How to Choose a Timeframe: Why One Chart Looks Different

A timeframe is only a grouping unit

1-minute, 1-hour and daily candles are not different markets; they are the same record of trades grouped into different sizes. One 4-hour candle can be rebuilt exactly from four 1-hour candles. Its open is the open of the first 1-hour candle, its high is the highest of the four highs, its low is the lowest of the four lows, its close is the close of the last 1-hour candle, and its volume is the sum of the four volumes. Switch the timeframe in the Pro Trading Chart or MarketScope and you can watch the trades of the same hours bundled into different shapes; the two figures below draw the same example prices as 24 one-hour candles and as 6 four-hour candles. The reverse does not work: shorter candles cannot be built from longer ones. A single daily candle cannot bring back the 1-hour candles inside it, so shorter-candle data holds more information, and a longer candle is a summary obtained by throwing some of it away. Volume is added up the same way, so heavy volume on a 4-hour candle does not mean trading was heavy for all four hours; it may have been packed into one.

• Open = open of the first candle
• High = highest of the four highs
• Low = lowest of the four lows
• Close = close of the last candle

What disappears when you combine candles

In the 4-hour figure the third candle looks like a single bearish candle with a long lower wick, but on the 1-hour chart it was a plunge that lasted two hours, followed by a rebound. The reverse also holds: the small ripples that rose and fell on the 1-hour chart are tidied into a few candles on the 4-hour chart, and the trend looks simpler. Longer candles cut noise but erase what happened inside each candle; shorter candles show the process but also show meaningless wiggles along with it. Neither is the more accurate one; they are the same facts seen at different resolutions. That is why many people, when they spot a notable shape on a longer candle, open the next shorter timeframe to see how that shape was made. The same long lower wick reads differently depending on whether it came from a gradual recovery or from a single plunge and sharp rebound. Going the other way, checking whether a sharp move on short candles ends up as a mere wick on the longer candle gives you a sense of how big that move is within the larger trend.

Shorter candles mean more noise and heavier costs

The shorter the candle, the smaller the move within each one, but the cost of trading stays the same. If spot fees are around 0.1%, every round trip of buying and selling costs about 0.2%, and on top of that come the gap between the best bid and the best ask (the spread) and the amount by which an order fills at a worse price than intended (slippage). On a daily chart that moves several percent a day these costs are a small fraction, but across a few 1-minute candles the cost can be about as big as the move itself. That is why the more often you follow signals on short candles, the more costs change the outcome. The shorter the candle, the larger the share of each candle's range taken up by the spread. In quiet hours such as late night or weekends, and in coins with small market caps, the gap between bids and asks widens, and much of a 1-minute wick may actually be made by only a handful of trades. When comparing signals, put the average range of one candle side by side with the round-trip cost and first work out what fraction of the range the cost eats up.

Indicator periods are counted in candles, not time

The 14 in RSI(14) means 14 candles, not 14 days. On a 1-minute chart the reference length is the last 14 minutes, on a 1-hour chart 14 hours, and on a daily chart two weeks (because it uses Wilder's smoothing, earlier candles also count a little, but the reference is 14 candles). Moving averages work the same way: a 200-period moving average on a 1-hour chart averages about 8 days, while the 200-day line on a daily chart averages 200 days. Crypto trades on weekends too, so 200 daily candles are also 200 calendar days, but a stock's 200-day line counts only trading days and stretches over roughly 9 to 10 calendar months. The same setting looks at a completely different span when the candle length or the market differs. So 'daily RSI(14) below 30' and '15-minute RSI(14) below 30' are completely different events even though the number is the same. On short candles such values can be reached several times a day; on daily candles they are reached rarely. Keep the indicator period unchanged when you switch timeframes and the span of time you are looking at changes; lengthen the period to match the span and the indicator's speed of reaction changes. It is best to decide which of the two you want to keep before switching.

• 1-minute RSI(14): last 14 minutes
• 1-hour RSI(14): last 14 hours
• 4-hour RSI(14): last 56 hours
• Daily RSI(14): last 2 weeks

When candles open and close

The longer the candle, the more it matters where it is cut. Binance cuts candles on UTC by default, and the crypto tools on this site, which use Binance data, follow the same standard. Daily candles start at 00:00 UTC, which is 9 a.m. in Korea, and 4-hour candles change every four hours counted from 00:00 UTC, which in Korea means 1 a.m., 5 a.m., 9 a.m., 1 p.m., 5 p.m. and 9 p.m. Weekly candles start at 00:00 UTC on Monday (9 a.m. Monday in Korea), and monthly candles at 00:00 UTC on the 1st of each month. Charts that cut at midnight Korea time, such as MarketScope's 24-hour candles built from data of the Korean exchange Bithumb, have boundaries nine hours apart from these, so candles for the same day or month can have different opens and closes. In stocks this problem takes a different form. The Korean regular session lasts six and a half hours, so the last 1-hour candle can end up as a short 30-minute candle, and since US stocks do not open on the hour either, charts differ in how they cut 1-hour candles. Take particular care when comparing the volume of such short candles, or of candles right before the close, with other candles.

Holding period and candle length

Which candles to watch is not a question with a right answer, but there is a guideline worth keeping in mind: pick a length that produces a few dozen candles over the period for which you intend to hold your view. If you think in days, that means mostly 1-hour or 4-hour candles; for a few weeks to a few months, daily candles; and for longer, weekly or monthly candles. Watch candles far shorter than your planned period and you end up reacting to much smaller swings; watch candles that are too long and, when your view ought to change, you wait a long time for a candle to close. It is only a convention, and it is set differently from person to person and from asset to asset. For example, if you intend to hold a view for about two weeks, in crypto those two weeks produce 336 one-hour candles, 84 four-hour candles and 14 daily candles. Someone who finds 14 daily candles too few to judge a trend and 336 one-hour candles too full of swings to react to would center on the 4-hour chart. Stocks form candles only while the market is open, so the same two weeks yield far fewer candles.

Different trends on different timeframes are normal

It is common for the same coin to be falling on the 15-minute chart while rising on the daily chart. Even a large trend contains small pullbacks, and when a pullback on a small timeframe drags on, the trend on the larger timeframe can change. Rather than asking which timeframe's trend is the 'real' one, it is less confusing to accept first that each timeframe summarizes a different span of time. The Multi-Timeframe Trend Matrix gathers the trends of the top coins by trading value on five timeframes, from 15-minute to weekly, into one table, and how to read several timeframes together is covered in the multi-timeframe analysis article in Part 6. A common approach in practice is to set the broad direction and key price levels on a longer timeframe and to watch what happens around those levels on a shorter one. There is a convention of keeping the ratio between the two candle lengths at about four to six (daily and 4-hour, or 4-hour and 1-hour, for example). Too close together and you are seeing the same information twice; too far apart and the link between the two pictures breaks.

Common misconception: longer candles are more reliable

Because longer candles look less noisy, it is easy to assume their signals are more accurate. But a longer candle is a summary of shorter ones and holds the same trades; what changes is that signals come less often, arrive later and react less to small swings. That does not automatically raise the odds of a signal being right, and a signal that appears a few times a year on the daily chart has too small a sample to check whether it works at all. The idea that shorter candles give faster information is also only half right: you see things sooner, but you also see many more moves that reverse soon after. The trap of picking whichever timeframe fits the conclusion you want is covered in the multi-timeframe analysis article in Part 6. Whatever timeframe you use, only a record of applying the same rules consistently to a timeframe chosen in advance lets you judge whether that timeframe suits your approach.

How timeframes look different in crypto and stocks

Your sense of candle length works quite differently in crypto and in stocks. Crypto never stops trading, so one daily candle holds a full 24 hours, and 1-hour candles run on without a break, 24 a day. In stocks, both the Korean and US regular sessions last six and a half hours, so only about seven 1-hour candles form per day, and the nights and weekends when the market is closed show up only as gaps between candles. That is why on a stock's 1-hour chart volume tends to crowd into the candles at the open and near the close, with relatively quiet candles in between, a pattern that repeats often. A weekly candle also holds five trading days in stocks but seven days in crypto. There is a catch, too, when you line up daily candles of Samsung Electronics or SK hynix against daily candles of a US index for the same date. The two markets' regular sessions open at different times of day in Korea time, so what happens in the US session shows up in the next day's Korean open, and the two easily look one day out of step. Crypto keeps trading in between, so the same news appears on crypto charts earlier than on stock charts, and as continuous candles without a gap.

Reading timeframes on a live chart

On a live chart, how much the candle in progress matters depends on the candle length. A 1-minute candle in progress is settled a minute later, but a daily candle in progress keeps changing shape all day, and a weekly candle all week. Opening a long-candle chart during the session and saying 'today's daily candle has a long lower wick' may be talking about a candle with half a day still to go. Indicators work the same way: the latest value of a daily RSI or moving average is a provisional value that treats the current price as the close, and it keeps moving until the candle closes. In tools that gather several timeframes on one screen, each candle has a different amount of time left until it closes, so it is worth remembering that settled signals from short candles and in-progress signals from long candles can appear side by side in the same row. When recording or comparing signals, the basic rule is to align them on closed candles.

A practical checklist

Here are the things to check, in order, when you look at a chart while switching candle lengths. This list does not tell you which timeframe is right; it is meant to reduce the mistake of mixing up information from different timeframes.

• First decide how long you intend to hold your view, then pick as your main timeframe a length that produces a few dozen candles over that period
• Check the broad direction and key price levels on a timeframe four to six times longer than your main one
• Convert the indicator period into how many hours or days it actually covers on that timeframe
• Make sure the charts you compare cut candles at the same reference time (UTC, Korea time or the regular session)
• If the rightmost candle is still in progress, note how much time is left until it closes
• On short candles, compare the average range of one candle with the round-trip cost
• Ask yourself whether you have already settled on a conclusion and are switching timeframes to find a picture that fits it