I have received a question from one of my blog reader asking me how should he trade the market with the 15 and hourly chart showing uptrend while the 4 hourly chart and daily chart showing downtrend.
I find this an interesting question as this situation often occur during trading especially for those of you who are trading the trend.
Indeed this can be a very confusing for a trader especially when you are new to trading.
Therefore I will like to use this post to share with you what I will do when I see such a situation in trading.
The best situation for a trader is when you see that the 15 minutes, hourly, 4 hourly and daily chart are all showing the same trend. What you need to do is to enter trades that are in the direction of the trend as it is always easier to trade in the direction of the trend than against it.
However there will be times where you will find that the trend of the higher time frame is opposite to the trend of the lower time frame which is what the reader experience.
So let me explain to you why you are seeing this.
If you take a look at your trading chart, you will see that the price is always moving in the form of waves and this is mainly due to the existence of support and resistance level.
We usually describe the wavelike movement as retracement and extension. The retracement is what we call correction but it is not a reversal in trend in that time frame.
For example, the trend of the daily chart is DOWN but it is currently showing sign of retracement.
If you go to the 4 hourly chart, you will see that the trend remains DOWN but the price started to move up
If you go to the hourly chart, you will see that the trend is now showing sign of UP
If you are a day trader like me where our trades usually ends within the day or the next day, I will suggest that you follow the trend of the lower time frame.
However you should set a smaller target profit as the price can reverse anytime.
For me, I will set a 50 pips target profit for trades where the higher and lower time frame do not aligned.
When the upper and lower time frames are aligned, I will enter a higher target profits like 100 pips cos the price will move more when it is in the direction of the trend.
I hope that this post has answered your question and you can now trade even when the trend are different on different time frame.