Looking at one timeframe is like reading one page of a book. Top-down analysis reads the chapter.
1. Direction
2. Location
3. Timing
The model
| Role | Swing trader | Day trader | Question |
|---|---|---|---|
| Higher | Daily | 4-hour | Which direction? |
| Middle | 4-hour | 1-hour | Where's the zone? |
| Lower | 1-hour | 15-minute | When do I enter? |
Keep a factor of about 4 to 6 between timeframes.
Pro tip
The magic: tight stops from the lower timeframe with targets from the higher timeframe. That's how traders get 1:3 or better reward-to-risk.
Wick says
Flipping through timeframes until one agrees with what you want to do. That's not analysis, that's shopping for an opinion.
Key takeaways
- Higher timeframe for direction, middle for location, lower for timing.
- Lower-timeframe signals against the higher trend are lower quality.
- Stick to the same set of timeframes every day.