Charts and timeframes
What you learn in 3 minutesOne market can look like three different markets depending on the timeframe you open. On a five-minute chart EUR/USD may fall 20 pips while the daily chart shows it still rising over the month. Which timeframe you trade decides what your stop, your target and your risk per trade have to be, and that changes the money at stake.
One EUR/USD move on three timeframes
| Step | Amount | Note |
|---|---|---|
| M5 view | Price falls 20 pips from 1.0850 to 1.0830 | A 20-pip drop on the five-minute chart, taken as a short-term move. |
| H1 view | Price is flat, still near 1.0850 | The same 20 pips is a small part of the hourly range, so the hour looks unchanged. |
| D1 view | Price is up 40 pips on the day | The daily candle opened lower and the 20-pip drop is only a pullback inside a rising day. |
| Pip value on one standard lot | 10 units of the quote currency | 100,000 x 0.0001 = 10, converted at the current rate. |
| Cost of 20 pips on one standard lot | KSh 2,000 | 20 pips x 10 units = 200 units of the quote currency, converted at the current rate to KSh. |
The broker may round the conversion rate, charge a spread or commission on top, and quote a slightly different price at the moment you enter or exit, so the final figure can differ from the one shown here.
The mistake people make here
People often open a five-minute chart, see a quick fall, and sell, without checking the hourly or daily chart. The same 20-pip fall may be a small pullback inside a rising day, so the short trade fights the larger trend. Before you place an order, look at the higher timeframe and decide which one your plan is built on. If you trade the five-minute chart, your stop and target must be sized for five-minute moves, not daily ones.Check yourself
On one standard lot of EUR/USD, what is the value of 15 pips in units of the quote currency?
15 pips x 10 units per pip = 150 units of the quote currency.
If 10 units of the quote currency converts to KSh 100, what is the value of 15 pips in KSh?
150 units x KSh 100 per unit = KSh 15,000.
A five-minute chart shows a 20-pip fall, but the daily chart shows a 40-pip rise. Which timeframe is the larger move on?
The daily chart, because 40 pips is larger than 20 pips over the same day.