Why the Markets Are Fractal—And Why Multiple-Timeframe Analysis Works

Listen to the article:

By Brian Shannon and written with Kyna Kosling (@KayKlingson).
July 9, 2025

Your timeframe then directs which trend and information to prioritize.

⚓️ Example #1: Day trading

Some participants may choose to day trade because they can’t stomach overnight uncertainty (including potential gaps), and are able to continuously watch the market.

So, what are the strategy implications?

• • Intraday charts become your main timeframe
• • Try to capitalize on minor trends, preferably aligned to longer-term trends
• • Pay attention to information, technical or fundamental, that can cause an immediate reaction

⚓️ Example #2: Swing trading (days to weeks)

Other participants may prefer to swing trade because they can’t watch the markets throughout the day, or because they prefer to make fewer decisions.

Here, the strategy implications are:

• • Focus on information, technical or fundamental, that can trigger a multi-day to multi-month move…
• • So, the natural main timeframe is the daily or weekly chart
• • Try to capture the secondary trend, ideally in line with the primary trend

⚓️ Example #3: Position trading (weeks to months)

Meanwhile, position traders focus on:

• • The primary trend
• • Weekly or monthly charts
• • Information perceived to have long-lasting impact on the value of the stock

Notice the pattern:

The higher the timeframe, the higher the conviction.

When trading with the primary trend, participants tend to make decisions more deliberately.

Plus, those decisions are based on the longer-term message of the market, which tends to be clearer and more reliable. Information at this higher level is inherently expected to remain valid for longer—accelerating earnings, for example. Or a stage 2 uptrend fueled by institutional buying, who can’t quickly sell their huge positions, making that trend more difficult to reverse.

As Benjamin Graham said:

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

Short term, the market tries to seduce you, whispering evil little thoughts in your ear.

Decisions are made faster intraday, which intensifies emotions.

You’ll also need to make more and faster decisions, which makes it more likely for emotions to creep into your decision-making process, ruining your plans. Plus, the more decisions you need to make, the more likely you are to make a mistake—even something as silly as fat-fingering a trade!

Yet many people are drawn to shorter timeframes, because they’re in a hurry to make money…

…but most people lack the emotional disposition (and skill set) to day trade successfully.

I’ve been trading full time since 1991, and I kid you not—I’ve seen tens of thousands of people attempt to day trade. Out of all those people, I’ve seen maybe a dozen people succeed, in the long run, as day traders.

The longer your timeframe, the fewer decisions you need to make, and the better your chance of achieving consistent profitability.

However, make no mistake:

When money is on the line, emotions are always involved—irrespective of timeframe.

This creates the repeating patterns (and overall market structure) we can observe across all timeframes.

Here’s an example — notice how the simple break of resistance led to a quick move higher on both timeframes, in both (different) stocks:

This reflects the fractal nature of the market.

You can take any timeframe, zoom in or out, and observe similar patterns and stages at every level of magnification.

That’s because in an auction market, price movement is always a function of supply and demand.

One of the reasons I say ‘only price pays’ so often is that price allows you to separate truth from opinion. Price action reflects the true state of supply and demand. And supply and demand come from the participants—the one true constant in the market.

People tend to act, react, and overreact in certain ways in specific, repeatable situations.

This human tendency gives the market an overall structure—the various stages within the life of each stock (accumulation, markup, distribution, and decline).

Charts aren’t just a bunch of patterns, but something to be humanized.

If you listen, they’ll tell you where other participants are likely to make buy and sell decisions. Because while you can’t know the precise reasons for each individual’s actions in the market, you do know this:

All participants are ultimately driven to either make money or avoid losing it.

For example, let’s say we have a level of resistance—a level where the source of supply is (temporarily) exceeding the source of demand. That resistance then gets broken after repeated tests, as demand overwhelms supply at that level (just like we saw in the earlier charts).

The market then rotates higher to find further sources of supply to satisfy the demand. Plus, the imbalance often increases as a range-bound stock clears resistance, because:

• • Demand increases as sidelined cash is attracted to the potential of a developing upward move
• • Supply at this level is removed from participants who realize the stock is in greater demand, and will likely see more favorable prices
• • Short sellers cover to minimize losses

We can observe this crowd behavior on every timeframe. (Though keep in mind that the more demand outweighs supply, the stronger the subsequent move in both magnitude and duration. That’s why higher timeframes tend to produce more reliable moves).

This observation reveals the fractal nature of markets.

All participants, on all timeframes, express their opinion through the same price discovery mechanism.

All participants gather in a central marketplace, using the same supply-and-demand mechanics, with the same crowd psychology at play.

Nuances, such as emotional intensity, may vary per timeframe. But since participants go through the same range of emotions, we can observe the similar patterns on each timeframe.

This allows short-term traders to experience on smaller timeframes what might take longer-term investors years to observe, giving traders the opportunity to learn market structure faster by observing price action on intraday timeframes.

Important: Do NOT participate intraday unless you are skilled at this type of trading! You can learn from the pros by observing them, but attempting to compete against them will almost certainly result in failure.

You can improve your odds through multiple-timeframe alignment.

Multiple-timeframe alignment significantly increases the odds, and potential size, of an imbalance in supply and demand, sparking a large movement in price.

The lowest-risk, highest-probability trades always come from trading in the direction of the long-term trend. This is a simple matter of math: The long-term trend is the sum of many shorter-term trends. Long-term trends also take a lot of energy in the opposite direction to reverse.

And if the longer timeframe lacks clarity?

Interpret that as a message from the market to avoid the stock—at least, for now. Cash is a position. When uncertainty reigns, cash affords you an objective view of the market while you wait for a low-risk entry signal.

Published by Alphatrends.net
https://alphatrends.net/archives/podcast/why-the-markets-are-fractal-and-why-multiple-timeframe-analysis-works/