Intermediate · Lesson 3 of 11 · 6 min read
Using more than one timeframe
A trade that looks great on a 5-minute chart can be swimming against a big trend on the daily chart. Looking at more than one timeframe helps you trade with the bigger picture.
Why one chart is not enough
Every timeframe tells part of the story. A small chart shows detail but lots of noise. A big chart shows the main direction but not the best moment to act. Using two or three together gives you both.
Use the bigger timeframe for direction and the smaller timeframe for timing. Trading in the same direction as the bigger trend usually means fewer trades fighting the market.
A simple three-chart setup
| Chart | Job | Example for a day trader |
|---|---|---|
| Big picture | Which way is the main trend? Where are the big levels? | 4-hour or daily |
| Trading chart | Where is the setup forming? | 1-hour |
| Timing chart | Exactly when to get in, and where the stop goes | 15-minute |
A handy rule is to keep each timeframe about 4 to 6 times the one below it, such as daily, 4-hour and 1-hour, or 4-hour, 1-hour and 15-minute.
Top-down, step by step
- Start big. On the 4-hour chart, is price making higher highs and lows, lower ones, or moving sideways? Mark the main support and resistance.
- Drop down. On the 1-hour chart, look for a setup in the same direction, such as a pullback to support in an uptrend.
- Time it. On the 15-minute chart, wait for price to show it is turning your way before you enter, and place the stop beyond the nearby swing.
GBPUSD is in an uptrend on the 4-hour chart. On the 1-hour chart it pulls back to a level that held before. On the 15-minute chart a strong rising candle closes back above a small trendline.
All three agree, so the trade is with the trend, from a good level, with a tight and clear stop. If the 4-hour chart had been falling, the same 15-minute candle would have been a much weaker reason to buy.
When timeframes disagree
Often they will. The small chart may be rising while the big one falls. That usually means a pullback inside the bigger trend, not a new trend. Many traders simply wait until the timeframes line up again.
Common mistakes
- Changing timeframe until you find one that agrees with the trade you already wanted.
- Using timeframes too close together, such as 5 and 10 minutes.
- Ignoring a major level on the daily chart because it is not visible on the 5-minute chart.
Check yourself
1. Which timeframe should decide the direction you trade?
The bigger one.
2. The daily chart is falling but the 15-minute chart is rising. What is the most likely explanation?
A short-term pullback inside the bigger downtrend.
3. You trade on the 1-hour chart. Which bigger timeframe might you check first?
The 4-hour or daily chart.
Try it on BTM
For education only, not financial advice. Trading carries a high risk of losing money, especially with leverage. Only trade with money you can afford to lose.
For educational purposes only. Nothing here is financial advice. Past performance does not guarantee future results, and trading carries a high risk of losing money, so only trade with money you can afford to lose. Read the risk warning.