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Trading on minute charts

He has provided education to individual traders and investors for over 20 years. Article Reviewed on July 28, Gordon Scott Updated September 17, New traders often wonder which time frames to watch while day trading stocks. Do you use tick charts and a five-minute chart for context, or is it better to use a one-minute chart instead? Is a minute or hourly chart more effective at monitoring major support or resistance levels created over the last several days?

By Kathy Lien Updated Sep 2, Some currency traders are extremely patient and love to wait for the perfect setup, while others need to see a move happen quickly, or they will abandon their positions.

These impatient souls make perfect momentum traders because they wait for the market to have enough strength to push a currency in the desired direction and piggyback on the momentum in the hope of an extension move. However, once the move shows signs of losing strength, an impatient momentum trader will also be the first to jump ship.

The 5-Minute Trading Strategy

Therefore, a true momentum strategy needs to have solid exit rules to protect profitswhile still being able to ride as much of the extension move as possible.

The 5-Minute Momo strategy does just that. What's a Momo? The 5-Minute Momo looks for a momentum or "momo" trading on minute trading on minute charts on very short-term 5-minute charts. First, traders lay on two technical indicators that are available with many charting software packages and platforms: the period exponential moving average EMA and moving average convergence divergence MACD. EMA is chosen over the simple moving average because it places higher weight on recent movements, which is needed for fast momentum trades.

Multiple Time Frames Can Multiply Returns

Key Takeaways The 5-Minute Momo strategy is designed to help forex traders play reversals and stay in the position as prices trend in a new direction.

The strategy relies on exponential moving averages and the MACD indicator. As the trend is unfolding, stop-loss orders and trailing stops are used to protect profits.

As within any system based on technical indicators, the 5-Minute Momo isn't foolproof and results will vary depending on market conditions. While a moving average trading on minute charts used to help determine the trend, MACD histogramwhich helps us gauge momentum, is used as a second indicator.

This strategy waits for a reversal trade but only takes advantage of the setup when momentum supports the reversal enough to create a larger extension burst. The position is exited in two separate segments; the first half helps us lock in gains and ensures that we never turn a winner into a loser and the second half lets us attempt to catch what could become a very large move with no risk because the stop has already been moved to breakeven.

The Best Chart Time Frames For Day Trading

Wait for price to cross above the period EMA, then make sure that MACD is either in the process of crossing from negative to positive or has crossed into positive territory within the last 25 minutes five bars or less on a 5-minute chart.

Go long 10 pips above the period EMA.

Key Points Day trading charts are one of the most important tools in your trading arsenal.

For an aggressive trade, place a stop at the swing low on the 5-minute chart. For a conservative trade, place a stop 20 pips below the period EMA.

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Sell half of the position at entry plus the amount risked; move the stop on the second half to breakeven. Trail the stop by breakeven or the period EMA minus 15 pips, whichever is higher. Wait for the price to cross below the period EMA; make sure that MACD is either in the process of crossing from positive to negative or crossed into negative territory no longer than five bars ago.

Best 1 minute timeframe trading strategy (scalping)

Go short 10 pips below the period EMA. For an aggressive trade, place stop at the swing high on a 5-minute chart. For a conservative trade, place trading on minute charts stop 20 pips above period EMA Buy back half of the position at the entry price minus the amount risked and move the stop on the second trading on minute charts to breakeven.

Trail the stop by either the breakeven or period EMA plus 15 pips, whichever is lower.

Although there were a few instances of the price attempting to move above the period EMA between p. We waited for the MACD histogram to cross the zero line, and when it did, the trade was triggered at 1.

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We enter at 1. Our first target was 1.

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It was triggered approximately two and a half hours later. We exit half of the position and trail the remaining half by the period EMA minus 15 pips. The second half is eventually closed at 1.

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ET for a total profit on the trade of The math is a bit more complicated on this one. The stop is at the EMA minus 20 pips or The first target is entry plus the amount risked, or It gets triggered five minutes later. The second half is eventually closed at ET for a total average profit on the trade of 35 pips.

Although the profit was not as attractive as the first trade, the chart shows a clean and smooth move that indicates that price action conformed well to our rules. We see the price cross below the period EMA, but the MACD histogram is still positive, so we wait for it to cross below the zero line 25 minutes later. Our trade bitcoin cost then triggered at 0.

As a result, we enter at 0.

Trading the 1 minute chart - Beginner Questions - bacaniplaza.com Forex Trading Forum

Our stop is the EMA plus 20 pips. At the time, the EMA was at 0. Our first target is the entry price minus the amount risked or 0. The target is hit two hours later, and the stop on the second half is moved to breakeven.

Tips and Tricks for a 1 Minute Scalping Strategy in Forex

We then proceed to trail the second half of the position by the period EMA plus 15 pips. The second half is then closed at 0.

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In the chart below, the price crosses below the period EMA trading on minute charts we wait for 10 minutes for the MACD histogram to move into negative territory, thereby triggering our entry order at 1. Based on the rules above, as soon as the trade is triggered, we put our stop at the EMA plus 20 pips or 1.

Our first target is the entry price minus the amount risked, or 1. It gets triggered shortly thereafter.

The second half of the position is eventually closed at 1. However, it does not always work, and it is important to explore an example of where it fails and to understand why this happens. As seen above, the price crosses below the period EMA, and we wait for 20 minutes for the MACD histogram to move into negative territory, putting our entry order at 1. We place our stop at the EMA plus 20 pips or 1.

Our first target is the entry price minus the amount risked or 1. The price trades down to a low of 1. It then proceeds to trading on minute charts course, eventually hitting our stop, causing a total trade loss of 30 pips.

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Using a broker that offers charting platforms with the ability to automate entries, exits, stop-loss ordersand trailing stops is helpful when using strategies based on technical indicators. When trading the 5-Minute Momo strategy, the most important thing to be wary of is trading ranges that are too tight or too wide. In quiet trading hours, where the price simply fluctuates around the EMA, MACD histogram may flip back and forth, causing many false signals.

The Bottom Line In order to consistently make money in the markets, traders need to learn how to identify an underlying trend and trade around it accordingly. When should you get in or out of a trade?

Alternatively, if this strategy is implemented in a currency pair with a trading range that is too wide, the stop might be hit before the target is triggered. The Bottom Line The 5-Minute Momo strategy allows traders to profit from short bursts of momentum in forex pairs, while also providing solid exit rules required to protect profits.

The goal is to identify a reversal as it is happening, open a position, and then rely on risk management tools—like trailing stops—to profit from the move and not jump ship too soon.

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Like with many systems based on technical indicatorsresults will vary depending on market conditions. Compare Accounts.