Fractal Nature of Price Action
Price action is fractal by nature. Regardless of whether you’re observing a 30-minute chart, a daily chart, or a weekly chart, the price displayed is the same in real time. However, the purpose of charts is to provide context. Each timeframe offers a unique perspective on how price has developed. For example, a 5-minute chart may reveal details about intraday movements while a daily chart condenses those details into broader a broader structure and context.
These perspectives may align or contradict one another, they can confirm or challenge your biases. The key takeaway is that charts and timeframes are tools to contextualize price, not definitive answers.
Defining Your Trading Timeframe
To navigate the apparent contradictions between timeframes, start by defining your trading timeframe. This is where you analyze price structure, execute trades and define holding periods. This will answer the opening question: measured moves and other tools should in preference align with your trading timeframe.
In case one wants to consider context, for various reasons, then multiple timeframes can be utilized. These act as a complement, not replacement.
Here’s how different timeframes can be used for context.
- Higher timeframe: Moving one timeframe up will compress the price data, providing a broader context, but at the expense of detail.
- Lower Timeframe: Moving one timeframe down will reveal intricate details, but can introduce excessive noise.
The balance between these components should match your trading style. Without a clear and defined approach, there is a risk of confusion and contradictory biases.
The Concept of "Moving in Twos"
Another, more anecdotal observation in price movement is the idea of “moving in twos.” This concept suggests that price often moves in sequences of two swings: an impulse move, followed with a pullback, which then repeats.
There tends to be some price disruption after this has played out, but does not always imply that trend movement must stop after two moves. However, measured moves tend to align more reliably with these sequences.
While not a scientifically validated principle, this concept has been discussed by traders such as Al Brooks, Mack and more. It provides a practical heuristic for applying measured moves more consistently.
Practical Application
To apply these ideas, consider the following:
- Define your trading timeframe. Use it as the primary basis for your measured move projections.
- If needed, incorporate one higher or lower timeframe to balance context and detail. However, these additional perspectives should not overrule your primary focus.
- Think in terms of “moving in twos.” Use this concept to locate sequences.
This post was about the relationship between timeframes and the fractal nature of price action. The focus is on our role as traders and how we decide to operate, rather than absolute answers. This might be clear to most, but if not, take some time to think about and define your trading style.
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