V. 26:10 (46-50): Directional Ratio Revisited by John “Jay” Norris

Directional Ratio Revisited by John “Jay” Norris

When trading, you must look at different time frames. Here’s how you can blend the different time frames using the forex market as an example.

It used to confuse me when I’d be analyzing a market and I would see an impulse rally on Wednesday — “impulse” meaning trending action — and then see an impulse selloff on Thursday. I couldn’t understand it. How could the market show such conviction two days in a row, yet move in opposite directions, with no marked change in the macroeconomics?

It wasn’t until I understood how different traders operated on different time frames that I grasped how price action like this could unfold in such a regular fashion. That confusing price behavior also dovetailed with one of the first things I was told on the trading floor so many years ago, which was, “Lose your opinion, not your money.”

I finally started to get a handle on the different time frames after going over my trades with my mentor. I would record a losing trade, and in going over it with him, he would say, “Didn’t you see the trend on the 60-minute chart?” or “I see the trigger you took on the 15-minute chart because of the trend on the 60-minute, but couldn’t you see the trend on the four-hour chart?”