How to Choose a Timeframe: Why the Same 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.

• 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.

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.

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.

• 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.

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.

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.

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.