Page 22 - Trading #101 Course – Part One: Trading Basics

TRADING #101 COURSE – PART ONE: TRADING BASICS /2017-10-06

Using the Higher Time Frame Filter

Don’t filter trades just to be seeking the “Holy Grail.”. In the final analysis, you may
decide to “let go” and not use filters at all. Be sure your filters do not cause you to form
strong opinions that override your risk control discipline. Instead, use filters to confirm
your trading signals.

Over time, your trading signals will catch major trends and, combined with sound money
management, is all you need. The challenge is during “draw-down” when it seems that
you are being “stopped- out” often and “need” to filter your trades. During these “draw-
downs,” your psychology will be tested.

Needing filters can be an illusion. Even while using filters, you will experience “draw-
down”. However, short 1-minute to 5-minute intraday time- frames are especially
influenced by traders of higher time frames.
Therefore, trading systems can be subject to losses more frequently due to trading
activity outside their time- frame, which they cannot see or measure. In this case, filters
can be beneficial.

The shorter time frames are the hardest to trade because price patterns that develop
amongst traders in that time frame can be offset by trading on higher time frames.
Filters are useful especially on these short times frames.

NOTE: Trade only in the direction of the trend based on a higher time- frame. Big
profitable trends occur when many different types of traders and investors from many
time- frames are participating in a trend.

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