Time frames: why the same stock tells different stories

Lesson 2/6~5 min
Preparing the chart…

The 15-minute, 4-hour and daily charts look at the same price but answer different questions; which one you choose depends on the question you are asking.

With the tabs above the chart you can open the same stock on three different time frames: 15 minutes, 4 hours and 1 day. Every candle summarises the period you chose. On a 15-minute chart one candle covers a quarter of an hour; on a daily chart one candle covers a whole trading day.

That is why the same stock can look like it is ‘falling’ and ‘rising’ at the same time. On the daily chart price may have been climbing for weeks, while on the 15-minute chart it has been sliding for the last two hours. Both are true; one shows the big wave, the other the small ripple on top of it.

The chart shows three lines: the orange line is the average of the last 20 candles (EMA20), the grey line the average of the last 50, and the dark grey line the average of the last 200. Watch how the order of the lines changes as you switch tabs. If the orange line is on top and price is above it, that time frame is in an uptrend structure. The opposite order is a downtrend structure. A mixed order means ‘no clear direction’.

The RSI panel below changes with the tab too. A stock that looks ‘oversold’ on the 4-hour chart can be perfectly calm on the daily. Deciding from a single time frame is like looking at only one corner of a photograph.

How to read it

  1. Start with the big picture: the order of the averages on the daily chart tells you the main direction. Trading against it is like swimming against the current.
  2. Then switch to the time frame you will trade on: 1 hour or 4 hours for short-term trades, the daily chart for positions held for a few weeks.
  3. For timing you can look one time frame lower: a small pullback on the 4-hour chart during a daily uptrend may offer a better price to join the main direction.
  4. Always check which time frame an indicator is calculated on. ‘RSI 28’ is only half the information unless you know the time frame.

In this state right now

Liquid BIST stocks whose 4-hour and daily charts currently disagree (RSI at an extreme on the 4-hour chart, on the other side on the daily).

Loading the live list…

Trap

The most common mistake is mixing up the time frame you trade on with the time frame you decide on. Selling a months-long investment because of a dip on the 15-minute chart, or setting a very wide stop on a 15-minute trade because you looked at the daily chart, are two faces of the same error. Pick one time frame, build your plan on it and use the others only for context.

Tip

Now you know why the screener list changes when you switch its time frame: the same rule is applied to candles of a different length. Choose the screener's time frame according to how long you plan to hold.

Glossary

Time frame
The period each candle covers on the chart: 15 minutes, 1 hour, 4 hours, 1 day and so on.
Higher time frame
A longer period than the chart you are looking at; used to see the main direction.
EMA20
An average of the last 20 candles that gives more weight to recent ones.

Mini quiz

  1. You see an uptrend on the daily chart and a decline on the 15-minute chart. What does it mean?
  2. For a position held for a few weeks, which chart shows the main direction best?
  3. Why is ‘RSI 28’ incomplete on its own?

Try it now

Analyse the same stock on different time frames →

For information only, not investment advice.