Intresting finding or simply statistic: 5min candel | Forex Factory

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Intresting finding or simply statistic: 5min candel

  • #1
  • First Post: Edited 12:13pm Aug 26, 2005 11:50am | Edited 12:13pm
Hi guys I am not sure I have new finding here or it is simple statistic and not sure if this is already widely known.
So I was looking at 5 min candles and I found that if there is minimum 20 pip (if more than better) move up or down during 5 minute, so after big rally as price begins falling it will reach minimum 2/3(sometimes more) of previous candle. However my finding does not work during fundamental releases. I checked and found out that there are cases when price action went on long time towards one direction when released fundamentals. So in choppy markets if suddenly appears the situation like this then you should expect price to come back. The best situation is when first 5 min candle makes 35 or more pip move and has big "body" and small "shadows" then second candle opens higher but comes back quickly. But if first candle makes only 20-25 pip move the second candle can follow it and you should not enter untill reversal confirms. The third is really reversal candle, after third candel begins correction. Today as EUR consolidated I tried this study and gained something quickly. But however you should always cover position when the correction candle reaches 2/3-3/4 of first "rally" candel. Never do it during fundamental info release. I attached here some files confirming my finding. this is made only for EUR/USD. I did not even looked if it is right for other pairs (I look later). If someone has already checked this study in practise so please write here if it really works. If someone has comments and notes which declines my finding please do not hesitate to write, it will be appreciated. thank you in advance. fx-trader777
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kiss the trend
  • #2
  • Aug 26, 2005 11:59am Aug 26, 2005 11:59am
There are more files, was not able to attach to previous post. Some files connected so there is 2-3 for each.
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kiss the trend
  • #3
  • Aug 27, 2005 2:22pm Aug 27, 2005 2:22pm
Very interesting Fx-trader777. Just a few questions: How long have you been testing this idea (over what length of time) and in what type of market (i.e. trending, ranging, choppy). Are you trading during a specific time session like London hours? Also, are you using markets orders for entry/exit as this is a quick trade? How large of a stop are you using? And the million dollar question; have you traded it live with a broker that will offer spreads low enough so that you can make enough money to trade this way? (sorry for all the questions!)

To your point of this same setup occuring on other pairs, I have seen this happen frequently on the GBP/USD pair. There is a caution on this type of trading though, because it can be your best friend or your worst enemy. Alot depends on your broker and just how fast you are. Also, something to consider is to combine the use of the 5 minute with the 1 minute chart. We are talking about very small time frames and it can be very difficult to trade. One other point that can't be left out is money management. In a trading style like this, it is crucial. You must know what your risk/reward ratio is to be profitable over time. The idea is interesting as I have worked on something very similar and found it challenging to have it fit all my criteria for my trading plan. candy
  • #4
  • Aug 28, 2005 6:49am Aug 28, 2005 6:49am
Quoting candy
Very interesting Fx-trader777. Just a few questions: How long have you been testing this idea (over what length of time) and in what type of market (i.e. trending, ranging, choppy). Are you trading during a specific time session like London hours? Also, are you using markets orders for entry/exit as this is a quick trade? How large of a stop are you using? And the million dollar question; have you traded it live with a broker that will offer spreads low enough so that you can make enough money to trade this way? (sorry for all the questions!)

To your point of this same setup occuring on other pairs, I have seen this happen frequently on the GBP/USD pair. There is a caution on this type of trading though, because it can be your best friend or your worst enemy. Alot depends on your broker and just how fast you are. Also, something to consider is to combine the use of the 5 minute with the 1 minute chart. We are talking about very small time frames and it can be very difficult to trade. One other point that can't be left out is money management. In a trading style like this, it is crucial. You must know what your risk/reward ratio is to be profitable over time. The idea is interesting as I have worked on something very similar and found it challenging to have it fit all my criteria for my trading plan. candy
Thanks, As for broker I am very pleased (I will not say name or Merlin will take my post to Adds ) Because there is not slipiges as other brokers and I can immediately buy or sell as I click on Sell/buy buttons (avarage time is 1/2 second). Frankly speaking it is not long time as I am trading forex I began it two month ago, but I verified my study on DEMO and it works. However It is not as reliable when there is fundamental info release, and it is less reliable during trending market (but minimum 2/3 of previous candle is reached, and during trending market it is interesting if this 5 min candle occurs against major trend so it is good situation to enter the market). When I trade according my study I always look at hourly chart and never trade against this trend (however trade but if there is 30-40pip 5minute candle). So I have enough confirmation of my study that this really works. I was testing this idea from 10 August till today on 5min charts. Yes you are right it works during London and NY markets better. Yes I tried it live this Friday and gained something very quickly (there was 35 pip move and later came back). I do not use stop loss or take profits because it happens so quickly I look all this time frame and need not to use orders. As for spreads my broker offers 3 pips on EUR/USD. However this idea has one lack: you should look at charts all london and NY markets, so if you live in Australia it is not suitable for you. However I live in Georgia (Eastern Europe) and during london open I am at my major job (at the bank) and cannot watch charts all day and then latar when NY opens I go home and trading during this rallies.
If you have any questions do not hesitate to ask
kiss the trend
  • #5
  • Aug 28, 2005 11:01am Aug 28, 2005 11:01am
Quoting fx-trader777
Thanks, As for broker I am very pleased (I will not say name or Merlin will take my post to Adds ) Because there is not slipiges as other brokers and I can immediately buy or sell as I click on Sell/buy buttons (avarage time is 1/2 second). Frankly speaking it is not long time as I am trading forex I began it two month ago, but I verified my study on DEMO and it works. However It is not as reliable when there is fundamental info release, and it is less reliable during trending market (but minimum 2/3 of previous candle is reached, and during trending market it is interesting if this 5 min candle occurs against major trend so it is good situation to enter the market). When I trade according my study I always look at hourly chart and never trade against this trend (however trade but if there is 30-40pip 5minute candle). So I have enough confirmation of my study that this really works. I was testing this idea from 10 August till today on 5min charts. Yes you are right it works during London and NY markets better. Yes I tried it live this Friday and gained something very quickly (there was 35 pip move and later came back). I do not use stop loss or take profits because it happens so quickly I look all this time frame and need not to use orders. As for spreads my broker offers 3 pips on EUR/USD. However this idea has one lack: you should look at charts all london and NY markets, so if you live in Australia it is not suitable for you. However I live in Georgia (Eastern Europe) and during london open I am at my major job (at the bank) and cannot watch charts all day and then latar when NY opens I go home and trading during this rallies.
If you have any questions do not hesitate to ask
Thanks for all your feedback. Excellent about your broker spread and execution speed. That’s exactly what you need for this type of system. I am in the U.S. so I trade London into New York session which seems to work very well for all types of strategies. I use a 30 minute chart for seeing overall trend if I’m in doubt. However, I like to stick with one chart because of the speed with which you are working, for me this simplifies everything. During news releases is the hardest time for everyone to trade, but in this case I think it has a possibility of happening. There are several waves of price action at news time: First the initial reaction, the reaction to the first reaction and finally the latecomers to the party, the reaction to the first two reactions. There are plenty of opportunities to catch a little of one of the waves, don’t try to catch it all or you will get burnt badly. Try a little higher timeframe chart, say 8 minute or 10 minute, even as far out as 30 minute. Use your same entry and exit except increase your bar size requirements to perhaps 30 or 35 in accordance with your increase in timeframe. I have done this and it can work extremely well. This way you stay out of the mad rush of the initial news pop of price and still profit handsomely from the moves in the market. Try it and see what you think.

I spend most of my time on GBP and this type of price action is exactly what happens on this currency as well as the EUR. The only problem is the spread for GBP tends to be a little higher, but if you’re good at trading this you’ll still make plenty of money. I guess I’m a chicken when it comes to stops. I always use stops, but only as an emergency stop and never plan on even coming close to hitting them. If you have system failure, your computer dies or whatever, you know this will not be a bottomless pit.

Again with a few questions for you: Are you just measuring the first candle by eye to see if it makes 20 pips or better or are you actually calculating to make sure? Also, about your entry, is it based on the break of the close of the first candle or just when it comes off the high of the previous candle? When do you decide that the trade has gone against you and exit so as to prevent large losses?

Thanks for the enjoyable exchanges about this trading strategy. candy
  • #6
  • Aug 28, 2005 5:38pm Aug 28, 2005 5:38pm
Quoting fx-trader777
Thanks, As for broker I am very pleased (I will not say name or Merlin will take my post to Adds ) Because there is not slipiges as other brokers and I can immediately buy or sell as I click on Sell/buy buttons (avarage time is 1/2 second). Frankly speaking it is not long time as I am trading forex I began it two month ago, but I verified my study on DEMO and it works.
I hate to burst your bubble but demo accounts do not slip with most brokers even when their money accounts do. You CANNOT accept the results you get with a demo account where slippage is concerned. What you can do to confirm this -- is call the broker and tell them that you've tested slippage on their demo account and ask them if slippage characteristics are identical to trading money. I think you'll find that in most, if not all cases, that demo accounts do not reflect the same slippage characteristics because they do not have to execute an order to return a result they simply execute a fake order at the price you select.

FT
  • #7
  • Aug 28, 2005 11:35pm Aug 28, 2005 11:35pm
Quoting fijitrader
I hate to burst your bubble but demo accounts do not slip with most brokers even when their money accounts do. You CANNOT accept the results you get with a demo account where slippage is concerned. What you can do to confirm this -- is call the broker and tell them that you've tested slippage on their demo account and ask them if slippage characteristics are identical to trading money. I think you'll find that in most, if not all cases, that demo accounts do not reflect the same slippage characteristics because they do not have to execute an order to return a result they simply execute a fake order at the price you select.

FT
No, I am trading live account almost 2 month and there was not any slippage, May be I am new and that's why, at any rate I like platform I am trading, because I am super-short term fundamentalist and do not like to wait long, So during Fundamental releases I can immediately enter the market (1/2 second). ANd the rate I deal is the rate shown on platform.
kiss the trend
  • #8
  • Aug 29, 2005 9:55am Aug 29, 2005 9:55am
Quoting candy

Again with a few questions for you: Are you just measuring the first candle by eye to see if it makes 20 pips or better or are you actually calculating to make sure? Also, about your entry, is it based on the break of the close of the first candle or just when it comes off the high of the previous candle? When do you decide that the trade has gone against you and exit so as to prevent large losses?

Thanks for the enjoyable exchanges about this trading strategy. candy
Yes it is more reliable to measure by eye , because however I find it more reliable if price during 5minute goes up or down permanently (so I watch 1min charts as well). If price goes suddenly 20 pip in a minute and then comes back and then 5 minute really closes 30-40 pip up (down) from previous candle it is not as reliable (it is only my opinion). Yes then I wait for this 30-40 pip candle's close break (and watch price action). However if rate do not come back during 8-10 candle, then I take loss (this loss is not big as after such rally market never continues so fast (besides fundamentals)). So I trade following this belief: In 100 cases like this more than 90 is confirming my strategy and I make profit, and if during 8-10 candle market does not reverses so I consider that this 10 case happened so I take loss wich is very little in comparison with profit.
kiss the trend
  • #9
  • Aug 29, 2005 3:10pm Aug 29, 2005 3:10pm
Quoting fx-trader777
No, I am trading live account almost 2 month and there was not any slippage,
I was only responding to this comment that you made.

Quote
but I verified my study on DEMO and it works
If that comment does not apply then don't worry bout what I said.

FT
  • #10
  • Aug 29, 2005 11:48pm Aug 29, 2005 11:48pm
Interesting way to scalp!,

Certainly worth looking out for.
  • #11
  • Aug 30, 2005 5:45am Aug 30, 2005 5:45am
Quoting fx-trader777
Yes it is more reliable to measure by eye , because however I find it more reliable if price during 5minute goes up or down permanently (so I watch 1min charts as well). If price goes suddenly 20 pip in a minute and then comes back and then 5 minute really closes 30-40 pip up (down) from previous candle it is not as reliable (it is only my opinion). Yes then I wait for this 30-40 pip candle's close break (and watch price action). However if rate do not come back during 8-10 candle, then I take loss (this loss is not big as after such rally market never continues so fast (besides fundamentals)). So I trade following this belief: In 100 cases like this more than 90 is confirming my strategy and I make profit, and if during 8-10 candle market does not reverses so I consider that this 10 case happened so I take loss wich is very little in comparison with profit.
Thanks for your comments. Yes, I use the break of the close too. One other thing you might look at if you haven't already is using some type of support and resistence points such as pivots or fibs for turning points. Most times I have seen reversals at key points, but not always. I also use Murrey Math for this type of trading which works really well.

I'm impressed with your 90% results, that's very hard to come by. If you started working on your strategy during the summer months, it would be prudent to keep testing your system into the fall as the market tends to change quite a bit. I have found that the more the market trends, the less opportunities for this type of trading, although they still exist.

One last thing, make sure your broker is okay with scalping or otherwise you'll run into trouble. Some brokers will not tolerate scalping and will make it miserable for you to trade or simply close your account. You have to look at your average trade time. If it's too short you may have a problem. Funny thng, but they'll let you do this type of trading during demo, but not live. Maybe start with a small amount of money to make sure it is viable. candy
  • #12
  • Aug 30, 2005 11:04am Aug 30, 2005 11:04am
Quoting candy
Thanks for your comments. Yes, I use the break of the close too. One other thing you might look at if you haven't already is using some type of support and resistence points such as pivots or fibs for turning points. Most times I have seen reversals at key points, but not always. I also use Murrey Math for this type of trading which works really well.

I'm impressed with your 90% results, that's very hard to come by. If you started working on your strategy during the summer months, it would be prudent to keep testing your system into the fall as the market tends to change quite a bit. I have found that the more the market trends, the less opportunities for this type of trading, although they still exist.
However I lost here on USD/CHF , as during 8 candle price did not come to 2/3 of rally candle (which was 30 pips) I take loss. That was right move, because later there was another rallies (not 5minute)
kiss the trend
  • #13
  • Aug 31, 2005 5:22am Aug 31, 2005 5:22am
Yesterday GBP was very generous and yielded 5 trades with one being a loser. Overall, I can't complain. Losses are kept short while the winners are big enough to make a decent amount. I find a little better results in some higher time frames than 5 min. I used stops and limits when the market was moving a little faster to protect the losses from being larger than I wanted. This worked fine. candy
  • #14
  • Sep 9, 2005 3:49am Sep 9, 2005 3:49am
As I was gathering statistical Info I found out that this is happening on pairs which fluctuate in narrow ranges, such as NZD/USD, AUD/USD it is happening rarely but for sure coming back. As for GBP this is happening very often but sometimes it is killing.
kiss the trend
  • #15
  • Last Post: May 23, 2019 7:18am May 23, 2019 7:18am
interesting experience. and this is a beneficial discovery for us beginners.
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