In my previous article on dynamic multiple time frames, I introduced one of my own approaches to trading: The concept of multiple time frame trading. The essence of the strategy is easy: Use the higher time frame price activity to define the tradable trend as well as potential support and resistance levels. For example, if you are trading the Treasury bond futures contract and you follow the market using 50-minute bars, then look to the daily bar's activity to indicate the trend and support and resistance levels.

The same idea applies if you are trading a stock on a daily basis -- say, Microsoft -- in which case, the weekly bars will be the basis for the trend as well as the important support and resistance points. That is the foundation of multiple time frame trading.

Besides the effectiveness of using a method based on a multiple time frame approach, another advantage is the method need not be complicated. A trader can make his or her method as simple or as complicated as desired. For me, though, the simpler the application, the better the results.

Today, this approach is gaining ground with professional traders for one reason: It works. Let's look at some techniques for defining the trend and support and resistance levels and work toward a trading plan.

GANN SWING TRADING

In my book A W.D. Gann Treasure Discovered and in my February 1998 article for STOCKS & COMMODITIES, I presented a trading plan based on Gann swing trading. I defined the trend and support and resistance levels based on Gann swings, and explained how the Fibonacci Trader computer program plotted the Gann swings needed for those trading plans. A recap of these rules can be seen in the "Gann swing trading" sidebar.

We can use those very same Gann swings to plot the Gann swing channels. There is no change to any of the calculations or definitions that we use to define the peaks or valleys, which in turn define the resistance and support levels as well as the change of trend definition. All other definitions will remain the same.