Trader Risk Profiling and Position Analysis
Below are a few examples that constitute bullish action on a chart:■ (^) Higher highs and higher lows
■ (^) Bullish volume or open interest action
■ (^) New highs
■ (^) Swings low failures
■ (^) Upside breakouts of significant overlay indicators
■ (^) Price being contained and supported by a trendline or moving average
■ (^) Confirmation of bullishness in the broad market
■ (^) Bullish charts patterns
■ (^) No bearish divergence or overextension indicated between price and
indicators
■ (^) Bullishness indicated on sentiment indicators that are not at extreme values
26.7.2 Collecting bearish indications
Below are a few examples that constitute bearish action on a chart:
■ (^) Lower highs and lower lows
■ (^) Bearish volume or open interest action
■ (^) New lows
■ (^) Downside breakouts of significant overlay indicators
■ (^) Swings high failures
■ (^) Price breaching a supporting trend line or moving average
■ (^) Non‐confirmation of bullishness in the broad market
■ (^) Bearish charts patterns
■ (^) Bearish divergence or overextension indicated between price and indicators
■ (^) Bearishness indicated on sentiment indicators that are close to or at extreme
values
26.8 Multi‐Timeframe Confirmation
It is very important to always refer to at least one higher and one lower degree of
trend when considering participating in or analyzing the market. The longer‐term
market action (normally viewed through higher timeframe charts) is used to identify
the direction of the prevailing or larger trend while the shorter‐term price action
(normally viewed through lower timeframe charts) is used to time entries and exits
more effectively, and at the same time allowing for a lower‐risk exposure as a result
of trading with smaller stop sizes on the lower timeframe. Hence, in order to fully
understand the current market sentiment or bias, and to effectively and efficiently
participate or engage in the market, it is always wise to refer to all three degrees of
trend.
Many traders employ multi‐timeframe analysis (MTF) as a strategy for gaug-
ing higher‐probability entries in the market. It is possible to set up the indicators
and oscillators in a way that displays the values for the higher, current, and lower
timeframes simultaneously on a single chart. Multi‐timeframe setups were dis-
cussed in the earlier part of this handbook.