Charts and timeframes
What you learn in 3 minutesThe word 'timeframe' on a platform means the length of time each candle or bar covers, and it is chosen by you, not by the market. The same AUD/USD price near 0.6640 can look like a calm drift on one timeframe and a violent move on another, so the timeframe decides what your plan has to be. This lesson shows one price move read three ways, and why the money at stake changes with the reading.
One 30-pip move on three timeframes
| Step | Amount | Note |
|---|---|---|
| Five-minute chart | 30 pips | The move is 0.6640 to 0.6670, which is 0.0030, or 30 pips. On this timeframe it fills the screen and looks like a trend. |
| One-hour chart | 30 pips | The same 0.0030 move is one candle among many. It looks like a normal hour. |
| Daily chart | 30 pips | The same 0.0030 move is a small part of one day's range. It may not even be visible as a separate event. |
| Money value on one standard lot | A$300 | One pip on one standard lot of AUD/USD is 10 units of the quote currency, so 30 pips is 300 units. At the current rate near 0.6640, that is about A$300. |
| Money value on 0.10 lots | A$30 | One tenth of the standard lot size gives one tenth of the pip value, so 30 pips is about A$30. |
The broker may round the conversion rate, charge a spread or commission on top, and quote a slightly different pip value depending on the rate at the moment of the trade. The figures here are worked from the numbers given and are not a forecast.
The mistake people make here
The common mistake is to open a five-minute chart, see a strong move, and trade it as if it were a daily trend. The five-minute move may be only 30 pips, which is A$30 on 0.10 lots, but the same 30 pips on a daily chart is a small part of a much larger day. Before placing an order, check the same instrument on at least two timeframes and write down which one your plan is based on. If the plan is for the daily chart, a five-minute move should not change it.Check yourself
AUD/USD moves from 0.6640 to 0.6670. How many pips is that, and what is it worth on 0.10 lots in A$?
0.6670 minus 0.6640 is 0.0030, which is 30 pips. On one standard lot, 30 pips is 300 units of the quote currency. At the rate near 0.6640, that is about A$300. On 0.10 lots, it is one tenth of that, about A$30.
The same 30-pip move appears on a five-minute chart and on a daily chart. Does the pip value change?
No. The pip value depends on the lot size and the conversion rate, not on the timeframe. The timeframe changes how the move looks and what plan you might use, but 30 pips on 0.10 lots is still about A$30.