Are charts a little bit deceiving?
You know I was wondering for a few weeks now how i could be so wrong time after time when doing really short scalps of the 5min or 1min chart.
Not sure why I didn't notice it but as you can see from the picture below the actual quote that i would buy or sell at is different to the quote in the actual chart.
I asked the broker about this and the discrepency is due to the fact that with candle sticks it is kind of like an average over the 5minute intervel or whatever time frame you are looking at. If i switched to the 'min/max' view then it would be accurate or if i switched it to the 'bid' or 'ask' it also would be accurate.
Anyway I'm not saying that charts are no good or anything like that. In fact i think that charts are critical and all important. I'm just highlighting an error i made and something i didn't realise despite trading on various time frames for months now.
So, in a way candle sticks too are a kind of lagging indicator--even when you are looking at the close of the current candle.
Yes, charts are deceiving, but not necessarily for the reasons you mention above. In regards to your situation, you must remember that there are always two prices at which to trade: the bid and the ask. A candlestick is not informative enough to show both the bid and ask levels, so instead it will either be shaped off of (1) the average of the two, (2) the bid, or (3) the ask, depending on what settings you have.
So for example lets say your settings shape candles off of the average. Depending on the spread, your options on the order page might be to buy at 100.02 or sell at 99.98. The average of those two prices is 100.00, which is what you see on your chart. If your setting are on "bid", then the chart will show the candle at 100.02. The reverse goes for the ask.
So your broker is correct in saying that to fix this either switch to a min/max or just he bid or just the ask.
Well, in a way, charts in general offer very little information on the market. A bar is by nature a little bit of information, which doesn't show you how much activity occurred at what price; or what kind of people were doing the trading (handful of floor traders trying to outguess and outmaneuver each other?); or how much of the activity was in large units and how much in small ones; or how much was bought or sold by large money managers vs. hedgers; and I could go on and on... I think you get the point.
Thanks for the explanations guys
You received some good input, but let me also just add this: I noticed you are trading using Oanda graphs and quotes. That could be a problem right there. You mentioned price (or rather candle sticks) is lagging--well their quote and graph does lag actual fills by quite a bit at times, perhaps because they use a Java applet. Anyway, I don't mean to turn this into a broker discussion and Oanda is fine, but I would also suggest watching quotes and graphs provided by other brokers or charting programs to "see" what is going on. I find this to be useful.
Mp --- Each Candle Represents The Time Its There
in other words, if you look at a candle in an H4 chart, you are looking at FOUR HOURS of movement, and theres a LOT of movement in 4 hours.
a 5 minute chart is showing you 5 minutes movement, and unless you actually look at where the price is, within that candle, you can become easily confused.
when i scalp, i use the 5 minute as a TREND chart and scalp using a TICK chart and a ONE MINUTE chart for its trend and support and resistance areas.
if i see a "good" move on the 5 minute, i move down to the lower timeframes to see where their price is, and whether its moving UP or DOWN in its cycle.
Once you see that the currency has bottomed on the one minute, one can then play the upside bounce as indicated on the 5 minute.
although a tad advanced, understand that within the 5 minute chart there are MANY resistance points created by the one minutes movement --- one can scalp the 5 minute a number of times before it reaches its FINAL resistance level and then drops since the one minute is what really controls each move on the 5 minute. One can even trade the numerous s+r points on the one minute, assuming there is enough spread to accomodate any profit, by watching the TICK chart for its signals and using the one minute as a TREND chart.
its a whole lot simpler to see than describe, but watch your one minute chart to see when there will be a profitable trade on the 5 minute.
enjoy and trade well
Im brand new here, and my opinion a account for nothing but I trade off the 5 min chart most of the time..many say its too unpredictable which is very true, but the whole market is unpredictable! It dosent matter if you are looking at a daily chart or a 5 min chart. Price is price. The fat cats will push price as they wish, and it dosent matter if you are looking at price from a 5 min chart or daily.
Just follow price bro.
Charts are only a graphical method of showing price at the moment. There were many successful traders who only looked at price long before there where charts for them to use.
There is a lesson in that.
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