The important aspect of trading is to participate in the direction of the trend. The Dow theory suggests that the prices move in two types of trends: Primary and Secondary. It has also been observed that these two trends take place on multiple timeframes simultaneously. That is, a primary trend on a higher timeframe is made up of several primary and secondary trend on the lower timeframe. For example, if the higher timeframe is bullish, the lower timeframe will consist of several bullish and bearish moves.

This is the logic behind multi-timeframe analysis. Multi timeframe analysis is a top-down approach where the price and its trend is analyzed on higher timeframes and the trade is taken on a lower timeframe in the direction of the higher timeframe trend. Multi timeframe analysis is important because of two reasons:

1. It allows the trader to trade in the direction of the higher timeframe by participating based on patterns of lower timeframe.

2. The trader is making an informed decision by considering the trend of all the timeframes.

Multi timeframe analysis on PnF charts?

PnF charts are noiseless charts. The unique feature about these charts are their reversal criteria. These are a 3 box reversal charts. This means that the charts will enter from column of X (O) to column of O (X) only when the price reverses by 3 times the set box size. On candlestick charts, timeframes are based on day, week, month, quarter, year etc…. But on PnF charts, the box sizes are the timeframe. The box size can be set to anything as per the trader’s preference but the standard box sizes are 0.25% (Daily/1-min), 0.5% (Daily), 1% (Daily), 3% (Daily) and 5% (Daily).

A column reversal on higher timeframes like 3% charts are an important information for a trader.

To conduct multi timeframe analysis on PnF charts, the box sizes that can be used are 3%, 1% and 0.25% (Daily).

Observe the chart below of 3MINDIA. On the 3% chart, the most recent column is column of X. The low and high of the column are 30212.83/- and 37157/- respectively. The same price action is represented by the DTB on the 1% chart. But when the box size is set to 0.25%, the marked box represents the column of X on the 3% chart.

A trade setup based on Multi timeframe analysis

A simple breakout strategy can be created on based on multi timeframe analysis on PnF charts.

The strategy is called BOOST.

BOOST stands for Breakout, Os at same level, Support, & Trend. Bullish BOOST is discussed here.

The logic behind this setup is to trade in the direction of the higher box size by participating in the breakout on the lower timeframe. 3%, 1% and 0.25% box sizes are used.

The Rules of BOOST are:

On 3% chart: Price in column of X or Os at same level is active or a Bullish weak breakout.

On 1% chart: Price is in column of X

0.25% chart: Not a Double top Buy.

The Os at same level or Bullish weak breakout on Higher timeframe of 3% suggests the trend is strong. Not a double top buy on 0.25% chart allows for participation upon breakout with a small stop loss.

To improve the accuracy of the setup, a 21 column EMA line can be added as a trend filter. Relative strength chart can also be used to select stocks that are outperforming the market.

Observe the chart below of DIVISLAB. The price formed an O at same level pattern on 3% chart and is in the column of X. On 1% chart, the price has given a Double top buy and is in column of X as well. The 0.25% chart shows the price is about to give a Double top buy breakout. This can be used as a signal to buy the stock with the low of the breakout column as stop loss.

Observe the chart below of RELIANCE. The price on 3% chart is in column of X. The price is about to complete a bear trap pattern on both, 1% and 0.25% charts. The breakout on 0.25% chart can be used to trade long the stock.

BOOST is one of the interesting strategies that was built from the basics of technical analysis. It is simple and effective as well. This strategy is one of the few I teach in my course on PnF charting method. If you found this strategy interesting and are curious to learn a new charting method that will improve your trading system, do check out the course: