My 5 Min Trading Learning Process & Thoughts

This thread is my way of learning how to trade the 5 / 15min (mainly 5min) timeframe using the principles with which I trade the longer (1H,4H,daily, weekly) timeframes.

This is a journal to detail my current thoughts and ongoing thoughts, discoveries, experiences as I learn, analyse and demo more and more on this timeframe.

How Do I Currently Trade The Longer Timeframes:

The folling other threads have an influence on how I trade the higher timeframes:

1. James 16 Chart Thread
2. Jacko's Forex House of Pleasure and Pain
3. Trend Trading Chart Thread
4. Trading With Deadly Accuracy Method
5. Peaks and Valleys (Trading Naked)

My trading methodology:

I mark major support / resistance zones (Price Pivot Zones - PPZ) on the higher time frame (starting with the weekly) working down to the 1HR and then watch how price reacts at these areas i.e. price action (limited to pinbas, outside bars, inside bars - not so keen on these, double / triple bar highs, lows, double bar high lower close - DBHLC and double bar low higher close - DBLHC).

The more supporting confluences at the PPZ areas the better - i.e. divergence, big round numbers (BRN), fib retracements (I only use 50 and 61.8).

I sometimes also take trades merely on the PPZ without waiting for price action, if there is a lot of conluence and it is a strong PPZ area together with decent fib retracement then I will take a trade - this is particualry true with pairs that are in a strong trend.

I also bear in mind charts of crude oil, gold and the dow in trading currencies as there is obvious correlation and they can give you a heads up on what might be happening in the near future.

My main last method of trading is merely to trade the trend. I have focused mainly on EU and GU this year on the longer time frames and have multiple posiitions running where I just add more positions on retracements to PPZ areas.

Why 5 / 15 min trading?

I'm at the stage in my trading career whereby I have what I would qualify as a small account and am in 'account building' mode. I successfully trade the longer time frames (although I'm still learning and by no means an 'expert) and want to add another type of trading where I can use the skills I've gained to build my account more quickly. The lower time frames obviously fit the bill as I have the time to do this in between trading the longer time frames.

The following threads have led me to where I am today on this time frame (in addition to the ones listed above):

1. Jankone 5 min Thread
2. Phillip Nel - 5 min intraday system

Differences between the 5min and longer time frames:

As far as I'm concerned there a are minimal difference, but the main ones I have seen / can think of are as follows:

1. PPZ strength - I'm a believer in the fact that the higher the time frame the stronger the PPZ area thus a weekly PPZ area should hold true on all time frames below it, thus a 5 min PPZ does not hold much strength on higher time frames and can be less reliable and more easiliy 'swept' aside.

2. Speed - pretty obvous but the speed with which price moves and speed with which you need to analyse and make a decision on a setup.

The Future

What I'm looking to do is to apply the main principles of my longer time frame trading on the lower time frames, with the main focus on keeping it simple at the start and then 'experimenting' with bringing in other factors.

I'm also concentrating purely on EU at the moment as I feel with this time frame that you can get a feel for how price moves, it's volatility and daily price movements. It might sound a bit wishy washy and it is hard to explain but I am a believer that the more you can get to you know your markets the better - this works on the higher time frame too - I trade more successfully on the majors - i.e. the pairs I know well than the exoctics. Whether it is subconsciouisly or not I do believe you can get a feel for a market over time.

My main initial focus is to base my demo trading on price action (J16 style) and breakouts in a trend (and virtually everyday you have a trend on this lower time frame - a big advantage) i.e. once a trend is formed finding an entry and then additional entry points to continue adding positions into a trend until the trend has changed. This is how I have traded the EU very successfully on the daily / 4HR time frame this year (obviously it is in a strong trend) and using price actions as a means to add in positions or warn of a potential reversal or change in trend. Thus I wont be using fibs, divergence, round nunbers, floor trade pivots, higher frame PPZ areas, MA's for the time being just keeping it as simple and pure as possible and then testing and adding in the other trading tools I use on the higer time frame one by one to see if they can add something.

Like my higher time frame trading I am looking for a high win rate. I average 80-90% on price action @ PPZ areas and 60-70% on pure PPZ trading on the higher time frame trading. I like to have the confidence that I can analyse the market correctly more often than not - I know some methods / systems have a low win rate but very high %R, but this is not for me. I am not 'wired' so that I can suffer a load of losses knowing that I will get one win which will make huge return, I know myself and know that I cannot have enough confidence in a method like this, I need to be correct most of the time, I am an analytical person and confidence comes with the fact that I know that say 70% of the time I be correct in my market analysis.But,. I do not see why this cannot be achieved with the same tools I use on the higher time frame trading.

Right, I think that is everything I have wanted to say for the time being. As I have stated I will be focussing on EU and mainly 5 mins and I have been demo trading since the start of this week i.e. 22nd March 2010 and saving my charts with market analysis and trade details as I go along. I will start to upload these over the next few days and well, just continue my journey on demoing, analysing and learning.

I welcome anyone else who trades this time frame using the main principles set out above to post, share thoughts and comments, after all that is is the wonder that is the great community of forex factory, the majority of people are here to learn and the best way to learn is to help and share ideas and epxeriences with one another.

Mark

Here is a chart from 23rd March 2010. This is my basic setup (ignore volume). I only trade during the periods of 8am - 7pm (GMT) and this captures the majority of the daily move. It is useful to bear in mind the last days range and the average daily range (ATR) so you know what can be expected during the course of a 'typical' day'.

As the day passes I mark on my chart the new highs (higher highs - HH), new lows (lower lows - LL), lower highs (LH) and higher lows (HL) - this is a basic method of determining a trend and when a trend is continuing or a change might be occuring.

As I mentioned in post 1 the aim is to try and capture the main moves of a trend - so chart 2 shows the main moves during the day. You can of course break this down further (chart 3) to show the smaller changes in direction during the course of the day.

Back later with how I approached trading that day, the trades I took and why and how I would have maybe approached it differently in retrospect.

Here is my summary of the market on 22/3/10. I split the analysis into 2 parts to make the chart bigger and easier to follow. Final chart is a summary of the trades I took pictorially.

A list of the actual trades I took is attached. It was a nice easy day with some nice gentle trend and only one choppy part of the day.

Great thread, alot of people can learn gold here

I agree 100% and I'm looking forward to more great posts by lovejoy80.

trublu

Here was my analysis for 23/3/2010 together with trades taken and updated trade log. As you can see price was more choppy today with some whipsaws and larger bar movements leading to a few losses.

I've noticed that your confidence can be more easily shaken on this time fraem as the speed and frequency of trades is much higher, therefore it requires a high amount of discipline and sticking to you main trading criteria at all times i.e. not letting your emotions get in the way.

I am looking forward to following along with you. I trade 5 min primarily as well. EU is also my main focus.

Rufus

Great thread thus far Mark! Really excited to follow and contribute to this thread! Very similar goals for me in that I plan to grow my account using 5/15min trades to supplement the few d/w trades that come along each month.
Enjoy your weekend, Josh

Thanks guys for all the comments thus far

Here is analysis for 24/3/2010 together with updated trade log.

Hi Mark,
great thread.I am sure u will bring many good tools and ideas trade on this low TF.In your begining part,is in FF similar thread system2.Entry and exits are on this levels but they ignore PA on this levels.
I saw your chart in Jankone thread end u used WMD method on this low TF,so this thread will be very interesting to watch.

Market analysis and trading log for 25/3/2010 - I stopped trading slightly early as the market was quite choppy and I wasn't really getting anywhere.

Market analysis for 26/03/2010 and updated trading log for the day and week.

I finished the day off ealry as I dont like trading Friday afternoons (glad I did - I would have taken that pin bar otherwise!) and by this time I was pretty exhausted! Trading the lower time frame certainly does mentally tire you out, what with focussing on the time frame and still trading the 4HR and above it's been a hectic week! I've got loads of thing s to do that I would normally do during the day, lots of bookmarked things to catch up on (anything I see interesting I bookmark it and read when I get time)...I've had little time for Call of Duty (lol!).

As I mentione din a previous post, you have to be on your game, sharp and mentally strong to trade this time frame and be willing to stick to your method no matter what and act very quickly...being disciplined, patient and mentally strong is so important on the 5min compared to trading the 4H and daily IMO, but the results speak for themselves. This is a demo acount but the last time I made 33.75R took a lot more than a week!

Next week I will start adding the following:

1. Round numbers
2. RSI - for divergence only
3. Marking PPZ zones frim higher time frames

These are all obvious thing that should compliment trading on this time frame and things that work well on the higher time frames.

I plan to demo for another week then I'll go live with a tiny (i.e. meaningless - say £50) live account using Oanda if things go well. I'll probably link it to myfxbook too instead of using excell - much easy to track and performan analysis that way.

Do you mean this thread:

http://www.forexfactory.com/showthread.php?t=80290

If so, someone else messaged me about it this moring, I've boookmarked it and added it to my list of things to read

Yes exactly that thread.

Man, you really nail the trades, a big thumbs up.

But there's one problem that you have to keep in mind. Demo trades are 'utopic' so to say. You can't expect to enter and exit the trades on live like you do now. You're going to be subject to slippage, requotes and so on which will really hurt you.

I really really like your approach, I haven't focused that much on 5 min (still studying the long approach) but I will follow this thread like a hawk.

Good job.

Yeah I realise that. Just gonna demo until I'm happy with my method then will text on Oanda live (currently using Mt4 for charts and Oanda demo for trades) - advantage with Oanda is that it is much quicker and easier to calculate lot size, better execution and smaller spreads. Demo is good for getting confidence in your own method etc, but will aim to go live within a fortnight.

Will have to be careful to avoid major news times when entering trades or when I ve have trades on due to increased spread and potential slippage. I find Mt4 (well FxPro and Alpari UK) notoriously bad for re-quotes, poor spreads on some pairs and it really bugs me twhen you want to a pending order and it has be so far away from the current price - MT4 is good for pcharts, indicators etc but sucks real bad for trading IMO - anyway rant over with! lol.

Hi Lovejoy80

What indicator do you use to draw the short colored lines for new highs and lows?

I have been drawing full length lines and it gets a bit confusing. The short line segments would be the ticket.

Thanks a lot for the informative posting. The things you are doing fit nicely in to what I have been working on this year. Looking forward to learning more tools for my Fx tool box.

Rufus

i believe Oanda (oanda users can correct me) has the min/max chart wherein u can spot a change in spread right away. this might be helpful in news times.
also, cobraforex & the THV group, i believe has a news indicator. it plots on MT4 so u are aware of pending news releases. check it out

just saw your thread Mark, good luck!!

I don't use an indicator, I plot them manually as I go through the day. I use the 'trendline' button but if you right click on line then untick 'ray' in properties from there on whenever you draw the line it doesnt go across your whole chart just as far as you want it - hope that makes sense, if not let me know and I'll take some screenshots.

Thanks, yes it does, it is much easier to keep an eye on the spread on Oanda and plus the spread is typicaly 0.9 for EU - much smaller than my MT4.

Thanks, I follow the news each day anyway and always write down at the beginning of each day the 'red flag' news that is out and what time - plus I have CNBC on in the background all day so this should suffice.