assetsfx.com

assetsfx.com

5 Minute Chart Day Trading [Reviewd in 2022]

assetsfx.com

5 Minute Chart Day Trading [Reviewd in 2022]

5 Minute Chart Day Trading is one of the successful day trading charts. Some currency traders are extremely patient and love to wait for the perfect setup.

In contrast, others need to see a move happen quickly, or they will abandon their positions.

 


Since the move shows signs of losing steam, an impatient momentum trader will also be the first to jump ship.

Therefore, a basic momentum strategy needs solid exit rules to protect profits while taking full advantage of the extension move. The 5 Minute Trading Strategy does just that.

 

In Today’s blog, we will try to describe:

How do you trade on the 5 Minute Chart Day Trading?

Bar any comprehensive logical examinations; we would try to say the 5-minute chart is one of the most famous time frames for day traders.

5-minutes furnishes you with the right blend of observing the subtleties without scalping and alternately permitting you to try not to sit tight for 10, 15, 30, or an hour to pull the trigger.

It's that barely recognizable difference where most traders feel great inside this time unit of measure. It additionally quietens the commotion of 1 and 2-minute charts. Back Top

 

What is a Momo?

The five-minute momo looks for a "momo" momentum or burst on very short-term (five-minute) charts. First, traders rely on two technical indicators available on many charting software packages and platforms: the 20-period exponential moving average (EMA) and the moving average convergence divergence (MACD).

The EMA is chosen over the simple moving average because it gives more weight to recent movements, which is necessary for fast momentum trading. The 5 Minute Trading Strategy plays a vital role in recent trend movements.

While a moving average is used to help determine the trend, the MACD histogram, which allows us to assess momentum, is used as a second indicator.

MACD histogram settings are the patterns used on most charting platforms: EMA=12, second EMA=26, signal line EMA=9, all using closing prices.

 

This strategy waits for a reversal trade but only takes advantage of the setup when momentum supports the reversal enough to create a burst of more excellent extension.

The position is closed in two separate segments; the first half helps us secure gains and ensures that we never turn a winner into a loser.

The second half allows us to try to catch what could become a massive move without risk because the stop has already moved to breakeven

The 5 minute chart day trading is quite beneficial while getting consistency in trading. Please take a look at how you trade on the 5-minute chart:

Back Top

 

Rules for a long trade

    1. Look for currency pairs trading below the 20-period EMA and MACD in negative territory.
    2. Wait for the price to cross above the 20-period EMA, then make sure that the MACD goes from negative to positive or has crossed into positive territory in the last 25 minutes.
    3. Go long ten pips above the 20-period EMA.
    4. Place a stop on the swing low on the five-minute chart for aggressive trading. For conservative trading, place a stop 20 pips below the 20-period EMA.
    5. Sell ​​half of the position in the entry plus the amount risked; move the stop on the second beat to the break-even point.
    6. Drag the stop by the break-even point or the 20-period EMA minus 15 pips, whichever is greater. Back Top

 

Rules for a short trade

    1. Look for the currency pair to be trading above the 20-period EMA and the MACD to be positive.
    2. Wait for the price to cross below the 20-period EMA; Make sure the MACD goes from positive to negative or crosses into hostile territory no more than five bars behind.
    3. Go short ten pips below the 20-period EMA.
    4. Place the stop at the swing high on a five-minute chart for aggressive trading. Put the stop 20 pips above the 20-period EMA for a conservative trade.
    5. Buy back half the position at the entry price minus the amount risked and moved the stop in the second half to break even.
    6. Drag the stop by the break-even point or 20-period EMA plus 15 pips, whichever is less. Back Top

 

Long Trades


Our first example above is EUR/USD on March 16, 2006, when the price moved above the 20-period EMA as the MACD histogram crossed above the zero line.

Although there were some instances of the price trying to move above the 20-period EMA between 13:30 and 14:00 ET, trade was not triggered because the MACD histogram was below the zero line. Multiple day trading charts are valuable, but 5 minute chart day trading is the best one.

We expected the MACD histogram to cross the zero line, and when it did, the trade was triggered at 1.2044. We enter at 1.2046 + 10 pips = 1.2056 with a stop at 1.2046 - 20 pips = 1.2026.

Our first target was 1.2056 + 30 pips = 1.2084. It was triggered about two and a half hours later. We exit half of the position and follow the remaining half through the 20-period EMA minus 15 pips. The second half finally closes at 1.2157 at 21:35 ET for a total profit on the trade of 65.5 pips.


The following example (above) is USD/JPY on March 21, 2006, when the price moved above the 20-period EMA.

As in the previous EUR/USD example, there were also some cases where the price broke through the 20-period EMA just before our entry point, but we did not accept the trade because the MACD histogram was below the zero line.

The MACD turned first, so we expected the price to cross the EMA by ten pips, and when it did, we entered the trade at 116.67 (the EMA was at 116.57).

The math is a little more complicated on this one. The stop is at 20-EMA minus 20 pips or 116.57 - 20 pips = 116.37. The first target is entry plus amount risked, or 116.67 + (116.67-116.37) = 116.97.

It fires five minutes later. We exit half of the position and follow the remaining half through the 20-period EMA minus 15 pips. The second half finally closes at 117.07 at 18:00 ET for an average total profit on the trade of 35 pips.

While the profit was not as attractive as the first trade, the chart shows a clean, smooth movement that indicates that the price action complied with our rules. If you want to get results on both long and short trades, you might go with the 5 Minute Trading Strategy. Back Top

 

Short Trades

On the short side, our first example is NZD/USD on March 20, 2006 (shown below). We see the price cross below the 20-period EMA, but the MACD-Histogram is still positive, so we expect it to cross below the zero line 25 minutes later.

Our trade is then triggered at 0.6294. As in the previous USD/JPY example, the math is a little confusing in this one because the moving average crossover did not occur at the same time the MACD moved below the zero line, as it did in our first EUR/USD example. As a result, we entered 0.6294.

Our stop is the 20-EMA plus 20 pips. At the time, the 20-EMA was at 0.6301, which puts our entry at 0.6291 and our stop at 0.6301 + 20 pips = 0.6321.

Our first target is the entry price minus the amount risked or 0.6291 - (0.6321-0.6291) = 0.6261. The target is hit two hours later and then stopped in the second half is moved to the break-even point.

Then we move into the second half of the position by the 20-period EMA plus 15 pips. The second half is then closed at 0.6262 for a total profit on the trade of 29.5 pips.


The example above is based on an opportunity developed on March 10, 2006, in GBP/USD. On the chart below, the price crosses below the 20-period EMA, and we wait 10 minutes for the MACD-Histogram to move into negative territory, thus triggering our entry order at 1.7375.

Based on the above rules, once the trade is triggered, we place our stop at the 20-EMA plus 20 pips or 1.7385 + 20 = 1.7405. Our first target is the entry price minus the amount risked, or 1.7375 - (1.7405 - 1.7375) = 1.7345. It is activated shortly after that.

Then we move into the second half of the position by the 20-period EMA plus 15 pips. The second half of the position is finally closed at 1.7268, for a total profit on the trade of 68.5 pips. The trade was also closed when the MACD histogram entered positive territory. Back Top

 

Momo's Commercial Failure

As you can see, five-minute momo trading is a compelling strategy for capturing momentum-based reversal moves. However, it doesn't always work, and it's important to explore an example of where it fails and understand why it does so.


The final example of the five-minute momo trade is EUR/CHF on March 21, 2006. The price crosses below the 20-period EMA, and we wait 20 minutes for the MACD histogram to move into negative territory, putting our entry order at 1.5711. We place our stop at the 20-EMA plus 20 pips or 1.5721 + 20 = 1.5741.

Our first target is the entry price minus the value risked or 1.5711 - (1.5741-1.5711) = 1.5681. The price trades down to 1.5696, which is not low enough to hit our trigger. It then reverses course, eventually beating our stop, causing a total loss of 30 pips.

When trading the five-minute momo strategy, the most important thing to be cautious about is trading too tight or too wide a range. The 5 minute chart day trading is almost required to maintain a successful day trading journey.

In quiet trading hours where the price fluctuates around the 20-EMA, the MACD histogram can swing back and forth, causing false signals.

Alternatively, if this strategy is implemented on a currency pair with an extensive trading range, the stop may be hit before the target is triggered.

Whatever 5 Minute Trading Strategy is really important for day traders. For intraday traders, 5 minute intraday trading strategy will also make good results. That's why someone says, “Don’t worry about what the markets are going to do, worry about what you are going to do in response to the markets.” Back Top

Here are a few FAQs about 5 minute chart day trading:

Q: Is a 5-minute chart suitable for trading?

A: Generally, 5-minute charts are extraordinary for stocks with lower volatility. Notwithstanding, assuming that you are trading low float stocks, you will need to utilize one little while minute chart to follow price movement.

While observing price movement on a lower level, you will likewise have to screen the more significant trends. For applying the 5 Minute Trading Strategy, you have to stick with 5-minute charts.

Q: Which time chart is best for day trading?

A: A tick chart will turn out best for setting trades for most stock day traders. The tick charts show the most itemized data and give more potential trade signals when the market is dynamic (comparative with a one-moment or more extended time period diagram). It additionally features when there is little action.

Q: Which indicator is best for 5 min chart?

A: The five-minute momo strategy is intended to help forex traders play inversions and remain in the situation as prices pattern toward another path. The technique depends on dramatic moving midpoints and the MACD indicator. If you trade on LiteFinance, then it might be good for day traders who want low spread.

Q: Which minute chart is best for intraday?

A: Five Minute Chart

Five minutes charts bar demonstrates high and low and opening and shutting of five minutes long. These are the most generally used day trading charts.

The 5 minutes outlines utilized for the present moment also Day Trading. This Time frame is the best time span for Intraday trading stocks. 5 minute candlestick patterns are required to trade on that strategy.

The Bottom Line

The 5 Minute Trading Strategy allows traders to profit from small bursts of momentum in forex pairs while providing solid exit rules to protect profits.

The 5 minute chart day trading is the only way to build a solid day trading profile for traders. The goal is to spot a reversal as it's 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.

As with many systems based on technical indicators, results will vary depending on market conditions.

litefinance

 

  • Share:

HOW CAN WE HELP YOU?

[email protected]