The Daily-4 Hour-1 Hour Trading Strategy is a highly effective method for day traders and swing traders who aim to capture medium-term price movements while maintaining a clear understanding of the broader market trend. This strategy involves using three different timeframes — the Daily, 4-Hour, and 1-Hour charts — to identify the overall trend, refine entry and exit points, and optimize trade timing.

By combining the Daily chart for long-term trend analysis, the 4-Hour chart for setup confirmation, and the 1-Hour chart for precise entries, this strategy allows traders to trade with the overall trend while fine-tuning their trade execution to capture profitable moves.

Why the Daily-4 Hour-1 Hour Strategy Works

• Trend Confirmation: By using the Daily chart to identify the primary market trend and the 4-Hour chart for setup refinement, traders can align their trades with the dominant market direction, increasing the probability of success.
• Optimal Entry Points: The 1-Hour chart offers the precision needed for accurate entry and exit points, allowing traders to take advantage of short-term price action while staying in line with the longer-term trend.
• Clear Risk Management: The strategy provides clear stop-loss and take-profit levels based on higher timeframes, reducing risk and improving trade management.
• Increased Trade Accuracy: Combining multiple timeframes filters out market noise and provides a clearer picture of price action, helping traders make more informed decisions.

How the Daily-4 Hour-1 Hour Strategy Works

This strategy uses three timeframes: the Daily chart for long-term trend identification, the 4-Hour chart for setup confirmation, and the 1-Hour chart for precise entries.

1. Identify the Trend on the Daily Chart

Start by analysing the Daily chart to determine the overall market trend. The Daily chart provides a broad view of the market, helping you identify the primary direction in which the price is moving.

• Bullish Trend: Look for higher highs and higher lows on the Daily chart, and ensure the price is above the 50-day moving average or other key long-term indicators (such as the 200-day MA).
• Bearish Trend: Look for lower highs and lower lows, and ensure the price is below the 50-day moving average or other significant long-term indicators.
• Neutral or Consolidation Market: If the price is moving sideways or inside a range, the market may be in consolidation, and trading may be less predictable.

Once you have identified the overall trend, move to the 4-Hour chart for setup confirmation and entry refinement.

2. Confirm Setup on the 4-Hour Chart

On the 4-Hour chart, you will refine your entry signals and confirm the trend direction established on the Daily chart. The 4-Hour chart offers a medium-term view that provides more relevant price action for capturing trades during the day.

• For Bullish Trades:
  • Look for price to pull back to a key support zone (e.g., Fibonacci retracement levels, previous swing lows, or moving averages) on the 4-Hour chart.
  • Ensure the RSI is above 50, confirming bullish momentum, or use the MACD to confirm a bullish crossover.
  • Look for bullish price action patterns (e.g., bullish engulfing, hammer, morning star) at key support levels.
• For Bearish Trades:
  • Look for price to retest a key resistance zone (e.g., Fibonacci retracement levels, previous swing highs, or moving averages) on the 4-Hour chart.
  • Ensure the RSI is below 50, confirming bearish momentum, or use the MACD to confirm a bearish crossover.
  • Look for bearish price action patterns (e.g., bearish engulfing, shooting star, evening star) at key resistance levels.

Once the setup is confirmed on the 4-Hour chart, move to the 1-Hour chart for precise entry points and trade execution.

3. Time the Entry on the 1-Hour Chart

The 1-Hour chart is used to identify the exact entry point. It allows you to take advantage of short-term price movements and pinpoint entry levels for trades that align with the overall trend.

• For Long Entries:
  • Wait for price to pull back to a key support zone or moving average on the 1-Hour chart.
  • Look for a bullish reversal pattern (e.g., bullish engulfing, hammer, morning star) as confirmation of the trend continuation.
  • Ensure the RSI is above 50 and price action aligns with the bullish trend from the higher timeframes.
• For Short Entries:
  • Wait for price to retest a key resistance zone or moving average on the 1-Hour chart.
  • Look for a bearish reversal pattern (e.g., bearish engulfing, shooting star, evening star) as confirmation of the trend continuation.
  • Ensure the RSI is below 50 and price action aligns with the bearish trend from the higher timeframes.

4. Set Stop-Loss and Take-Profit Levels

Once you’ve identified the entry, set your stop-loss and take-profit levels based on the 4-Hour chart and key support/resistance levels.

• Stop-Loss:
  • For long trades, place your stop-loss below the most recent swing low or below the support level on the 4-Hour chart.
  • For short trades, place your stop-loss above the most recent swing high or above the resistance level on the 4-Hour chart.
• Take-Profit:
  • For long trades, set your take-profit at the next resistance level or use Fibonacci extensions to project potential price targets.
  • For short trades, set your take-profit at the next support level or use Fibonacci extensions for downside targets.

5. Risk Management and Trade Management

• risk-to-reward ratio: Always aim for a minimum 1:2 risk-to-reward ratio to ensure that the potential reward justifies the risk you are taking on each trade.
• Position Sizing: Use proper position sizing to ensure that you are not risking more than 1-2% of your total capital per trade.
• Trailing Stop: Once your trade moves in your favour, use a trailing stop to lock in profits while allowing the trade to capture more gains if the trend continues.
• Partial Profit-Taking: Consider scaling out of positions at key support or resistance levels, or when the price is showing signs of a reversal.

Strategy Summary Table

Component	Details
Timeframe	Higher timeframe (Daily) for trend direction; middle timeframe (4H) for setup; lower timeframe (1H) for entry
Indicators	Moving averages, RSI, MACD, Fibonacci retracements
Entry Trigger	Price action patterns (bullish or bearish) and indicator confirmation on the 1H chart, aligned with Daily/4H trend
Stop-Loss	Below/above recent swing low/high or key support/resistance levels on the 4H chart
Take-Profit	Next support/resistance, Fibonacci extensions
Best Use Case	Forex, stocks, commodities during medium to long-term trends

Example: Bullish Daily-4 Hour-1 Hour Strategy on EUR/USD

1. Step 1: Identify the Trend on the Daily Chart:
   • EUR/USD is in a bullish trend on the Daily chart, with price consistently above the 50-period moving average and forming higher highs and higher lows.
2. Step 2: Confirm Entry on the 4-Hour Chart:
   • On the 4-Hour chart, price pulls back to the 1.1800 level, which aligns with the 38.2% Fibonacci retracement.
   • A bullish engulfing pattern forms at this level, confirming the potential for a trend continuation.
3. Step 3: Time Entry on the 1-Hour Chart:
   • On the 1-Hour chart, the price retraces to 1.1800 and forms a bullish engulfing candle, confirming the trend continuation.
   • The RSI on the 1H chart crosses above 50, supporting the bullish momentum.
4. Step 4: Enter the Trade:
   • Enter a long position at 1.1810, with a stop-loss at 1.1750 (below the swing low) and take-profit at 1.1900 (next resistance level).
5. Step 5: Exit the Trade:
   • The price moves up to 1.1900, hitting the resistance level, and the trader exits with a 3R profit.

Conclusion: Optimise Your Trading with the Daily-4 Hour-1 Hour Strategy

The Daily-4 Hour-1 Hour Strategy is a powerful approach for traders looking to capture medium-term price movements while ensuring their trades align with the broader market trend. By combining trend confirmation on the Daily chart, setup refinement on the 4-Hour chart, and precise entry points on the 1-Hour chart, traders can increase their chances of success and optimise their trade timing.

To learn more about how to implement the Daily-4 Hour-1 Hour Trading Strategy, enrol in our Trading Courses at Traders MBA and elevate your trading skills for greater success.