In some previous articles we have looked at how to combine indicators to generate high probability trading signals and whilst these various indicator combinations prove time and time again to be hugely successful, It’s important to remember just how profitable these indicators can be when used in isolation.
One of the most effective ways to employ any indicator is to view it on a Multi-Timeframe basis. By this we simply mean looking at the indicator not just on the timeframe you usually trade, but on higher and lower timeframes also. The idea here is to find signals on a larger timeframe and then identify confluent signals on the lower timeframes to gain specific entry points to potentially much larger moves.
Our Order Flow Trader (OFT) has proven to be extremely successful on this Multi-Timeframe basis. As the indicator combines order flow techniques with trend following techniques, signals generated on the higher timeframes can often lead to fantastic long term trades where trends develop.
In this GBPUSD Weekly chart we can see that OFT generates a few signals, we get two bullish signals which generate some nice upside, a bearish signal which is negated and then we see another bearish signal which marks the start of a long term bearish trend, generating fantastic profits.
If we drop down to the H4 chart we can see that after that weekly bearish signal is given, we get a huge amount of confluent bearish signals all the way down that channel.
So how best to use this?
Well, one way is to execute the trade on the Weekly chart and use the lower timeframe signals to add to your position. Another way is to use the Weekly signal as a guide and then execute on the H4 chart giving you much tighter stops and therefore much lower risk.
These confluent OFT signals on the lower timeframes offer fantastic opportunities for maximising profit, so long as you continue to trade in the direction of the higher timeframe signal.
As with all trends, there are retracements against the move and the H4 signals won’t always work, but you will be right far more than you are wrong and as the trend develops, the large profits accrued will far outweigh any small losses you might take. Remember that trading with the trend overtime is far more profitable than trying to pick reversals.
So spend some time with the indicator and take a look at combining different timeframes to get your desired signal frequency and trading length such as Daily & M15 or H4 & M30.
Now, you will have noticed that there is currently a bullish weekly OFT signal on GBPUSD, and on the H4 charts we have already seem some great bullish trades. So is this the end of the longer term downtrend or just a pullback?