One of the most dependable features of the currency market is its tendency to form trends in an assortment of time frames. Trends with the forex market can linger for weeks, month or even years and traders who support themselves with these trends can improve their chances for success. Why Does Multiple Time Frame Strategy Works The multiple time frame strategy allows the traders to trade only in the direction of the overall trend. Additionally, it requires the trades to be placed only after the price has pulled back to a favorable entry point. In short, the strategy does not allow the traders to enter long at the highs or short at the lows. The technique can also be utilized for shorter time frames. Like for example, when the active day trader can use the four-hour chart for long-term reference and a 15-minute chart for short-term reference. By performing a role of a trend trader, your main objective is to use the trend to your own advantage. If the currency pair is in a downtrend, you should look only for short entries and ignore any opportunity to go long. More so in the same instance, if the pair is rallying, you must find your entry point and locate a greater resistance level. The Tops and Bottoms If the trader waits for the oscillator to turn before entry, he will not be able to enter at the absolute peak. There are several traders who seem to be excessively concerned with achieving the ultimate entry point; they desire to sell short at the peak and proceed long at the absolute bottom. The problem in choosing tops and bottoms is that it is a dangerous game. No one can really foretell the peaks and valleys in stocks, options, futures, as well as forex. Any trader who tries to achieve this is simply attempting to get lucky. If the trader waits for the momentum to turn, he or she has no chance of entering at the very top or bottom which is fine. Always remember that an experienced trader is willing to sacrifice a portion of the move, in exchange for the enhanced probability of success that patience grants. The Entry Signal and Stop Placement To know when to enter your short trade, it is important to refer as the exchange rate slides and the RSI descends from overbought levels. The trader can enter short within the vicinity or point at which the Relative Strength Index is no longer providing an overbought reading; this should also be the point when the exchange rate drops. RSI or Relative Strength Index is used to measure the activity of the market as to whether it is over sold or over bought. Additionally, it provides the trader an indication as to which way the market is going. Placing the stop is also important and must be immediately applied in order to gain protection from any adverse movement. The trader must know how to stop at a certain point, again by referencing the RSI. It is important for the trader to consider the possibility, that after his or her entry, the exchange rate could rally further. If the pair trades above the stop point, it is advised not to hold on to it, as it could only be breaking out to the upside. And so, the stop should be placed in a location where the trader will be taken out of the trade if a new high is reached. Knowing When to Stay Out If the currency pair is rising up from support, the trader should not enter a long trade and try to gain from a possible bounce. In a multiple time frame strategy, the main focus is to trade only in the direction of the trend and to disallow trades that go against the trend. It does not mean that the trades going against the trend are never profitable because anything can occur in an individual trade. A trader who fights against the trend on a steady basis will only have difficulty in finding success, as opposed to some who follows the trend. When a trader properly uses the multiple time frame strategy, he or she has the capacity to see the exchange rate rising. This kind of trader would not also be tempted to go long and battle against the odds. The correct attitude for trading should be to allow the exchange rate to rise and hope that it creates another opportunity for short entry.