What’s important about this?
Consider the hammer candle shown in the right graphic during its formation has appeared as a continuation of the previous move down. At times, it was confirmed within the one-hour time frame (shown left) to be completed into a reversal hammer.
Establishing the trading decision on a higher time frame can only be done at the completion of the rollover into the next period, and when the bar or candle is complete.
Part of building a rule-based system hinges around this method, as does the basis of many trading algorithms. Time frame trading is best established by using two time frames related to each other, such as one-hour and 30-minute, or daily (24-hour) and 12-hour. Using the completed bar or candle in the higher time of choice to establish an entry decision at its completion fulfils the first part of a rule-based trading plan.
A lower time frame is then used to garner the actual entry into the anticipated move. This will include the continuation and break of the high of the decision bar, or some form of shorter time frame entry method at the completion of its own rollover period. An inside period is a great example of this when worked against the higher time frame. Stop loss from the higher time frame can be immediately established at the low or a factor of the low. A factor of the low is taking the low of the period and moving the stop loss a few pips or cents further away.
Now the rule-based trading plan comes to fruition, with the high time frame entry alert and the lower time frame entry into the position. This can be back tested with a pencil and printed charts, and is worthy of your attention.