Do you want to trade 5 minute FX charts?
In this weekly video:
00:22 – Should you trade 5 minute charts?
01:05 – Unrealistic way of trading – too much chart time needed
01:48 – Trading at silly times of the morning
02:45 – Less strength on a 5 minute chart
03:32 – Trading the W1 and D1 charts while in the US
04:22 – Less than 1 hour per day to trade full time
04:50 – 14 Continuation pattern trades made +5.5% gain last week
06:08 – Software to trade offline charts
06:34 – Conclusions?
Why should you trade the five minute forex charts? Let's talk about that and more right now.
Hey, forex traders, Andrew Mitchem here, The Forex Trading Coach. This is video and podcast number 230.
Should you trade 5 minute charts?
I'm going to talk about five minute chart trades. Why should you trade them? Should you trade them? Let's talk about that and see what your answer is in a couple of minutes from now. The reason I want to talk about five minute charts is I had an email from a guy in the UK called Michael. He came to me and said, “Look, Andrew, I'm struggling with my trading. I purchased a course.” I'm not going to name you the course, but he said, “Look, I purchased the course, been doing it for a little while and I'm getting nowhere.”
I said to him, “Okay, so tell me about the style of trading.”
He said, “Look, it's all based on five minute charts.” Instantly for me that's like a bit of a warning system going off there.
Unrealistic way of trading – too much chart time needed
I said, “Okay, Michael, what's the issue? Why can you not trade the system?”
He said to me, “Well, it's requiring a lot of” his time, a lot of the chart time, like he's sitting at the computer a lot. He's got work to do. He's got a wife and kids to commit to. He said, “I just can't commit that amount of time to sitting there watching charts, and when I do sit there watching charts, I'm feeling like I'm forcing trades to happen. I'm overtrading. I'm constantly scanning different charts, different currency pairs. I'm on five minute charts looking for setup, scared to miss something, and almost like a gambling mentality, that constantly having to do something, scared to miss a trade.”
Trading at silly times of the morning
He also said that he has a mentor with his course who's over in America. He gets up at like three or four o'clock in the morning to trade the European session. Michael's there trying to go to work, and he's trying to trade. There's people getting up at like silly o'clock in the morning, crazy times in the morning, to trade these five minute time frame charts because they think they have to be there at that time trading these short time frame charts. You can get where I'm going with this. To me it's crazy. It's not sustainable. Even if you're making money from trading five minute charts, if you want to do that then maybe select say like an hour or so at a time that you're going to sit and do that.
My system works on five minute charts but I don't trade five minute charts. The same principle applies, but the downside is also you have to commit yourself to sitting watching the computer. You feel like you're forcing trades because you think [inaudible 00:02:40], therefore I'm going to look for trades.
Less strength on a 5 minute chart
The short time frame charts, if you're a technical trader like I am, a five minute chart doesn't really have a great deal of relevance because they still do work technically, but they have less relevance and less strength than say like an hour chart, or a four hour chart, or a daily chart, something like that.
The other thing is also you have to be really careful and mindful of news events. You also have to understand that the spread, the cost to take a trade, will have a significant impact on your overall profitability if you're looking at small time frame charts. All these things you have to weigh up. My conclusion is why on earth would I want to sit looking at the charts all day trading five minute charts. I just think it's crazy and it's not achievable long term. Give you some ideas.
Trading the W1 and D1 charts while in the US
As you probably know, I just spent almost three weeks in America. I came back last week but I spent almost the three previous weeks in America. I just traded the weekly charts once a week and the daily charts once a day. Five o'clock New York time, their afternoon time, looked at the charts, took about ten minutes to scan through the charts, took a trade if there was something there, moved on. Very easy to do.
Now back home in New Zealand, I'm trading the same weekly and the daily charts but when the daily charts change over, I'm also looking at four hour charts, and six, and eight, and twelve hours at the same time. Then I'm looking at four hour charts as and when I can during the daytime every four hour increments. Then five A.M. eastern standard time, which is currently my nine P.M., I'll look at the four, six and twelve hour charts again. In the daytime, I'll look at the eight hour charts once more if I can.
Less than 1 hour per day to trade full time
Total time of trading less than one hour per day. I'm a full time forex trader less than one hour actually watching the charts looking for new time frame, a new setups because I know when to look at the charts. I know I can only look at a new potential trade setup upon the completion of a candle, very, very easy to have other things going on in your life, far more enjoyable than to sit watching five minute charts. I can promise you far, far more profitable.
14 Continuation pattern trades made +5.5% gain last week
Now last night I had a webinar with clients. I love the webinars because of the shorter time frames. Yes, I do go down and look at say like one hour charts, et cetera. On that webinar, I explained to clients that the previous week, last week, I found fourteen trades that had really good setups, as a continuation pattern on the four, six, eight, and twelve hour charts, just fourteen in the entire week. If you had taken all fourteen of those, which realistically you probably would not because of different times of the day being asleep or at work or something, but let's say you did. You'd have made a five and a half percent account gain if you'd taken all fourteen of those trades that setup as continuation patterns.
I'm not even counting reversal patterns. I'm just looking at the higher probability continuation patterns. Fourteen trades in one week, maximum five and a half percent account gain if you'd taken all of them. Pretty amazing results for such a small amount of time. When you think about that, it's something that you know when to look at the charts, you know what you're looking for if you understand the way that I trade in my strategy. It's all taught in the course but if you understand what you're looking for, very easy to scan through a chart and go, “No, no, no, no, no. Yes, potentially trade then. No, no, no, no, no,” and you go like that. You can look through four hour, six hour, twelve hour charts, very, very easy to do.
Software to trade offline charts
I have some great software that allows myself and my clients to trade what we call offline charts, which are the made up charts, nonstandard empty four charts, such as like six and eight and twelve hour charts, fantastic way of trading, high reward to risk, low stress on the individual, very easy to plan your day around it.
If you'd like to know more, just send me an email [email protected]
Conclusions, you make your own. If you want to trade five minute charts staring at the screens all day, or more relaxed and far more enjoyable, far more profitable and by the way, you're not feeding your broker's pocket by trading the higher time frame charts. You're cool. If it was me, I'd go along with time frame.
This is Andrew Mitchem, The Forex Trading Coach.