Work your way from the long-term chart picture to the short-term chart picture
Closely linked to the first rule is the second rule, when analyzing the technical starting point for an underlying, first start with the long-term chart in order to identify the long-term trend and long-term relevant resistance and support. In the following, one would examine the medium-term picture and then the short-term chart situation. In practice, the weekly chart is usually used for the long-term analysis, the daily chart for the medium-term analysis and the hourly chart for the short-term analysis. Very short-term investors who are on the move in the minute or hour range often also use 15-minute charts, 5-minute charts or even 1-minute charts. The fact that one works one’s way from the longer time periods to the shorter time periods and not the other way round is because the “noise” of the market increases the shorter the period under consideration becomes. In other words, the reliability of signals gradually decreases as you work your way from the long-term chart to the short-term chart. The shorter the observation period, the more frequently one encounters false breakouts in particular. The false outbursts usually occur in the opposite direction to the superordinate time level. This means, for example, that the probability that a breakout of a short-term trading range to the south will subsequently turn out to be a false breakout is higher in the medium-term uptrend than in the medium-term downtrend.