Identifying Swing Trades and Intraday SetupsLast week I had a client call and tell me they were having trouble with his setups (setups are the same regardless of whether you it’s identifying swing trades or intraday).  So I asked him to explain how he looks at his charts.  He said, “I see the setup on the 3 minute and then I go to the higher timeframes to make sure they agree with the setup.”  Of course, this is not working for him and I knew why.

When we begin looking on the lower timeframes then our perception is skewed to whatever the three minute chart says.  Why?  Because you are wearing the three minute rose colored glasses…… other words, you are not seeing the true market direction.  (This is true regardless of whether you are identifying swing trades or intraday trades.)  If the three minute is indicating a long position, then you look at the higher timeframes and “justify” a long position.  And, believe me, traders can justify any setup from this perspective.

And I explained this to him.  This morning he called to say thank you.  Simply changing the order of looking at his charts enabled him to identify with the THD setups.  Nothing earth shattering or amazing — just simply changing the order.

The setups didn’t change, the indicators didn’t change, and his methodology didn’t change.  He simply took off the 3 minute rose colored glasses so he could see clearly.  Now, identifying swing trades and intraday trades just got easier!  Since he tends to look to the left first, he simply arranged the higher timeframes on the left side of the screen and the lowest timeframe on the right side of the screen.

When identifying swing trades or intraday setups, always begin on the higher timeframe.

If you cannot determine the market direction on the higher timeframes, chances are you should not try to find setups on the lower timeframes.