5 Ways My Trades Are Improved By Using Multiple Time Frames

How long is the coastline of Great Britain?

If I gave you all the resources you needed to answer that question, you'd quickly hit a problem…

The length changes depending on how you measure it.

Take a map for example. Measuring with units of 100 km, you’d find the coastline is around 2,800 km. But if you reduce the unit size to 50 km, that length grows to 3,400 km.

Zoom in further, and the smooth edges become jagged. More detail means a longer coastline.

Zoom all the way in to every rock crevice, every grain of sand, even to a microscopic level and the length keeps increasing.

This is known as the Coastline Paradox. Because of its fractal nature, a coastline doesn’t have a well-defined length.

In basic terms, a fractal is a geometric shape with increasingly detailed structures at smaller scales, and this complexity appears everywhere in nature.

So what does this have to do with trading?

The markets are also made up of fractal patterns.

This concept was extensively studied by mathematician Benoit Mandelbrot, who details it in his book, The (Mis)Behavior of Markets, one of the greatest finance books ever written.

One core principle of the Duomo Market Theory is related to this: The Hierarchy of Time Frames.

Once you understand the importance of different time frames, there are many ways they can be used in your trading.

I’ll briefly go through the five main ways I use them, so you can get an idea of how they improve the precision and potential of my trades.

1. More or Less Information

Moving up or down time frames is like a filtering process, letting you gain or reduce detail in the price moves.

Like the Coastline Paradox, a move on a higher time frame looks smooth and simple. But if you drop to a lower time frame, that same move shows more structure and fluctuations.

Using time frames this way can clear up confusion.

If a section of a chart looks messy, switch to a higher time frame to cut through the ‘noise.’ Or if you need more detail, zoom in to a lower time frame to understand what’s happening.

When I start my analysis, I aim to view what I call the “Goldilocks waves” for a particular time horizon, that's the time frame that gives just the right amount of information without overwhelming or under-representing the market’s structure.

2. Time Horizons

The markets are full of participants operating on every possible time horizon, from long-term pension funds to rapid-fire HFT algos. A mistake retail traders often make is thinking they have to force themselves to align with a specific time horizon.

In reality, there are opportunities across all time horizons in the markets. Rather than trying to fit into one specific time frame, focus on the time horizon that suits you best.

This could be based on personal factors, like needing more or less time for decision-making, or practical things like fitting trading around your day job.

For example, if you want trades lasting a day to a week, you might analyse waves of no more than 12 hours. The ‘Goldilocks’ time frame for this could be between the 5-minute and 30-minute time frames, depending on market context.

By shifting your focus to time horizons rather than a single time frame, you open up more tailored trading possibilities.

3. Confluence

Another principle of the Duomo Market Theory is that price behaviour is scale invariant. This means, since the markets are fractal, you’ll see similar patterns of price behaviour across any scale.

Therefore, it’s possible for us to find the time horizon that suits us best, because strategies based on identifying particular price behaviours should be equally effective on any scale.

This also opens the door to finding opportunities across multiple time frames that have confluence and reinforce each other.

Aligning trades on different horizons can increase the probability of success or provide new ways to structure a trade for optimal expectancy.

4. Better Risk/Reward

When you have an opportunity for a trade, the potential outcomes will be relevant to that particular time horizon. Therefore, each time horizon aligns with certain risk/reward ratios.

But by layering time frames, you can improve that risk/reward massively.

Imagine you’re trading a reversal at a significant level on the daily time frame. Your analysis shows this may be the terminal point in the current trend. You set your stop loss some distance above the significant level, and your initial profit target is the end of the most recent price move.

But there will be a more specific terminal point on a smaller scale. Even the biggest trends of all time started with a single price tick. Therefore, you can use lower time frames to refine your entry point further.

Dropping down to the 1-hour time frame, you might find a significant level closer to the current price that could be a more precise turning point. By entering at this smaller level, you preserve the potential upside but can tighten your risk significantly, giving you a better risk/reward ratio.

5. Conflict

Just as time frames can align and provide confluence, they can also clash. What you see on one time frame might conflict with what you’re seeing on another.

In some cases the conflict won’t be relevant as the time horizons are too far apart to matter to one another. But in other cases, the conflict may lead you to change the way you approach the opportunity.

This might mean changing your trade management approach, reducing the amount you choose to risk, or even deciding not to take the trade at all.

We've barely scratched the surface of how much better your trades will be by using multiple time frames the right way.

This is something most traders either don't understand, or completely overlook. But it's covered in detail in the Duomo Trader Development Program.

If you want to start learning these powerful concepts and become a more professional trader, you can find out more here.