What is a timeframe?
The timeframe is the period one candle stands for. On a daily chart each candle is a session. On a weekly chart each candle is a trading week, which in a normal week on the Egyptian Exchange means five sessions, Sunday to Thursday. On a monthly chart each candle is a whole month.
A weekly candle is nothing new; it summarizes the daily sessions of that week. A monthly candle summarizes the month's sessions the same way.
One stock on three timeframes
Look at this invented stock on all three timeframes. On the daily chart, it touched 21 and then slid to about 19.5 over the last six sessions. On the weekly, it has risen across nine weeks and only the last week is red. On the monthly, it has climbed for about eight months without a major pause.
Which one is right? All three. The daily tells you what happened over the last two weeks; the monthly tells you what happened over the last year. What matters is the horizon you are thinking in. If you think in days, the daily is closer to your question. If you think in months or years, the weekly and monthly show the picture without the noise of single sessions.
Change the chart window
On the daily chart of any stock on FoudaLens you can choose a window from 30 days up to one year. Compare the same stock over 30 days and over a year.
Check yourself
1. A week opened at 8.00, closed at 7.60, high 8.30, low 7.50. What color is the weekly candle?
2. A stock is falling on the daily and rising on the monthly. What does that mean?
Summary
- The timeframe is the period a candle stands for: a session, a week or a month.
- A weekly candle takes the first open, the last close, and the week's high and low.
- Choose the frame by your horizon, and remember the last candle may still be forming.