Multi Timeframe analysis and trading is a concept that traders learn very late in their trading journey. The logic of trading multi timeframe is simple: Trade in the direction of longer timeframe by participating in the shorter timeframe. This approach to trading can become objective when we use Point and Figure charts. In today’s newsletter, let us understand how to analyse and trade stocks on multiple timeframes using Pattern Cluster.

Understanding Pattern Cluster

Point and Figure charts are breakout charts. Even the simplest pattern on this charting method is a breakout pattern. This concept of breakout can help us trade in the direction of the bigger box size by participating in the direction of the smaller box size. A single swing on a bigger box size is made up of multiple swing breakouts on the smaller box size. This allows for multiple entries and reduces risk because of smaller stop loss.

Pattern Cluster is a method to trade multi timeframe on Point and Figure charts. Because Indian markets are inherently bullish, we will discuss how to trade bullish pattern cluster. The rules of pattern cluster are:

1. A bullish breakout pattern should be active on 3% (Daily) box size

2. A bullish breakout pattern should be active on 1% (Daily) box size

3. Trade bullish breakouts on 0.25% (Daily) box size.

When we say the pattern should be active, we mean that currently, the must be in the breakout column. We are essentially trading breakout of a bigger box size but using a smaller box size to do it. Breakout patterns can be a Turtle, Triple Top, Quadruple Top, Double Top, Trap, a Follow-Through patterns etc.

Observe the chart below of ADANIPORTS on 3%, 1%, and 0.25% (Daily). The chart pane on the left side shows a bear trap active on 3% chart. The pane on the top right shows an active Double Top Buy pattern on 1% chart. On the 0.25% chart on the bottom right pane, there is a breakout pending. Upon breakout, the price will complete a bear trap pattern.

In the chart below of MARICO, the left pane shows 3% chart. The top right pane shows 1% chart, and the bottom right pane shows 0.25% chart. On the 3% chart, the price is in an active Double Top Buy pattern. On 1% chart, the price is in an active Anchor follow through pattern. On 0.25% chart, a Double Top Buy breakout is awaited.

Pattern Cluster is a powerful approach to multi timeframe trading because by trading active breakout patterns on the bigger box size, we are participating in high probability trades on a smaller box size. This is one of the concepts discussed in my course on Point and Figure charts available on The Noiseless Trader platform as part of the TNT One membership. If you are already subscribed to the membership, take out a few hours this weekend and revise the concepts. And if you do not have a membership, do check out TNT One to learn technical analysis in a structured manner. Check out TNT One using the link below 👇👇👇