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Lesson 5 · 10 min

Big picture, then detail

Read a market from the top down: the daily for direction, the 4 hour for the levels, the 1 hour for the moment. Then ask if the move is strong or tired.

  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
  6. 6
  7. 7
  8. 8
  9. 9
  10. 10
  11. 11
  12. 12
Step 1

The daily chart gives the direction

Start with the daily chart (1d). Read it with lesson 3: higher highs and higher lows, lower ones, or sideways? That is the direction you want to trade in. Here gold is in a clear uptrend, so the question for the smaller charts becomes: where could I buy?
3,8003,9004,0004,1004,200HLHHHLHHHL
Step 2

The 4 hour chart gives the levels

Now the 4 hour chart (4h). Find the nearest support below the price and resistance above it, as in lesson 4. In an uptrend you are not buying anywhere: you are waiting for a pullback to reach a zone where buyers stepped in before.
  1. The last high of the move.
  2. Price pulls back into the zone where the old ceiling was. In a daily uptrend, this is where buyers may return.
4,0504,1004,15012
The green band is the old ceiling, now a support zone.
Step 3

The 1 hour chart gives the moment

Finally the 1 hour chart (1h). Price reaching the zone is not enough; you want to see buyers act there. A long lower wick (lesson 2) and then a higher low (lesson 3) are the signs. Only now would a buy plan make sense, and lesson 6 shows how to write it.
  1. Price dips into the zone and is pushed straight back: a long lower wick.
  2. The next dip stops higher. A higher low on the 1 hour chart: buyers are back.
4,1004,1204,1404H SUPPORT ZONE12
Step 4

When the charts disagree

Often the small chart points one way and the big one the other. A simple rule for a beginner: trade in the direction of the daily chart, or not at all. A falling hour inside a rising day is usually a pullback, so you wait for it to end rather than sell into it. If the daily chart is sideways, the edges of its range are the only places worth a plan.

1 DAY: UP

1 HOUR: DOWN

The daily is rising, the hour is falling. The hour is most likely a pullback inside the daily trend.
Step 5

Strong, or getting tired?

The direction is half the story; the other half is energy. A strong trend has long bodies in its direction and short, shallow pullbacks. A tired one makes smaller and smaller pushes, with long wicks against it and deeper pullbacks. A tired trend is not a reason to bet against it, but it is a reason to be careful buying more of it.
  1. The first push up is big.
  2. The next one is smaller, with longer wicks on top.
  3. The third barely makes a new high. The trend is still up, but it is running out of energy.

STRONG

TIRED

123
Left: long bodies up, short pullbacks. Right: each push smaller, each pullback deeper.
Step 6

The five minute routine

Put it together and you can read any market in about five minutes, always in the same order:
  1. Daily: up, down or sideways?
  2. 4 hour: where are the nearest support and resistance, and where is price between them?
  3. 1 hour: has price reached a level, and is it reacting there?
  4. Energy: strong or tired?
  5. Decision: a plan in the daily direction, or wait.

Waiting is a decision. Most of the time this routine ends with “not yet”. That is the routine working, not failing.

Watch out. No routine predicts the next move. It keeps you on the side of the bigger trend and shows where a trade makes sense. The stop loss still decides what you can lose.

Words

New words in this lesson

Top-down reading
Looking at the biggest chart first, then each smaller one.
Higher timeframe
The bigger chart, like the daily. It sets the direction.
Lower timeframe
The smaller chart, like the 1 hour. It shows the moment.
Pullback zone
A level where a pullback could end and the trend continue.
Rejection
Price reaching a level and being pushed back hard, often leaving a long wick.
Momentum
How much energy a move has: big pushes, small pullbacks.
Check yourself

Test yourself

6 questions, 3 of them on a chart. Tap an answer to see right away if it is correct and why. You pass with 5 of 6; retry any time.

1In a top-down reading, which chart do you look at first?
2The daily chart (left) is rising. The 1 hour chart (right) is falling. What is the 1 hour move most likely?
3Which chart shows an uptrend that is getting tired?
A
B
C
4Daily: uptrend. 4 hour: price is in a support zone. 1 hour: a long lower wick in that zone. What does the routine suggest?
5Price has reached the 4 hour support zone. Which candle shows buyers stepping back in?
4,1004,1204,1404,1604H ZONEABC
6The daily chart is moving sideways. What fits best?
AI readThe big picture and your timeframe, in one AI readThe AI compares the larger timeframe with the one you trade before it writes a plan.
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Risk warning. Trading financial markets involves a high risk of loss and is not suitable for everyone. This course is education, not financial, investment or tax advice. The charts are drawn examples, not real prices or predictions. Past behaviour of a market does not guarantee what it does next. You make your own trading decisions.