Using a "cascade of time" ranges

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This branch discusses the tactics of working with the "cascade of time ranges" (CTFT). Have you ever traded on multiple time ranges? What time range do you usually use when trading? Most veteran traders usually use multiple ranges when it is necessary to identify support and resistance zones. However, although many traders may use multiple time frames, they often narrow their horizons when opening a trade and focus only on one time range.

In this branch, we will discuss a strategy called "cascade of time ranges". The strategy is based on the breakdown of consolidation zones and is a very useful tool for technical analysis. If you use it correctly, it will allow you to identify and make many profitable trades in multiple time ranges. In the best case scenario, you will be able to profit from both short-term and long-term transactions at the same time. When momentum is detected on a smaller time frame, it means that the trend begins to form on a larger time frame. CTFT is a technique that allows you to profit from large price movements.

 

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Don't focus on a single time frame.



Most technical traders use a technique known as"multi-time frame analysis". This technique uses a larger time range to determine the trend over a smaller time range. For example, a trader can use a trend on daily charts to confirm the direction of movement and momentum on a 30-minute chart. The idea behind this tactic is that a long-term trend helps you make the right choice when determining a short-term trend. However, many traders, having identified a short-term trend, forget that a long-term trend can also give very good opportunities to open positions.



This tendency to use only one level of analysis often leads to players missing out on great trading opportunities. Many traders believe that if they have opened a position, they now have nothing to do but sit and watch it in the time range in which the trade was opened. Using the technique suggested here, you can analyze the outcome of a trade for other time frames. In addition, you will be able to make new profitable trades that you would otherwise ignore.

 

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relay Race and champagne spray.



To imagine what a CTFT is, imagine a relay race in which the 30-minute chart passes the stick to the 4-hour chart, and it, in turn, passes it to the daily chart. Please note that in this situation, there may be partial matches, when one runner (deal) continues to run, and the other begins his run. Another good example can be given by several champagne glasses placed in a pyramid. When the champagne that is poured from the bottle fills the first glass (time range 1), it begins to pour into the glass below. In this example, each glass at the lower level represents a longer-term time range.



The point of all this is that if you find a consolidation pattern, such as a symmetrical triangle on a longer-term time frame (TF3), you can predict a breakout of the consolidation range on short-term time frames (TF1 and TF2). By identifying multiple targets across all three time ranges, you will have more opportunities to profit from price movements that will cascade from one time range to another.



Trading on a cascade of time ranges works best in the Forex market, since it is characterized by strong trend characteristics and inertial movements. Another reason that makes the Forex market the most suitable for using this tactic is the fact that trading on it takes 24 hours, as a result, trends develop continuously, without breaks that are typical for other markets.

 

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Identification of the consolidation pattern

The key to CTFT is to identify the consolidation pattern over the largest time range. The figure below shows the USD/JPY chart for April 2006. Note that all three charts (30-minute, 4-hour, and daily) show consolidation patterns. On the daily chart, we see a symmetrical triangle, on the 4-hour chart, an uptrend channel where support has just been broken, while on the 30-minute chart, a breakout of the horizontal consolidation range is visible.

 

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Template

The key to cascading trading is the trading pattern (see the picture below). This template is a plan for your attack and retreat. Remember - - those who can't make a plan are always doomed to fail. Once you set your goals, you can easily make deals. In this example, the template is based on the April collision for the USD/JPY pair that we have already discussed above. Please note that all profit targets and stop losses are calculated in advance. Accordingly, you can calculate the risk-reward ratio. When a trade is triggered, the time and date are entered in the template.

By identifying a consolidation pattern on a long-term chart, we can try to catch price movement on short-term time ranges. Please note that the deal on the third time frame (the longest) was the last of the three that was concluded. Ideally, previously concluded deals are also closed before those that were concluded later. Profit goals should be stable. You should not be tempted to adjust them in the process when the position is open.

 

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Sample template

Let's look at the template in the image below. In this example, the USD/JPY pair was trading at 118.48 when the analysis was performed on April 16, 2006. TF1 is a 30-minute chart, a signal to open a short position at the price of 118.40. There are three profit targets on the template: 118.15, 117.97 and 117.53. Stop loss at 118.74. Profit targets are marked in green on the chart. The bottom line shows that all three profit goals were achieved in 16 hours and 15 minutes.

In this example, all profit goals were met for all time ranges. On may 12, 2006, the USD/JPY pair formed a minimum of 109.39, reaching the profit target on the 3rd time range. The figure above shows the process of achieving targets.

The method of determining targets is not included in the tasks of this article. Technical analysis is a combination of science and art. Each trader has their own way of defining goals using support and resistance levels, pivot points, Fibonacci, MA, and so on.

When calculating trades, you need to have an idea of how long it will take to complete a trade when working on each price range. It is preferable that targets are reached in less than a third of the time it took to form a consolidation model (for example, if consolidation took 60 days, then the target on the daily chart should be reached in about 20 days).

In trading, you can never predict anything with absolute accuracy. Of course, your models may not work. Movement reversals and other troubles may occur. You should set stop losses based on your profit tolerance and trading plan.

 

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how CTFT works step by step.



1. First, you should have a clear consolidation model over the largest time range (TF3).

2. ideally, consolidation patterns should also be identified on the TF1 and TF2 time ranges.

3. Define multiple targets for each time range.

4. Determine the stop loss for each time range.

5. Determine the amount of capital you can risk for each time range.

6. when positions are open, keep track of how quickly your targets are being reached. Some orders can be filled quickly. On others, rollbacks and consolidations may occur before the goal is reached.

7. Achievement of targets should occur within reasonable time limits.



You can also use trailing stops to fix your initial profit, but you can also opt out of them to allow your profit to grow. Trailing stops are best used if the speed is fast and the momentum is strong and the situation is developing in your favor.

 

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Stop losses and position sizing.



Conservative traders prefer not to take risks with so much hard-earned money. Stop losses on large time ranges should be larger than smaller ones. The size of stops is determined in such a way that it is possible to make a profit, even if the profit goal for the third chart is not taken. For example, in this case, the stop loss for the third time range is 156 pips. The combined profit for the first and second charts is 195 pips. Thus, in the worst case, the profit on all three charts will be 39 pips.



Cascading trading requires excellent capital management skills to limit the risk that transactions present to your Deposit. The key rule is to use no more than 10 % of your Deposit per transaction. Since the tactic involves three separate trades on three different time ranges, you should have enough risk capital in your account. If your Deposit is $ 100,000, you can place a maximum of $ 30,000 for all three trades.