What it means
A classic setup: a higher-timeframe uptrend, a lower-timeframe pullback, then a lower-timeframe change of character back up.
In practice
The process runs from the top down. A higher timeframe shows the trend and the important levels, a middle timeframe shows the setup, and a lower timeframe times the entry and keeps the stop tight.
Trading with the higher timeframe gives a setup room to run, and entering on the lower one improves the ratio of reward to risk.
What to watch for
Timeframes disagree all the time, and waiting for every one to line up means never trading. Pick two or three that are roughly four to six times apart and decide in advance which one has the final say.
Related terms
3 terms- TimeframeHow much time each candle covers: 1 minute, 15 minutes, 1 hour, 1 day and so on.
- BiasYour working assumption of direction, usually from the higher timeframe; you trade with it and update it when structure says so.
- Change of characterThe first close against the trend through its last protected swing, an early sign the trend may be turning.