Understanding Multiple Time Frame Analysis (MTFA)_4. Using Long-term Time Frames

Lesson 4: Using Long-term Time Frames

With MTFA, it is better that we first discussed about long-term time frame before
we proceed to other frequencies. By analyzing a long-term frame, the key trend is
created. The motto every trader should remember when trading for this frequency.
Don’t carry out your positions on this wide-angled chart, although the trades taken
must be moving in the same course as the trend. That doesn’t imply that trades can’t
be taken against the bigger trend, however, those that present lower chance of
succeeding and the profit target should be less than if it’s following the path of the
general trend. In forex markets, when the long-term time frame includes a daily,
weekly, or monthly periodicity, fundamentals are likely to have a great deal of
influence on direction. For that reason, traders are tasked to keep an eye on
significant economic trends when following the overall trend on this time frame.
Whether the main economic issue concerns current account shortages, consumer
spending, business investment, or other factors, these changes must be observed to
have a better idea about the course in price action. Then again, changes in such
dynamics are rare, just like the trend in price on this time frame, so you’ll only have
to keep tabs on them from time to time.

Another factor for a time frame in this range is the interest rate. Often deemed
as an indicator of an economy’s health, the interest rate is a vital piece in pricing
exchange rates. Capital usually flow toward the currency with the higher rate in a
pair as this connotes better returns on investments.