Hi folks, this strategy is still getting the odd comment and viewing, glad to see it's still of value to you! I'm still actively trading with most of the principles below. Also in lieu of the 5m timeframe opening range, I use the "Asian" range from 0 GMT to 5 GMT as a high and low to either take reversal entries from the extremities or as breakout pullbacks.
Welcome to my thread on my 5 minute timeframe price action strategy. This strategy trades with the trend on a 5m TF, taking pullbacks that utilise the 14ema and volume. I currently day-trade this strategy full-time at the Asian Open for a few hours, then the Frankfurt Open for a few hours. I'll discuss each component of the strategy, and then post trades each day showing it all working together. Things will be easier to understand if you read through the basics so we're all speaking the same language.
The first six posts in this thread are prerequisite, as there are a few price action basics to introduce. There are also links around the web that reinforce the concepts. Trading with the trend,. Once the forum gets rolling please post any trades that use the strategy and ask any questions.
If there's any queries about MQL4 coding, detailed trading questions or requests for any of my custom indis or templates; I'd request a donation to onegirl.
While this isn't soliciting or advertising, it shows a commitment from your end. For me, a big part of trading is paying it forward. I don't necessarily agree with people selling their trading services, that'd be like a fisherman making you pay him in fish to teach you how to fish. So we're all talking about the same charts, I've put together this basic template with indis, you'll need to add a 14ema and MT4's volume indicator.
Trade with the trend! The trend is your friend! The trend is your friend until it ends or bends! Trade against the trend, never again! Price action basics has an uptrend making higher swing highs and higher swing lows, a down trend consists of lower swing highs and lower swing lows. Dow theory I believe? Anyway, determining the trend is fairly simple, if it looks up, it's up and vice versa.
The tricky thing is when does the trend change? Using an uptrend as an example, the trend is broken no longer an uptrend when the swing before the highest swing high is broken. Take the highest high, go back to the swing low before it, and that is the key price on the chart. When price breaks lower than that, the buyers don't have control anymore. More often that not though, you can use a simple method that a fellow Australian day-trader uses, a trend line.
How to determine the trend with two lines and why they make me horny. For this 5m TF price action strategy, I use a 50ema and 14ema to simplfy my trend, I've found that when the 14 is above the 50, this more often than not signifies an uptrend.
Vice versa for down trend. I'm cautious when price breaks sharply below the 14ema. In an ideal world of trending pullbacks, price remains above the 14ema, and the 14ema stays above the 50ema. When these conditions are met, it's fairly obvious what the trend is!
If price is within a pip range, it's not worth trading. For the indicator fanatics out there, if the 50ema is flat or the 14ema is bouncing around the 50ema, price is rangebound.
The 14ema ensures that you are getting "good value" for your trade entry, or as the old saying goes, "Buying Low" in an uptrend or "Selling High" in a downtrend. This strategy heavily depends on price moving, is price isn't moving, we're not entering any trades.
The best poker player in the world can sit down at the table, but if he gets dealt dud hands all night he can't do much. This goes for the fisherman too, if the fish aren't swimming by, it's not his fault, there's just nothing to catch! Again much like the previous post on identifying the trend, this topic is basic but a must for this strategy.
I'd say this is the second most important part of the strategy, after the trend. Basically any key price level that screams out on a chart.
I find the easiest way to do this without and indi is to grab a highlighter app highlight for mac or similar for windows, and draw basic lines on the chart, connecting swing lows and swing highs.
The PDHL is key in my eyes, I define the day as starting at the Sydney Open and going through to the end of New York, so the high and low that occurred throughout that time period. For me, these two prices were the be all and end all. I'm not sure whether the "big players", "huge banks" or giant pending orders were sitting at these prices, but I find that the following day, they're significant enough to provide strong resistance for price to break through, and if price is strong enough to break through, then it takes off!
I define the opening range as the high and low of the first 5 minutes of the session. I see this as the arm wrestle at the start of the session. If price breaks above the opening range, there's a higher probability that the buyers won the wrestle, if price breaks below, the sellers won.
Psychological levels include the numbers 1. The best thing about all of these key price levels, is that some clever chaps out there in internet land have coded MT4 indicators for each of them! If you can consistently make 3R return per day 12 pips for 4 pips risk, 30 pips for 10 pips risk etc. But each trader took the exact same trade. On the chart, it is the amount in pips that's between my entry and my stop loss. If I lose on a trade and let it my initial stop loss, I'm going to lose 1R.
Sizing a position lot size is as simple as heading to Position Size Calculator: This ensures that even when losing, you'll stay in the game. This is why it makes me laugh if a trader says "wow I made pips!
If I make a 12 pip profit but only risk 3 pips, this trade is 4R, or twice as profitable as the pip trade. Then I'd ask how many 12 pips moves the market makes versus how many pips moves it makes, but that's another story! I set my stop losses quite tight on a chart for a particular setup, placing the stop-loss below a recent swing low in an uptrend or above a recent swing high in a downtrend.
Depending on your broker, you'll also need to include the spread in your stop-loss, it's very frustrating being stopped out by half a pip, so give the trade some room to breathe. Price has however not made a lower low so this has me on guard slightly.
This EURUSD trade on the other hand is a breakout of the opening range, and is also a test of a previous swing high, I'd take the risk here and have a tighter stop loss.
Both easy in hindsight to explain, but I can confess that Stop-Loss placement can turn an entry that's too early into a winner, and a winning trade into a loser if you try to reel the fish in too quickly! Once in a trade, I look to move the Stop-Loss as close as I can to break even once the trade closes above long or below short past 1R or 1: On this trade, the candle that triggers our entry candle 2 also closes above 1R, at this candle close we can look to move our SL underneath the lows of bullish candles, this is how I trail.
For uptrends, I trail below bullish candles, for downtrend I trail above bearish candles. With the entry trigger candle closing above 1R, this doesn't give us much room to move out stop to break-even. At the close of candle 3 we move our stop below the low of candle 3. At the close of 4 , move the stop to below the low of 4 etc. Finally we're stopped out by the wick of candle 6. You can always take profits manually on that large move upwards.
In my experience, I've missed out on trades "eventually" moving into profit because I've become impatient and moved to break-even too quickly. Only to see that price wouldn't have hit my original stop-loss, and then it sailed straight into my profit target. This is why I've adopted the method of not moving to break-even until after price closes through 1R. I trail most of my trades, but I do find that price rarely bursts through the previous day's high and lows, so these are good locations for profit targets.
Also if you're a 4: When the markets moving and I'm looking at a couple of pairs, it's a bit of a pain in the butt to size positions via babypips website, as good as it is. If only we could google "MT4 position sizing indicator" I'll include this in the references. If you're not a believer in volume in forex that's ok, but this isn't a debate about whether the volume in forex is valid or not. Volume in forex is about measuring the cause versus the effect. Does the volume correlate with the price?
In a nice trending move, is volume increasing on the 'positive' moves and decreasing on the pullbacks? Did that tiny doji candle produce a massive volume?
Volume in conjunction with candle price bars can tell you quite a bit of information. I'd recommend reading and re-reading "Master the Markets" by Tom Williams there's a version available by TradeGuider but they try and sell you their software.
Stopping Volume doesn't occur throughout each session, but it's worth being aware of. My take on stopping volume is when a large amount of sellers in an uptrend or buyers in a downtrend come in and literally "stop" the current move. On the chart this is usually a nice strong bullish candle with a decent sized wick on the top, which indicates the sellers coming in.
Without volume on the chart, you wouldn't know a heavy amount of sellers have come into the market. Keeping an eye out for any NSND volume bars. Look for a lack of Supply or demand when price pulls-back in a trend. And we're almost ready to put it all together!
This is the last of the introductory posts, some house-keeping stuff about brokers and chart setups, and the finer detail of entries and order. I'd recommend heading forexpeacearmy. My criteria for a good broker is fast execution, minimal slippage and low fees.More...