Intraday rotations - M5 Channel trading

My method is based on intraday waves (aka leg, aka swing move, aka rotation), on the M5 TF.
My approach is heavily based on Price Action, with the help of some indicators. In terms of indicators, I use a 8-period SMA channel of the Highs & Lows, that helps me gauge momentum & direction. My execution TF is M5, my HTF is H1.

Here’s what my chart looks like:



I have HTF levels automatically traced, I use the previous 2 day / week / month High & Low as potential targets / reversal zones. Those levels are marked as dotted lines on my chart, with various colors (depending on H/L, and TF). For me, a HTF level is a HTF level, and I don’t apply more “weight” if it’s say a Weekly Low compared to a Daily Low. It’s just a simple no-brainer and objective way to have levels & targets. Obviously, I pay more attention to zones that have 2+ HTF levels clustered close together.
And for HTF momentum & direction, I use the same 8-period SMA channel of the Highs & Lows, but for the H1 TF. It’s a HTF indicator, which explains the “stairs” effect. Generally speaking, I want to trade in conditions where the M5 channel is outside the H1 channel. This confirms that there is both momentum and direction.

Finally, I have the Asian range traced out (with a % being in relation to the average range of that Asian session (average of the past 14 Asian sessions). It gives me a sense of the relative momentum for the day.



As a visual aid, I have my SMA channel be green when both high & low are going up, red when both are going down.

There have been many different trading strategies using a similar approach, here are a couple:
https://www.forexstrategiesresources...erage-channel/
https://www.tradingsetupsreview.com/...nel-day-trade/
https://www.tradingview.com/script/o...-Buy-and-Sell/
https://www.forexfactory.com/thread/...rt-term-system

I use a channel “rotation” approach in quite a few ways:

1. Continuation after a pullback

 

1. Reversals. Price needs to have moved away from my baseline (H1 channel), I measure it in terms of the number of ATRs between the 2 channels, I have a threshold above which I can consider it a potentially valid reversal. Ideally it needs to happen at one of my HTF levels (or a swing level that I have manually marked).

Attached Image (click to enlarge)

That’s the basis of my setups. In terms of targets, I have a few ways I set them:

1. TP based on a measured move
2. TP based on previous support / resistance
3. TP at HTF level
4. Letting the trade run until the next reversal.

In terms of SL, I simply look at the level printed at the fresh rotation

Going back to Price Action, I look at a few things:

1. How clean the previous intraday swing moves have been (effort-result aspect; number of failures; body-wick ratios; …)
2. During the day, where price is at vs the Asian Range (consolidation or range expansion).
3. How efficient price is at making new highs / lows for the day
4. I gauge short-term momentum with how the bars form relative to the M5 channel. On a momentum move / leg / wave, I want the bars to mostly form outside the channel (free bars). When bars close back inside the channel, I want that pullback move to very quickly fail. Bars closing on the opposite side of the channel are indicative of the end of that leg, and potentially a next rotation (or start of consolidation zone).

In terms of entries, depending on my conviction of a potential setup, and depending on the implied momentum, I can wait for certain confirmations, or have what may seem as a late entry.

What I look for in a “valid” rotation:

1. For price to cleanly stall or fail at some point (no big wicks in both directions, no hectic movement).
2. Confluence with HTF level is better
3. I then want to see momentum gaining on the creation of the fresh rotation, with a bar closing with conviction above / below the channel, with little upper / lower wick. The ATR size of that bar should be relatively large.

I try to build a narrative around the setup (usually based on continuation or failure), within the current market structure.

This method is just another way of looking at HHs and LLs, breaks of structure, continuations and mean reversion. Nothing groundbreaking, I just framed it a certain way based on a combination of methods I learned during my journey.

There are a few inspirations from which I took a few bits and pieces here and there, or just general trading inspiration:

1. Linda Raschke
2. Adam Grimes
3. Secrets Of A Pivot Boss (Franklin Ochoa)
4. Markets In Profile (James Dalton)
5. Understanding Price Action (Bob Volman)
6. Al Brooks

There were also a few FF threads:

1. PIE thread
2. The DIBS Method
3. Ratios & Harmonics (Mr Pip)

Some trades:

 

1. Reversal setup. Rotation took place below HTF cluster, with bullish conviction on the rotation. Exit is less than ideal, price had just broken above small consolidation level, next HTF level would have made more sense.

 

1. Continuation setup. Very shallow pullback after initial drop, bar closing back below M5 channel.

 

1. Late entry, continuation after double failure at PDL. Bearish momentum gaining, double HTF level serving as high probability target.

 

1. Continuation setup inside H1 channel. Momentum was great on the turn. Got stopped out on break of previous lows. Good loss.
2. Shortly after my exit, I saw momentum picking up, entered late and targeted HTF level cluster / previous swing high. Execution wasn’t great on the second trade, but I was hoping to get a slight pullback, didn’t happen and got in on the impulse move up.

 

1. Continuation rotation after weak pullback. Exit when price closed below channel.

1. Reversal setup: Large bullish move with no pullback into HTF level. M5 channel over-extended vs H1 channel. Failure at HTF level with a LH, then a drop down which gives the bearish rotation. Entry was on break of the lows of the weak bullish pullback. Conservative target at HTF level (PDH) because reversal setup.

 

1. Sub-optimal continuation setup:

 

1. Bullish rotation confirming a HL in bullish day, with the previous HL failing to break below HTF cluster.
2. Bullish momentum building up on the rotation, with consecutive free bars forming after the turn.
3. BUT:
   1. The initial bullish move after the drop was low-conviction (slow grind up, many wicks).
   2. Entry was right on a HTF level that had pushed price back right after the Asian session. Going long right at fresh and confirmed and unbroken resistance is not the best idea.
   3. Exit could have been more disciplined. Given the resistance level, the first red bar closing below the channel, after price stalled at that HTF level, was a sound and less expensive exit.

 

1. Reversal setup:

 

1. Strong initial bullish move, failed just below HTF level with the strongest pullback of the day. Didn’t “trust” the following bullish rotation (because of strength of the pullback).
2. When that rotation immediately reversed, with a strong bearish bar closing below channel, I went short for a potential measured move down.
3. Right after the entry, price action proved me wrong, and it would have also be reasonable to close it a bit faster.

 

1. Continuation setup:

 

1. M5 channel expanded outside H1 channel, failed to pull back inside (confirming at the same time short-term structure).
2. Entered short at the close below M5 channel going for a daily range expansion.
3. Exit at PDL.

1. Reversal setup:

 

1. Here the H1 channel is simply the 96 period SMA of the Highs & Lows (instead of the HTF indicator that I use), because 8 * 12 = 96. Same thing, really, just visually a bit different & less wide because obviously the ATR on H1 is higher than M5.
2. Entry is on the rotation down, after pretty steady upmove with no pullback, into HTF cluster. I liked the fact that price stalled for a bit above the PDH level, before breaking down.
3. After my entry, I typically ask myself the question: “Is price behaving like expected?”. Which doesn't mean I expect it to go my way every time of course, but for example if I enter after a level, I don’t mind a retest of that level, in which case I expect a clear rejection of said level. Here, there was no rejection, momentum fading out, and as it did my conviction of a momentum mean-reversion move faded away. I closed as bars were unable to make even a slight lower low.

1. Reversal setup:

 

1. Rotation took place after place stalling just below Asian range & above HTF level. Nice bullish momentum, waited for price to pull back a bit to get a better entry around the top of the channel.
2. I could have closed earlier tbh, the first red close below M5 channel was a clear sign that it wasn’t the right time for the reversal.

1. Reversal setup:

 

1. This was more of an anticipation of a rotation, on NY market open. Nice bounce off HTF level, strong bullish momentum, I entered before the candle close. Exit around Drop-Base-Drop area.

1. Continuation setup:

 

1. First trade was a continuation after a retest of HTF level. I was going for a measured move up, given the shallow pullback. Closed around BE because price action was stalling, and didn’t correspond to “Is price behaving like expected?” (given the narrative that I built around the trade).
2. Second trade of the same setup, this time with more confluence: HTF cluster held a second time, nice bar size (2.6x ATR) on the rotation, following red bar that failed at the top of the channel, entered on the break of the highs. Exit was poor, reason was price was approaching the current day’s high, but initial narrative of measured move (around next HTF level) still held true.

This morning's trade:
XAUUSD had a large drop during the Asian session, the Asian range was 2.4x its usual ADR.
After initial bounce off PDL, it broke that level easily on the second try, with the bounce coming off the Y-2 low, into retest of PDL.
The entry was on the rotation after the retest, I liked the inverted pinbar that rejected the pullback into the channel.
Target was at previous zone of rejection, for a quick 100pip scalp.

Today's trade, short on gold:



ADR nearly reached (99%), into a first bearish rotation. The small consolidation showed weak bullish reaction, I shorted as bearish momentum was picking up, going for a measured move AB=CD near previous demand zone.

Yesterday evening I took another trade on Gold, looking for a last-hour dump into maybe current day's low. Closed as soon as price was regaining the channel.
-67pips.




This morning saw a setup that I didn't take, the rotation down on gold after retest of PDL. Was a bit hesitant because of the relatively low momentum after the first touch of PDL, and after the bar closed below it was too late / far for me. Target would have been D-2 which worked out just fine here.

Today's trade, a reversal rotation on Gold. Price was slowly grinding up, with a sudden drop on the bearish rotation.
I entered super late, there was some fomo on that entry, and an ideal entry would have been closer (or inside) to the M5 channel.
Target was PDH, which then offered another bullish rotation that I didn't take.

Yesterday's trade, bullish rotation on Nas on market open. Was expecting a breakout of Asian session & price to at least tag PDH.
Entry was late & there was some fomo in that execution, a normal / better entry would have been to wait for price to go back closer (inside) the M5 channel.
Exit was too early, minimum would have been at PDH level, or with a bit more patience the first close below channel, which occurred after the failure to reach the next HTF level.

Today's trade, a reversal rotation on Gold.
I viewed the failed dip below Y-2 high as a fakeout, price then retraced and started respecting a short-term support zone, so I went long.
Closed when price broke that zone and about to break the HTF level again. -106pips.