Is Periodicity Arbitrary? Is It Universal?

Consider the different time periods which software visualized with candlesticks:
1 minute
5 minute
15 minute
30 minute
1 hour
4 hour
etc (there may be different variations)

I was wondering how these time periods might effect people’s perception of trends, particularly with candlesticks. Consider the shapes candlesticks can take: Spinning Tops, Marubozu, Doji, Hammer, Hanging Man, etc… These shapes are ultimate dictated by what periodicity is used. This is particularly relevant on the one minute periodicity. Does all software/brokers synchronize on the same minute? If not their candlesticks could look radically different. The ‘open’ and ‘close’ are arbitrarily decided upon when the period ends and closes, but time is really continuous, not discreet. Candlesticks are presenting continuous data in a discreet manner, which is I think might have a profound effect on the psychology of traders. While some algorithmic traders might be unaffected by this, manual traders might be effected differently by the different ways their candlesticks are presented, depending on how the minute designations are setup. This is a difficult question to explain. I tried my best. I can explain further if you ask questions, but I think this is an important topic.

Funny you should ask that.

I asked my broker that while ago.

As for the price action, the movement of a currency is universal. All brokers get the price of say, the Euro for example, from the ECB server.

The charts however, differ slightly from broker to broker, because they are based upon the “last” number. The “last” may vary broker to broker, because if the ask price is 1.4752 and the buy is 1.4750, and someone buys at FXCM, while someone sells at PFGBest, there will be a two pip difference on the minute charts from the two companies.

As for the differences between the trend spotting from the minute through the daily, perspective is very important. It’s like stepping back to take get a bigger picture.

I’ve pretty much stopped looking at the minute chart altogether. Five minutes and up seem to have better references as to reversal/continuation signs in candlestick reading. Also, those little head and shoulders, triangle patterns, wedges, and anything else that may arbitrarily show up on a minute chart based on say, the last thirty candles, often look completely unrecognizable when viewed from a five minute chart that has six candles for the same time span.

The patterns on the short periods are far more unreliable than the longer time frame sticks.

Great topic!

Great topic, one of those things that I think everybody thinks about at some point but never really finishes the thought. I wouldn’t have thought that the small differences in spreads between brokers that may affect PA would really make a huge difference, but that may depend on how you trade and also how you have your chart set up, most people view the PA as an average price anyway, so you’re not actually looking at the price plus or minus the spread. Also if you are worried about getting unreliable quotes from your broker you can get your quotes elsewhere or even compare multiple brokers average quotes from free trial platforms. But thats probably going a bit over the top.
I’ve also come across many situations looking at candlesticks where a reversal pattern on an hourly chart looks like a continuation pattern on a 5 minute chart. I guess you just have to be careful and make sure you look at multiple time frames. But as master tang says, the larger the time frame, the more accurate the PA is, this may be partly because the larger the time frame is that you are looking at, the more insignificant in-congruencies become. but as I said, you would probably have to be trading off a 5 second chart to really be effected by it.

I’m glad everyone likes the topic! I was just thinking, does this apply to price too? Of course there may be specific points/ranges of support and resistance, but does it tend to hang out at nice sounding, round numbers? Of course the biggest one is 1:1. If this applies to time (horizontal) should it also apply to price (vertical). Keep in mind both are continuous.

Well if two brokers have their close of a one minute candle at two slightly different times one could only assume that the price (which fluctuates constantly) would close at different prices occasionally if not frequently. how drastic the difference would depend on how far apart the close times are. One would hope, however, that these inconsistencies be consistent. By that I mean, if broker A closes their one minute candle at X and broker B closes their one minute candle at X+1, that this be consistent, rather than changing every now and then. I must say that I have noticed, while watching the charts provided by my broker, the 1m candles closing at slightly different times, some at :00:05 some at :00:10 I wonder why that is.
But even so, I really don’t see how this would effect everyday trading unless the broker is manipulating the price/time of close against you purposely.

The only real chart is the 1-tick chart. All the rest are “data compressed conceptual” representations. You always compare price between 2 times. Price will either be up, down or the same. What chart you look at is irrelevant. Don’t get taken in by “illusions” based on chart time frames.

If you’ve already bought into the concept that

  1. a trader can take chunks of past price data,

  2. reduce each chunk to four (OHLC) variables,

  3. present each reduction graphically into a “candle”,

  4. look for certain “patterns” among consecutive “candles”,

  5. and finally assert that the presence of such patterns predicts future price behavior,

then the issue you bring up seems rather minor.

I was wondering how these time periods might effect people’s perception of trends, particularly with candlesticks.

You are blinded by the bells and whistles of your fancy trading software.

If you want to know if markets are picking up speed look at your tick chart. +10.000 ticks and you are about to see some real price movements happening very shortly because somewhere out there the price and market liquidity was right for players with deep pockets and they are moving into the market. :wink:

Candlesticks are presenting continuous data in a discreet manner, which is I think might have a profound effect on the psychology of traders.

That implies traders generally look at candlesticks. They don’t.

Forex markets are driven by information-flow, liquidity and news prints.

Volume gets moved when Forex markets are liquid. If a player moves the Forex market 4 percent, for example, he is probably going to change the market psychology for the next few days.

All what you see is a long solid candle and you’ll be shaking your head in disbelieve because you didn’t see it coming. So it has a psychological impact on you and the rest of the crowd who got hit on the wrong side of that particular play.

If you get over your shock quickly enough you are probably trying to join in on the right side of that particular play with the handicap of increased spread in tandem with the majority of the crowd who got hit if you get filled in the first place.

The player who moved the market 4 percent entered the market because the price was right and the market had liquidity. And not because of some candlestick patterns on fancy charts. :wink: