Charts and timeframes
How one price path draws three different charts
A price path is a list of trades with times. The chart software groups those trades into bars. The group size is the timeframe. On M5, each bar covers five minutes. On H1, each bar covers one hour. The same trades are used, but the grouping changes the shape.
Grouping hides detail. Inside one H1 bar there are twelve M5 bars. The H1 bar shows only four numbers: open, high, low and close for that hour. The twelve M5 bars show the route the price took to reach those four numbers. A straight-looking H1 bar can contain a sharp fall and a sharp rise.
This is why USD/ZAR near 18.4100 can look up on one chart and down on another. The daily chart may show a higher close than yesterday. The M5 chart may show a fall over the last twenty minutes. Both are true. They describe different time windows. Neither chart is wrong.
What the timeframe decides before you enter
The timeframe sets the size of the noise you must survive. A stop placed on an M5 chart is close to the current price. A stop placed on a daily chart is further away. If you use a daily idea but an M5 stop, normal five-minute movement can close the trade before the daily idea has time to work.
The timeframe also sets the expected holding time. A move that takes four H1 candles needs about four hours. The same rand move on M5 may take forty-eight candles, or four hours, but with many small reversals. Your target must match the timeframe you chose, not the one you happen to be watching.
Costs do not shrink with the timeframe. Spread, commission and swap are charged per trade, and they vary between brokers. A small target on a fast timeframe can be eaten by costs. A larger target on a slow timeframe gives costs less weight, but needs a wider stop and more patience.
Keeping the plan on one timeframe
Pick one timeframe as your decision chart. Write it down. All entries, stops and targets come from that chart. Other timeframes are for context only. They can tell you if the longer trend agrees, but they do not change your stop or your target.
If you want to use a second timeframe, give it a fixed job. For example, the daily chart can set the direction, and the H1 chart can time the entry. The stop still comes from the H1 chart, because that is where the entry was made. The daily chart does not resize the stop after you are in.
When the market moves against you, check the decision chart first. If the decision chart has not changed its structure, the trade plan is still valid. Closing because a faster chart looks scary is a plan change, not risk management. Decide the timeframe before the trade, then let that timeframe govern the exit.
One move, three timeframes: 0.1500 rand on USD/ZAR
| Step | Amount | Note |
|---|---|---|
| The move itself | 18.4100 to 18.5600 | a rise of 0.1500 rand in USD/ZAR, the same price path on every chart |
| On M5 (each candle is 5 minutes) | about 30 candles | 0.1500 rand spread over roughly 30 five-minute candles, so the climb looks slow and full of small pullbacks |
| On H1 (each candle is 1 hour) | about 3 candles | the same 0.1500 rand over roughly 3 hourly candles, so it looks like a steady push |
| On D1 (each candle is 1 day) | 1 candle or less | the same 0.1500 rand may sit inside a single daily candle, so it barely shows |
| Money on 0.10 lots | R1 500 | 0.1500 rand move x 10 000 units per 0.10 lot = R1 500 before costs |
| Money on 1.00 lot | R15 000 | 0.1500 rand move x 100 000 units per 1.00 lot = R15 000 before costs |
Your broker sets its own spread, commission and swap, and these vary between brokers, so the rand amounts above are before any of those costs. The broker also rounds prices to a set number of decimals, which can vary, and your fill may differ from the price you saw on the chart.
Doing it once, step by step
These steps show you how to read one USD/ZAR move on three timeframes and keep your plan on one of them.
- 01
Open the same instrument on three timeframes
Load USD/ZAR on a daily, an H1 and an M5 chart. Keep the price scale visible on each. Note the current price, around 18.4100. Do not place a trade yet.
- 02
Mark the same clock time on each chart
Choose a time, such as 14:00. Find the bar that covers 14:00 on each chart. On M5 it is one small bar. On H1 it is one larger bar. On the daily chart it is part of one daily bar. This shows you the grouping.
- 03
Measure one move on each timeframe
Find a recent move of about 0.1500 rand on USD/ZAR. Measure how many bars it covers on M5, on H1 and on the daily chart. Write the three numbers down. The rand move is the same; the bar count changes.
- 04
Choose your decision timeframe
Decide which of the three charts will govern your trade. Write it down. Your stop, target and holding time will come from that chart only. The other two charts are for context.
- 05
Set the stop and target from that chart
On your decision chart, place the stop where the idea would be wrong. Place the target where the move would be complete. Check that the distance in rand is larger than the spread and expected costs, which vary between brokers.
- 06
Review only on the decision chart
While the trade is open, look at your decision chart to judge the plan. Ignore faster charts unless they are part of your written plan. If you close early because a faster chart moved, you have changed the timeframe after entry.
The mistake most people make here
The common mistake is to take a signal from one timeframe and manage the trade on another without adjusting anything else. Someone sees a strong daily candle, enters, then watches an M5 chart and closes on the first small dip, because the M5 noise feels like a reversal. The stop was sized for a daily move but the exit was driven by a five-minute move, so the plan and the chart no longer match. Decide the timeframe first, then set the stop, the target and the expected holding time to fit that same timeframe, and only look at the other charts for context.Check yourself
USD/ZAR moves 0.0800 rand while you hold 0.50 lots. What is the gross result in rand?
0.50 lots is 50 000 units. 0.0800 x 50 000 = R4 000 before costs.
The same 0.0800 rand move appears on H1 as 4 candles and on M5 as 48 candles. How many M5 candles fit into one H1 candle?
48 divided by 4 = 12. One hour holds twelve 5-minute periods, so 12 M5 candles fit into one H1 candle.
You hold 0.20 lots and the spread costs 0.0100 rand per unit. What does the spread cost you in rand?
0.20 lots is 20 000 units. 0.0100 x 20 000 = R200. This comes off the result before commission and swap, which vary between brokers.
Questions that come up next
If the daily chart says up and the M5 chart says down, which one is the real market?
Both are real, and neither is wrong. They are the same trades grouped into different windows of time. The daily chart describes the whole day; the M5 chart describes the last few minutes. What matters is which one you chose before you entered. If your plan was written on the daily chart, the M5 picture is context, not a reason to change the plan.
How far away should my stop be on each timeframe?
There is no single number, because it depends on how much the market usually moves in that window. A stop that survives M5 noise will be close to the price. A stop that survives daily noise must sit further away. The rule is that the stop is sized to the chart you entered on, not to the chart you happen to be watching afterwards.
Can I look at a second timeframe at all?
Yes, but give it one fixed job. A common split is the daily chart for direction and the H1 chart for timing the entry. The stop still comes from the entry chart. The second chart may tell you whether the longer trend agrees, but it does not resize your stop or move your target once you are in.
Why does the same rand move take longer on a faster timeframe?
A move of 0.1500 rand on USD/ZAR is the same distance on every chart. On H1 it may unfold over a few candles; on M5 it spreads across many more, because each candle covers less time. More candles means more small reversals along the way. The distance is identical, but the route and the waiting time are not.
Do costs get smaller if I trade a faster timeframe?
No. Spread, commission and swap are charged per trade and they vary between brokers. A fast timeframe usually means many trades and a small target, so costs take a larger share of each result. A slower timeframe has fewer trades and a larger target, so costs weigh less, but you need a wider stop and more patience.
What should I write down before I open a chart?
Write the timeframe you will use for decisions, and the timeframe, if any, you will use for context. Then write the stop, the target and the expected holding time that fit the decision timeframe. Doing this first stops the chart you are watching from quietly rewriting the plan.
The words used on this page
- timeframe
- How much time one bar or candle on a chart covers. M5 means five minutes per bar, and H1 means one hour per bar. The same trades are grouped differently, which is why one market can look like several.
- bar
- One group of trades shown as a single shape on the chart. It holds four numbers for its period: open, high, low and close. A bar hides the route the price took inside that period.
- noise
- The small up and down movements inside a timeframe that do not change the wider direction. A stop placed too close to the price is closed by noise rather than by a real change.
- holding time
- How long you expect to keep the trade open. It must fit the timeframe you entered on. A daily idea may need days, while an M5 idea may need minutes.
- spread
- The gap between the price you can buy at and the price you can sell at. It is charged on every trade and it varies between brokers. It comes off your result before commission and swap.
- context chart
- A second timeframe you look at for background only. It can show whether the longer trend agrees with your idea. It does not change your stop or your target.
What to take away
- One market, several charts: the timeframe groups the same trades into different windows, so both pictures can be true.
- Choose the decision timeframe first, then set the stop, the target and the holding time to fit that same chart.
- A second timeframe is for context only; it does not resize the stop after you are in.
- Costs are charged per trade and vary between brokers, so a small target on a fast timeframe carries more of that weight.