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5 minute charts

  • #1
  • First Post: Sep 9, 2007 5:43am Sep 9, 2007 5:43am
Are 5 minute charts as bad to trade from off of as some people say they are? Thanks.
Binary Options Trader
  • #2
  • Sep 9, 2007 5:44am Sep 9, 2007 5:44am
That depends on your trading style really. There's not right or wrong answer for that question. I personally dont like the 5 minutes, I feel more comfortable with the Hourly and 4H charts.
  • #3
  • Sep 9, 2007 5:59am Sep 9, 2007 5:59am
Quoting WTB
That depends on your trading style really. There's not right or wrong answer for that question. I personally dont like the 5 minutes, I feel more comfortable with the Hourly and 4H charts.
But why do you feel more comfortable with the hourly or 4 hour charts? If I may ask....
Binary Options Trader
  • #4
  • Sep 9, 2007 4:38pm Sep 9, 2007 4:38pm
Quoting Yoda_Glenn
Are 5 minute charts as bad to trade from off of as some people say they are? Thanks.
Spread makes short period trading costly. Shorter periods usually have smaller take profit targets but your spread is fixed. Thus as a percentage of profits your costs go up quite a lot. I personally prefer the shorter periods because I feel more in control of my equity, I don't have to go to bed with open positions in the market.
I think most people in this forum will recomend learning with hourly or greater time frames, though as a 9 to 5 wage slave I find that this can mean you miss out on a lot of entry points.
  • #5
  • Sep 9, 2007 4:55pm Sep 9, 2007 4:55pm
If your going to scalp, check with your broker and see what their rules are for scalping.

Wish you many pips
  • #6
  • Sep 9, 2007 10:07pm Sep 9, 2007 10:07pm
Quoting WHTenn
If your going to scalp, check with your broker and see what their rules are for scalping.

Wish you many pips
Are you implying that trading on five minute charts is scalping?
  • #7
  • Sep 9, 2007 10:09pm Sep 9, 2007 10:09pm
depend on the volatility of the pair, the more volatile the better to trade in the small TFs
  • #8
  • Sep 10, 2007 12:01am Sep 10, 2007 12:01am
Hi Yoda_Glenn,

I personally dont use the 5-minute chart as I find it too slow for my system, but the thing you should do first is find out what sort of trader you are, position, intra day or even scalping it all depends on what sort of person you are, do you like taking risks, how comfortable you are with where you stick your stop loss, can you sleep at night when you have a trade going all that sort of stuff. Me personally I like to trade intra day so I developed my system for that.

Now I use the 15-minute, 3-mintue and 1-minute charts to define my entry and then run the majority of the trade of the 15-mintue chart and run my stop loss from the 15 as well.

So once you decide which way you want to trade then research the forums here as they have some systems here that would suite any style you choose to go with.

Cheers Go Getter
Go Getter When Trading Its All About "WHO YOU ARE BEING"
  • #9
  • Sep 10, 2007 2:26am Sep 10, 2007 2:26am
Quoting Yoda_Glenn
But why do you feel more comfortable with the hourly or 4 hour charts? If I may ask....
No particular reason, no particular bias. After having run some statistical results on my personal track records, I simply score my best results when I trade off the Hourly and 4H charts, thus those are the first ones I look to trade now a days. The "why?" is irrelevant to me.
  • #10
  • Sep 10, 2007 11:05am Sep 10, 2007 11:05am
I find the higher the timeframe, the more stable the patterns, support resistance, and general price action. for example look at a trendline on the 5 minute timeframe for the past couple hours, its 50/50 that it will break, or bounce, or even a false breakout. Now look at 1 or 4 hour, or even daily candle, over the past month, you'll start to see the patterns and price action is a lot more stable and easier to predict, especially support and resistance. just takes patience
  • #11
  • Sep 17, 2007 4:43pm Sep 17, 2007 4:43pm
Support and Resistance are really 90% of the game. The 5 min chart "support lines" are not necessarily major.

Plus, think of this: (I am using Interbank FX as an example)

Spread on GBP/USD = 4 pips.

If you take the following trades:

buy +7 pips cost 4 pips
buy +5 pips cost 4 pips
buy +20 pips cost 4 pips

This is assuming that you are correct three times in a row. I would only take a small loss to wipe out two of these trades.

Plus, assuming you could play a 4 hour candle during the same time, you would be more likely to capture more than the 32 pips during this time frame of trading. (The idea being that you didn't catch EVERY pip on the way up.)

So on a 4 hour candle, it could be more like:

buy +64 pips cost 4 pips

In the shorter time scenario, you gave your broker $120 (1 full lot), while on the longer one, you gave them $40. Plus, your profit is $640, compared to $320.

This is simplistic, I will give you that....but think about it. The truth should make itself obvious to you.

All I can say is brokers LOVE short term traders. Eventually at least one of your trades will go wrong. They get to wipe out two of your wins, and collect the spread on all three trades as well.

Clockwork
  • #12
  • Sep 21, 2007 11:19am Sep 21, 2007 11:19am
I often take entries on the 5 or 15 min tf, and once im in the trade ill pull out to a longer tf. It's working well for me.
  • #13
  • Sep 21, 2007 12:03pm Sep 21, 2007 12:03pm
Quoting Marrethiel
Are you implying that trading on five minute charts is scalping?
Isn't it true scalpers usually trade the shorter TFs?
  • #14
  • Sep 21, 2007 3:00pm Sep 21, 2007 3:00pm
Quoting opie999
Isn't it true scalpers usually trade the shorter TFs?
Not Always. In my opinion, Scalping is very short time trading system and get small pips in each trade, just like hit and run. And not usually use 1M or 5M TF, sometimes bigger than that.

Regards,

IIN
  • #15
  • Sep 21, 2007 4:03pm Sep 21, 2007 4:03pm
Quoting Marrethiel
Are you implying that trading on five minute charts is scalping?
I think that your broker's definition for "scalping" is far more important than your own definition. I have the impression that anything under "10 minutes trades" will go "under the radar" if you're trading with a Market Maker.
"I say high, You say low, You say why, and I say I don't know..."
  • #16
  • Sep 21, 2007 7:11pm Sep 21, 2007 7:11pm
Quoting iinzall
Not Always. In my opinion, Scalping is very short time trading system and get small pips in each trade, just like hit and run. And not usually use 1M or 5M TF, sometimes bigger than that.

Regards,

IIN

Uh, No.
  • #17
  • Sep 21, 2007 7:33pm Sep 21, 2007 7:33pm
I think the 5 is fine for trading. Like any trading in forex, the bigger picture
is most important. I don't trade the one hour as I think it doesnt tell me anything outside of "be cautios" at the top/bottom. The 4 hour is good as
if you catch on the way down your likely to get a big move. the one hour, on the other hand, can end abruptly and fibs galore...I prefer to stay out and let the others get into those trades.
-- dont let anyone fool ya. forex is a tough business.
  • #18
  • Sep 21, 2007 8:20pm Sep 21, 2007 8:20pm
Taken from Investopedia.

Quote
Scalping is a trading style specializing in taking profits on small price changes, generally soon after a trade has been entered and has become profitable. It requires a trader to have a strict exit strategy because one large loss could eliminate the many small gains that the trader has worked to obtain. Having the right tools such as a live feed, a direct-access broker and the stamina to place many trades is required for this strategy to be successful.

Scalping is based on an assumption that most stocks will complete the first stage of a movement (a stock will move in the desired direction for a brief time but where it goes from there is uncertain); some of the stocks will cease to advance and others will continue. A scalper intends to take as many small profits as possible, not allowing them to evaporate. Such an approach is the opposite of the "let your profits run" mindset, which attempts to optimize positive trading results by increasing the size of winning trades while letting others reverse. Scalping achieves results by increasing the number of winners and sacrificing the size of the wins. It's not uncommon for a trader of a longer time frame to achieve positive results by winning only half or even less of his or her trades - it's just that the wins are much bigger than the losses. A successful scalper, however, will have a much higher ratio of winning trades versus losing ones while keeping profits roughly equal or slightly bigger than losses.

The main premises of scalping are:

  1. Lessened exposure limits risk - A brief exposure to the market diminishes the probability of running into an adverse event.
  2. Smaller moves are easier to obtain - A bigger imbalance of supply and demand is needed to warrant bigger price changes. It is easier for a stock to make a 10 cent move than it is to make a $1 move.
  3. Smaller moves are more frequent than larger ones - Even during relatively quiet markets there are many small movements that a scalper can exploit.

Scalping can be adopted as a primary or supplementary style of trading.

Primary Style
A pure scalper will make a number of trades a day, between five and 10 to hundreds. A scalper will mostly utilize one-minute charts since the time frame is small and he or she needs to see the setups as they shape up as close to real time as possible. Quote systems Nasdaq Level II, TotalView and/or Times and Sales are essential tools for this type of trading. Automatic instant execution of orders is crucial to a scalper, so a direct-access broker is the favored weapon of choice.

Supplementary Style
Traders of other time frames can use scalping as a supplementary approach in several ways. The most obvious way is to use it when the market is choppy or locked in a narrow range. When there are no trends in a longer time frame, going to a shorter time frame can reveal visible and exploitable trends, which can lead a trader to scalp.

Another way to add scalping to longer time-frame trades is through the so-called "umbrella" concept. This approach allows a trader to improve his or her cost basis and maximize a profit. Umbrella trades are done in the following way:

  1. A trader initiates a position for a longer time-frame trade.
  2. While the main trade develops, a trader identifies new setups in a shorter time frame in the direction of the main trade, entering and exiting them by the principles of scalping.

Practically any trading system, based on particular setups, can be used for the purposes of scalping. In this regard, scalping can be seen as a kind of method of risk management. Basically any trade can be turned into a scalp by taking a profit near the 1:1 risk/reward ratio. This means that the size of profit taken equals the size of a stop dictated by the setup. If, for instance, a trader enters his or her position for a scalp trade at $20 with an initial stop at $19.90, then the risk is 10 cents; this means a 1:1 risk/reward ratio will be reached at $20.10.

Scalp trades can be executed on both long and short sides. They can be done on breakouts or in range-bound trading. Many traditional chart formations, such as a cup and handle or triangle, can be used for scalping. The same can be said about technical indicators if a trader bases decisions on them.

Three Types of Scalping
The first type of scalping is referred as "market making", whereby a scalper tries to capitalize on the spread by simultaneously posting a bid and an offer for a specific stock. Obviously, this strategy can succeed only on mostly immobile stocks that trade big volume without any real price change. This kind of scalping is immensely hard to do successfully as a trader must compete with market makers for the shares on both bids and offers. Also, the profit is so small that any stock's movement against the trader's position warrants a loss exceeding his or her original profit target.

The other two styles are based on a more traditional approach and require a moving stock where prices change rapidly. These two styles also require a sound strategy and method of reading the movement.

The second type of scalping is done by purchasing a large number of shares that are sold for a gain on a very small price movement. A trader of this style will enter into positions for several thousand shares and wait for a small move, which is usually measured in cents. Such an approach requires highly liquid stock to allow for entering and exiting 3,000 to 10,000 shares easily.

The third type of scalping is the closest to traditional methods of trading. A trader enters an amount of shares on any setup or signal from his or her system, and closes the position as soon as the first exit signal is generated near the 1:1 risk/reward ratio, calculated as described earlier.

Conclusion
Scalping can be very profitable for traders who decide to use it as a primary strategy or even those who use it to supplement other types of trading. Adhering to the strict exit strategy is the key to making small profits compound into large gains. The brief amount of market exposure and the frequency of small moves are key attributes that are the reasons why this strategy is popular among many types of traders.

(For further reading, see Introduction To Types Of Trading: Scalpers.)
By Vadym Graifer

  • #19
  • May 9, 2010 9:45am May 9, 2010 9:45am
Quoting clockwork71
Support and Resistance are really 90% of the game. The 5 min chart "support lines" are not necessarily major.

Plus, think of this: (I am using Interbank FX as an example)

Spread on GBP/USD = 4 pips.

If you take the following trades:

buy +7 pips...
I would have never on my own thought of it that way. I usually look at the HTF and trigger off the LTF but may adjust to take less trades but take them off the HTF= more pips in long termhttp://cdn.forexfactory.com/images/icons/icon14.gif
Always Learning
  • #20
  • Last Post: May 9, 2010 12:36pm May 9, 2010 12:36pm
Quoting clockwork71
Support and Resistance are really 90% of the game. The 5 min chart "support lines" are not necessarily major.

Plus, think of this: (I am using Interbank FX as an example)

Spread on GBP/USD = 4 pips.

If you take the following trades:

buy +7 pips...

I agree with this 100%. There are numerous trends within the 5min timeframe throughout the day and S/R are very important. A S/R area on a 1hr or 4hr chart is still valid if price reacts there by +/- even 20 pips or so. Know these areas on a 5min chart where they coincide on a longer term chart. I like to use the 15min as a mid-term direction for the 5min and it helps a lot.
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