Charts and timeframes
What you learn in 3 minutesA reader asked: why does USD/ZAR look like it is going up when I open one chart, and down when I open another? The answer is the timeframe, which is simply how much time each bar or candle on the chart covers. On one screen the same market can show three different pictures, and the timeframe you choose decides what your stop, your target and your holding time have to be. This lesson shows one price move on three timeframes and what each one tells you.
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.
The mistake 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.