Reading price charts can be tricky. Get it right and you find yourself profitable almost immediately. Get it wrong and you sweat when the market moves against you, sowing FUD … Fear, Uncertainty and Doubt.

And when your confidence is shaken, your trading is ruined too.

But there’s an old trick traders have used for years to change their perspective on a trade, and give them an edge in selecting entries and exits.

They simply change the time frame of the chart to see a different way of calculating the odds in favor of a good trade.

 Take a look at the two charts at the bottom of this article. They both show the same instrument, the current Gold futures contract (GCM6) but the one on the left shows 60-minute bars; the chart on the right shows 5-minute bars.

We’re short term traders, and normally we would trade off the five-minute chart, the one on the left.

But that chart is confusing. The market dropped into a trading range and has stayed there. Sooner or later it will break out, but in which direction?

There are lots of things we consider, but one of them is the longer time-frame chart, in this case the 60-minute chart.

The 60-minute chart isn’t very clear-cut either, but It shows three highs over the past couple of days that could be a head-and-shoulders pattern, and – if you squint – what could be a pennant forming on the long declining bar into the previous close.

That’s not much to go on, but combined with other signals, it helps us decide to go short, rather than long. We place an order to sell around $1288, near the top of the trading range, with a stop just above the last spike out of the range about $1291, and a target roughly the same length as the last run down, about $1283.

How did it work out?

We don’t know yet. That trade was placed last night during the Globex session. It got filled at $1288.40 just before 9:00 pm. We’ll find out if it worked in the morning.

Or you can take a quick peek at the gold futures and tell us.

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Chart: GCM6, May 3, 2016.

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