Thursday 23 October 2008

Multiple Time Frames and Hilbert Sine Wave

Hope your Emini trading is going well. I've had a lot of interest in my version of the Hilbert Sine Wave (Better Sine Wave) recently. So I thought I'd post a quick article on how you can use the Hilbert Sine Wave with multiple time frames.

The image below shows a TradeStation workspace with 12 Emini charts. I'm using @ES.D, the continuous Emini contract with day session data only.

Emini Multiple Time Frames Image

Multiple Time Frames and Hilbert Sine Wave

The multiple time frames start with the lowest time frame (1 minute) in the top left and progress down in columns until you reach the highest time frame (weekly) in the bottom right. The time intervals are chosen so that there are always a whole number of bars per trading day. For example, there are exactly five 81 minute bars in a trading day. The 12 time frames charted are, in ascending order:

1 minute
2 minute
3 minute
5 minute
9 minute
15 minute
27 minute
45 minute
81 minute
135 minute
Daily
Weekly

The first advantage of seeing all time frames at once is that trend moves in the lower time frames can be placed in the context of cycle moves in higher time frames. This is a key principle of cycle analysis and multiple time frames - when cycles fail in the lower time frames and break out into trend moves, these trend moves are seen to be cycle moves in higher time frames.

The second advantage is that cycle moves sometimes fail in the lower time frame and end up over-shooting but then reverse because they have been "caught" by the cycle developing in the very next higher time frame. A recent example is shown below.

Emini Hilbert Sinewave 81 minute Image

Hilbert Sine Wave (Emini 81 minute)

The 81 minute Emini chart recently had almost perfect Hilbert Sine Wave support and resistance levels (labeled "PB" for pullback and "END" for End of Trend). But then in the next 2 cycle turns, the Emini overshot the support and resistance levels - shown by red and white dots.

Emini Hilbert Sinewave 135 minute Image

Hilbert Sine Wave (Emini 135 minute)

When looking at the very next higher time frame - the 135 minute chart - you can see that the first group of cycle turns didn't catch the top and bottom as well as the 81 minute chart. However, the last cycle group picked the resistance and support levels nicely.

What I see is the predicted cycle turning point in the 81 minute chart being "overshot" and "caught" by the stronger cycle in the next higher time frame. Of course, looking at the volume patterns at these turning points will also allow you to gauge whether the cycle turning points will hold - but that's another article!

Good luck with your Emini trading.