Timeframe continuity is the method of aligning lower timeframe strat actionable signals with higher timeframe trends to get high-probability trade setups. In trading, you will be able to extract profit from the market only if you are trading with the big institutions. If you are trading against them, then you will end up losing. That’s why it is necessary to align the timeframes to filter high-probability trade setups.
In this post, I will explain the timeframe continuity concept in detail along with examples, so make sure to read the full post without skipping any steps.
How to Identify the Higher Timeframe Trend?
In strat trading, we always use two strat patterns to identify the direction of the trend on a higher timeframe:
- 2-2 pattern
- 1-3 pattern
A single candlestick represents a price range with high and low values. The break of the high or low decides the future direction of the market. For example, if the price breaks the high, the trend will be bullish; however, if the price breaks the low, the trend will be bearish. You can also see the same phenomenon in the 2-2 pattern. When a 2 candlestick forms, the next 2 candlestick will decide the direction. The color of the candlestick does not matter; only the breakout of the high or low determines the market’s direction.
In simple terms:
- If a 2-2 bullish continuation pattern forms, the trend will be bullish.
- If a 2-2 bearish continuation pattern forms, the trend will be bearish.
- If a 1-3 bullish pattern forms, the trend will be bullish.
- If a 1-3 bearish pattern forms, the trend will be bearish.
Now you know that if one of the above strat patterns forms on any higher timeframe, you will be able to identify the trend direction easily.
Also, keep in mind that after a 2 candlestick, once the next candlestick breaks the high/low, the 2-2 pattern becomes valid. You do not have to wait for the recent 2 candlestick to close. This is the most important part to understand.
How to Identify Timeframe Continuity?
According to strat trading concepts, if we align the trend on at least two higher timeframes with the short timeframe trade setup, it will be called timeframe continuity.
For example, let’s suppose I am trading on the 15M timeframe in XAUUSD. The higher timeframes will be daily and weekly. Now, I will check these higher timeframes, and if both are making a 2-2 bullish continuation pattern, then on the 15M timeframe, if any bullish strat pattern forms, like 2-1-2 bullish reversal or 2-1-2 bullish continuation, it means the direction of all timeframes is aligning, making it perfect to trade bullish strat patterns on lower timeframes.
You can also choose more than two higher timeframes for more conservative setups. I hope you can now align higher timeframes for high-probability trade setups.
Avoid Scenario 1 Formation in Timeframe Timeline
When identifying timeframe continuity, if a Scenario 1 or inside bar pattern forms on any higher timeframe, you should always avoid trading until the breakout of the inside bar. Inside bars represent indecision in the market, and we will trade only after the market decision, which will be confirmed only after the Scenario 1 breakout.
Let’s understand this in more detail with an example.
Timeframe Continuity Example
As you can see on the EURUSD chart, a 2U-2U pattern was forming on the weekly timeframe. Then I switched to the daily timeframe and found that a 2U-2U pattern was forming again. Both these higher timeframes were aligned.
Remember that you should check the most recent two candlesticks to identify the 2-2 pattern—the most recent live candlestick and the candlestick before this live candlestick.
Next, I switched to the lower timeframes to identify the strat actionable patterns that aligned with the bullish higher timeframe trend.
How to Trade Strat Patterns Using Timeframe Continuity
To trade using timeframe continuity, first, determine the lower timeframes on which you want to trade. If you are day trading, the lower timeframes will be 15M and 5M, while the higher timeframes will be daily and weekly.
I have also added a chart below explaining the higher and lower timeframes based on the nature of the trading strategy.
| Trading Style | Lower Timeframe | Higher timeframes |
|---|---|---|
| Day Trading | 1M, 5M, 15M | 8H, Daily, Weekly |
| Swing Trading | 1H, 4H | Daily, Weekly, Monthly |
| Position Trading | Daily | Weekly, Monthly, Quarterly |
Steps to Trade Using Timeframe Continuity:
- Identify the trend on higher timeframes using 2-2 and 1-3 patterns.
- On lower timeframes, find the actionable strat patterns that align with the higher timeframe trend.
- Open trades on lower timeframes and place a stop loss according to each actionable signal.
- Take profit based on any reversal signal on higher timeframes.
Using higher timeframes for take profit will provide very high risk-reward trades and help keep your portfolio green.
Conclusion
I think timeframe continuity is the most important concept that every strat trader should understand in detail. Without timeframe continuity, it will be very difficult to make a profit in the market.
In trading, you should always keep in mind that if you make a profit, someone else is losing. Every trader is trying to make a profit from the market, but only those who put in extra effort with a properly planned strategy will succeed.
So, make sure to properly backtest the timeframe continuity concept, and don’t forget to comment below if you have any questions. I will try my best to answer the comments.
Thanks!
