Charts and timeframes
How a chart is built from prices
A chart is a picture of time along the bottom and price up the side. Each candle or bar covers one slice of time. On a five-minute chart, each candle covers five minutes. On a daily chart, each candle covers one full trading day. The chart does not change the market. It changes how much of the market you see at once.
When you open a five-minute chart of EUR/USD at 1.0850, you see every small move. A rise to 1.0870 is twenty pips and it fills the screen. Open the daily chart at the same moment and that same rise is a thin line inside one candle. The price is the same. The picture is not.
This matters because your eye reacts to the picture, not to the number. A screen full of movement feels like opportunity. A screen with one small candle feels like nothing is happening. Both are the same market. The timeframe decides which feeling you get.
What higher and lower timeframes hide from each other
A lower timeframe shows detail. A higher timeframe shows structure. On a five-minute chart you can see a pullback of ten pips. On the hourly chart that pullback may be one candle. On the daily chart it may not appear at all. The detail is real, but it sits inside a larger move that the lower chart cannot show you.
The reverse is also true. A daily chart can show a trend that lasts weeks. Inside that trend there are many five-minute moves in the opposite direction. If you trade only the five-minute chart, you may take one of those opposite moves and never see the larger trend pushing against you.
No timeframe is more correct than another. Each one answers a different question. The five-minute chart answers what is happening in the next hour. The daily chart answers what has been happening for months. You need both answers before you decide which one your plan will follow.
Choosing the timeframe your plan will follow
Your plan needs one timeframe to lead. That is the timeframe where you read the trend and set your target. A second timeframe, usually lower, is used only to fine-tune where you enter. If the two disagree, the higher one wins. This is not a rule from a regulator. It is a way to stop the lower chart from pulling you into trades the higher chart would reject.
The leading timeframe also sets your numbers. A 30-pip target is normal on an hourly chart. On a daily chart, 30 pips may be too small to matter. On a five-minute chart, 30 pips may be a large move. The same number means different things on different timeframes, so your target and stop must be chosen on the timeframe you are actually trading.
In the Philippines, the SEC Philippines regulates investment products, but it does not tell you which timeframe to use. That choice is yours. GCash and bank transfer are common ways to fund an account, and the amount you send is in pesos. The timeframe you pick decides how often you may trade and how much each pip is worth in pesos when you convert.
One 30-pip move on three timeframes
| Step | Amount | Note |
|---|---|---|
| Five-minute chart (M5) | 30 pips | The move takes about 30 minutes and fills most of the screen, so it looks like a clear trend. |
| One-hour chart (H1) | 30 pips | The same move is one candle among many, so it looks like a small step inside a wider range. |
| Daily chart (D1) | 30 pips | The same move is a tiny part of one daily candle, so it looks like noise. |
| Value of 30 pips on one standard lot | ₱17,100 | One pip on one standard lot of EUR/USD is 10 units of the quote currency (100,000 x 0.0001). At an example rate of ₱57 to 1 unit, 30 pips x 10 x ₱57 = ₱17,100. |
The broker may round the conversion rate, charge a spread or commission, and quote a slightly different exchange rate, so the final peso amount can vary between brokers.
Doing it once, step by step
Open the same instrument on three timeframes and write down what each one shows. Then decide which timeframe your plan will follow before you look at any order button.
- 01
Open the daily chart first
Start with the daily chart of EUR/USD. Mark the highest and lowest price of the last twenty days. Write one sentence: is price closer to the top, the middle, or the bottom of that range. This is your structure.
- 02
Open the hourly chart next
Switch to the hourly chart without changing the instrument. Find the last clear swing high and swing low. Note whether the hourly move agrees with the daily direction or goes against it. If it goes against, treat the hourly move as a pullback, not a new trend.
- 03
Open the five-minute chart last
Now open the five-minute chart. Find a move of about 20 pips. Check whether that move is visible on the hourly chart. If it is not, it is noise for your plan. If it is, it may be the start of something the hourly chart can confirm.
- 04
Write your target and stop on the leading timeframe
Choose one timeframe as your leader. Set your target and stop using the candles on that timeframe only. Do not move them because the five-minute chart looks exciting. A 20-pip target on 0.10 lots of EUR/USD is about ₱1,140 at an example rate of ₱57 per unit, before costs. Your broker may round the rate and add a spread or commission, so the final peso amount can vary between brokers.
- 05
Check the two timeframes against each other
Before any order, look at your leading timeframe and one other. If the other timeframe disagrees with your direction, wait or reduce your size. Do not add size because the lower timeframe shows a strong candle. The higher timeframe is the one that can stop you out.
- 06
Record the timeframe you used
After the trade, write down which timeframe led and which one you used for entry. Note whether the higher timeframe agreed. Over time, this record shows you which timeframe fits your plan and which one only adds noise. No timeframe is right for everyone, and no result is promised.
The mistake most people make here
The common mistake is to open a five-minute chart, see a strong move, and trade it without checking the hourly or daily chart. That move may be only a small pullback on the higher timeframe, so the trade can be stopped out by the wider swing. Before placing any order, look at the same instrument on at least two timeframes and decide which one your plan is based on. If the higher timeframe disagrees with the lower one, wait or reduce your size.Check yourself
On a five-minute chart you see a 20-pip move. On the daily chart the same move is barely visible. If you trade 0.10 lots of EUR/USD and the move is 20 pips, what is the value in pesos at an example rate of ₱57 to 1 unit?
One pip on one standard lot is 10 units of the quote currency. On 0.10 lots, one pip is 1 unit. So 20 pips x 1 unit = 20 units. At ₱57 per unit, 20 x ₱57 = ₱1,140. The broker may round the rate and add costs, so the final amount can differ.
You see a 40-pip move on the hourly chart and a 40-pip move on the daily chart. Are they the same opportunity?
No. The number of pips is the same, but the time taken and the context are different. On the hourly chart 40 pips may be a full swing; on the daily chart it may be a small part of one candle. The timeframe decides whether your target and stop are realistic.
Questions that come up next
Which timeframe should I look at first?
Start with the daily chart. It shows the larger structure and takes only a moment to read. Then open the hourly or five-minute chart to see where price sits inside that structure. If the lower chart shows a move that the daily chart does not support, treat it as noise until the daily chart agrees.
Can I trade only one timeframe?
You can, but you will miss context. A single five-minute chart hides the daily trend that may push against your trade. A single daily chart hides the smaller moves you need for an entry. Most plans use one timeframe to lead and a second to fine-tune the entry.
How do I know which timeframe is leading my plan?
The leading timeframe is the one where you read the trend and set your target. Write it down before you look at any chart. If you find yourself switching the leading timeframe after a loss, the plan is not yet fixed.
Does a longer timeframe mean a bigger profit?
No. A longer timeframe usually means a wider stop and a longer wait, not a larger profit. The number of pips you aim for must match the timeframe you chose. A 30-pip target on a daily chart may be too small to cover the wider stop that the daily chart requires.
What if the higher and lower timeframes disagree?
Wait, or reduce your size. The higher timeframe usually reflects the larger flow of orders. If the five-minute chart shows a strong rise but the daily chart shows a downtrend, the rise may be a small pullback inside that downtrend. Trading against the higher timeframe raises the chance of being stopped out by the wider swing.
How many timeframes should I check before placing an order?
At least two. One to set the context and one to time the entry. More than three can slow you down and create confusion. The goal is not to see everything, but to see enough to know which timeframe your plan follows.
The words used on this page
- timeframe
- The amount of time each candle or bar on a chart covers. A five-minute chart uses one candle for every five minutes. A daily chart uses one candle for each full trading day.
- pip
- A small unit of price movement. For EUR/USD, one pip is usually the fourth decimal place. If the price moves from 1.0850 to 1.0851, that is one pip.
- lot
- A standard unit of trade size. One standard lot of EUR/USD is 100,000 units of the base currency. A mini lot is 10,000 units, and a micro lot is 1,000 units.
- pullback
- A short move against the main trend. On a five-minute chart a pullback may look like a trend of its own. On a daily chart it may be one small candle.
- swing
- A price move from one turning point to the next. A swing on the hourly chart may last a day. A swing on the daily chart may last several weeks.
- spread
- The difference between the buy price and the sell price quoted by your broker. It is a cost you pay on each trade. The spread can vary between brokers and between timeframes.
What to take away
- The timeframe you open decides which market you see, not how the market behaves.
- One timeframe must lead your plan and set your target and stop.
- A lower timeframe only fine-tunes the entry, it does not overrule the higher one.
- When two timeframes disagree, wait or reduce your size.