The hourly chart sits at the crossroads between day trading and swing trading. It offers meaningful price action without the noise of minute charts, while still providing enough opportunities for active traders. If you find scalping too stressful and daily charts too slow, the 1-hour timeframe might be your perfect fit.
Understanding the Hourly Timeframe
On an hourly chart, each candlestick represents 60 minutes of price action. For stocks, this means approximately 6.5 candles per trading day. For forex and crypto markets that trade 24 hours, you get 24 candles per day.
Why Hourly Charts Work: The 1-hour timeframe filters out market noise while capturing meaningful moves. Patterns that form on hourly charts tend to be more reliable than those on minute charts because more market participants are watching them.
Who Should Use Hourly Charts?
The hourly timeframe is ideal for:
- Part-time traders: You do not need to watch every candle - check in every hour or two
- Swing traders seeking entries: Use hourly for precise entries on daily chart setups
- Traders avoiding PDT rules: Hold overnight occasionally without full swing trade duration
- Those wanting work-life balance: Trade effectively without constant screen time
Key Support and Resistance on Hourly Charts
Support and resistance levels on the hourly chart are significant because they represent multiple hours of price agreement. Here is how to identify them:
Finding Strong Levels
- Look for price zones that have been tested multiple times
- Identify levels where strong reversals occurred
- Mark round numbers and psychological levels
- Note previous day high and low, as these are key for hourly traders
Trading Hourly Support and Resistance
- Wait for price to approach a key level
- Look for rejection candles (wicks, dojis, engulfing patterns)
- Enter on confirmation with stop loss beyond the level
- Target the next major level or use trailing stops
Best Indicators for Hourly Charts
1. Moving Averages
Popular moving average settings for hourly charts:
- 20 EMA: Short-term trend and dynamic support/resistance
- 50 EMA: Medium-term trend direction
- 200 EMA: Long-term trend filter - many institutional traders watch this
2. RSI with Divergences
The RSI on hourly charts is excellent for spotting divergences. When price makes a new high but RSI makes a lower high, it often signals a coming reversal.
3. MACD
MACD crossovers on the hourly timeframe provide reliable trend change signals. The histogram shows momentum strength and can warn of fading trends.
4. Bollinger Bands
Bollinger Bands on hourly charts help identify volatility expansion and mean reversion opportunities. Price touching the outer bands often leads to reversals.
Hourly Chart Trading Strategies
1. The Hourly Trend Continuation
This strategy rides established trends by entering on pullbacks.
How to Trade It
- Identify a clear trend using the 50 EMA direction
- Wait for price to pull back to the 20 EMA
- Enter when an hourly candle closes back in the trend direction
- Stop loss below the pullback low (for longs)
- Target the previous swing high or 2:1 reward to risk
2. Hourly Range Breakout
When price consolidates for several hours, it builds energy for a breakout. Trade the breakout with volume confirmation.
3. Session Open Strategy
The first hourly candle of major sessions (US open, European open) often sets the tone. Trade breakouts of this candle with momentum.
4. Multi-Timeframe Confirmation
Use the daily chart for direction and the hourly chart for entries. This combines the reliability of higher timeframes with better entry precision.
Candlestick Patterns on Hourly Charts
Candlestick patterns are more reliable on hourly charts than on minute charts. Key patterns to watch:
- Engulfing patterns: Strong reversal signals at support or resistance
- Pin bars (hammer, shooting star): Rejection of price levels
- Inside bars: Consolidation before breakout
- Three white soldiers / three black crows: Strong trend continuation
Pro Tip: An engulfing pattern at a key support or resistance level on the hourly chart is one of the most reliable reversal signals in trading. Wait for the candle to close before entering.
Risk Management for Hourly Trading
Hourly chart trading requires different risk management than scalping:
- Wider stops: Hourly chart stops are typically 0.5% to 1.5% from entry
- Smaller position sizes: Compensate for wider stops with fewer shares
- Patience with targets: Let trades develop over hours, not minutes
- Account for gaps: If holding overnight, consider gap risk
Hourly Chart for Options Trading
The hourly timeframe is excellent for options traders who want to capture multi-day moves:
- Use hourly charts to time entries on weekly options
- Identify trend direction for credit spread placement
- Spot support and resistance for strike selection
- Monitor trades without constant attention
Combining with Other Timeframes
The hourly chart is most powerful when used with other timeframes:
- Daily chart: Identify the major trend and key levels
- Hourly chart: Find your entry and exit points
- 15-minute chart: Fine-tune entries for better risk-reward
Common Hourly Trading Mistakes
- Overtrading: With only 6-7 candles per day, you need patience
- Ignoring the daily trend: Always know the bigger picture before trading hourly
- Tight stops: Hourly moves need room to breathe - do not use scalper stops
- Forcing trades: Some days have no good hourly setups, and that is okay
- Ignoring news: Major news can invalidate hourly technical patterns
Building Your Hourly Trading Routine
- Pre-market (15 minutes): Check daily charts for context, mark key hourly levels
- First hour: Watch for opening range establishment
- Check-ins: Review charts every 1-2 hours for setups
- Last hour: Decide whether to hold overnight or close positions
- End of day: Log trades and prepare for tomorrow
Track Your Hourly Trading Performance
Pro Trader Dashboard automatically logs your trades and shows you which timeframes and strategies perform best. See your hourly trading stats alongside your other trading data.
Summary
The hourly chart offers a balanced approach to trading - enough opportunities to stay engaged without the stress of constant monitoring. It is ideal for traders who want to combine technical analysis with a sustainable lifestyle. Focus on key support and resistance levels, use trend-following strategies, and always consider the daily chart context before making hourly trades.
Ready for even longer timeframes? Explore daily chart trading strategies or learn how to combine timeframes with multi-timeframe analysis.