Breakout on a One Minute Chart?
When I first started trading, I was enthralled by the movement of the one minute chart. I found it moved, to my eyes anyway in a 20 minute period, like a whole day's movement on a share chart would move. It was like speeding up reality for me and I loved it.
As I grew more accustomed to the movement and experienced the flat sideways markets where the candles moved a maximum of two or three pips in length for long periods, and I experienced the sudden breakout around a scheduled news release or market open in Europe. I started to feel the market noise was just too much, in the end it was unsettling me and my trading results where terrible.
I was trying to think the market rather than see it and react to it.
I had learned the hard way that Support and Resistance is the key to trading, as it can help you recognise when we are in blue sky territory, like when the Aussie made a new high again after the credit crunch, it was amazing, or when the Aussie broke over parity for the first time, it was amazing too and the markets ran and ran, I must be a romantic, I am sure that is not good for a trader.
Anyway, this lends me to touch on a subject that I have returned to and I am now starting to master and it is easy and enjoyable and most importantly for my ego and my account, I am now making better returns, trading a one minute chart, than I ever did trading the five, fifteen or hourly chart.
Everything I have read suggests you do not trade the one minute bar, so I stopped even looking at it and then in a time of particular frustration (and a large drawdown on my account), I went back to the one minute chart, with a small live account. I had made the decision to sit my main account, which is quite substantial in size, on the sidelines, as I had experienced an 11% drawdown in a 13 week period.
My strategy was just not working, when it had been working for me really well for over three years, was it the market or was it me, was it just time for my system to breakdown in the market place. Who knows, so I am back trading the one minute chart and I am finding to my absolute delight and surprise that I am really good at it, I mean really good. It is very interesting and it is all to do with support and resistance in the market, it's that simple.
Now everything I read about support and resistance, also suggested that the key levels are usually generated on the time frames, above the local candle time frame you are trading, an example is if I am trading a five minute candle, I would flip the chart up and place obvious support and resistance on the chart, using the fifteen minute or one hour candles, to ensure this is an accurate placement. I would drop the timeframe back to five minute and trade from there, with levels marked that should have more relevance than the local five minute support and resistance areas I might draw.
That was how I was taught, and it had always worked, once I worked it out, I never really changed that approach, yet here I am placing support and resistance on a one minute chart and trading from the one minute too, with quality trading results.
What do I do around these local support and resistance that is making my results so good? It took me a while to identify what I had actually done, I have simplified my trading, I had stripped it back to the pure price, support and resistance levels drawn on the one minute chart, one single indicator and a trend line or two, plus a rectangle drawn around the support level.
Time to stop and analyse the simplicity of the trading system and the results I am getting I thought.
An example today I took two trades, I had one with a nine pip stop loss, that made eighteen pips and one with a twelve pip stop which made twenty four pips, two from two, I risked only one percent on each trade and made two percent on each trade, so I made two trades, no more than one percent risk in the market at any one time, with a four percent result for the day.
Yesterday I took three trades.
I got stopped out on one trade and won on two, generating a three percent profit, with no more than one percent risk on any trade. I am up seven percent this week and it is Tuesday night.
It was never like this before, why is the support and resistance level working now, when I struggled on the five minute or fifteen even when I was aware of these levels.
I think it is because I am looking for obvious places where the market is showing repeated short term support or resistance, depending of course if I am a buyer or a seller, which I determine based on a long term EMA, if the price is above I am buying the currency pair, I can only buy and if the price is below, I am only selling, ever. Simple again see.
When I am wrong, it is often over very quickly, so there is little concern when I am in a trade, in preparation and set up mode, I watch for obvious thrust away from the support or resistance level where the price is creating a clear breakout away from the marked level, usually the breakout is through a slightly sloping or horizontal breakout line and a quick breakout entry trade is placed.
I set the stop loss behind the level of support or resistance, so every trade has a different risk in pips, so I use a calculator I have built to calculate the number of pips back into one percent of my capital and that calculates my position, every trade is risking one percent and my target is always two percent.
If there is a serious support level between the open and the target price I usually choose to ignore the trade and wait for the next one.
It is the ninth of October 2012 and I am up seventeen percent on my account since the beginning of October.
Not rocket science, going back to what makes sense to me, this approach works for me because it fits my view of the world and I am using support and resistance, recognised short term support and resistance, as the place to calculate my stop and this is the magic ingredient. Value and simplicity.
It is simple, yet when I explain what I am doing to my trading buddies, they all say the same thing, €Oh it cannot be that easy€, is it clarity or is it just that for once, one of the most recognised principles in trading is working for me, because I trade it and I believe it gives me an edge, I believe I have an edge now and so It seems I do. This is a very interesting outcome for me, I am now looking at my main account and all I have to deal with now is slippage on the size of the positions I need to take, as I am trading a one minute bar remember.
Frame the article
Explanation
Discussion on Long term support and Resistance
€ Relate
€ More meaning
How does it work
€ Is it reliable
€ Putting the ### in context
Summary
Overall you can use ### on a one minute chart
A really good example of how this is in the Impatient Trader trading system that relies on break out sfrom levels of consolidation and also applies stop loss strategies around these areas as well Link
As I grew more accustomed to the movement and experienced the flat sideways markets where the candles moved a maximum of two or three pips in length for long periods, and I experienced the sudden breakout around a scheduled news release or market open in Europe. I started to feel the market noise was just too much, in the end it was unsettling me and my trading results where terrible.
I was trying to think the market rather than see it and react to it.
I had learned the hard way that Support and Resistance is the key to trading, as it can help you recognise when we are in blue sky territory, like when the Aussie made a new high again after the credit crunch, it was amazing, or when the Aussie broke over parity for the first time, it was amazing too and the markets ran and ran, I must be a romantic, I am sure that is not good for a trader.
Anyway, this lends me to touch on a subject that I have returned to and I am now starting to master and it is easy and enjoyable and most importantly for my ego and my account, I am now making better returns, trading a one minute chart, than I ever did trading the five, fifteen or hourly chart.
Everything I have read suggests you do not trade the one minute bar, so I stopped even looking at it and then in a time of particular frustration (and a large drawdown on my account), I went back to the one minute chart, with a small live account. I had made the decision to sit my main account, which is quite substantial in size, on the sidelines, as I had experienced an 11% drawdown in a 13 week period.
My strategy was just not working, when it had been working for me really well for over three years, was it the market or was it me, was it just time for my system to breakdown in the market place. Who knows, so I am back trading the one minute chart and I am finding to my absolute delight and surprise that I am really good at it, I mean really good. It is very interesting and it is all to do with support and resistance in the market, it's that simple.
Now everything I read about support and resistance, also suggested that the key levels are usually generated on the time frames, above the local candle time frame you are trading, an example is if I am trading a five minute candle, I would flip the chart up and place obvious support and resistance on the chart, using the fifteen minute or one hour candles, to ensure this is an accurate placement. I would drop the timeframe back to five minute and trade from there, with levels marked that should have more relevance than the local five minute support and resistance areas I might draw.
That was how I was taught, and it had always worked, once I worked it out, I never really changed that approach, yet here I am placing support and resistance on a one minute chart and trading from the one minute too, with quality trading results.
What do I do around these local support and resistance that is making my results so good? It took me a while to identify what I had actually done, I have simplified my trading, I had stripped it back to the pure price, support and resistance levels drawn on the one minute chart, one single indicator and a trend line or two, plus a rectangle drawn around the support level.
Time to stop and analyse the simplicity of the trading system and the results I am getting I thought.
An example today I took two trades, I had one with a nine pip stop loss, that made eighteen pips and one with a twelve pip stop which made twenty four pips, two from two, I risked only one percent on each trade and made two percent on each trade, so I made two trades, no more than one percent risk in the market at any one time, with a four percent result for the day.
Yesterday I took three trades.
I got stopped out on one trade and won on two, generating a three percent profit, with no more than one percent risk on any trade. I am up seven percent this week and it is Tuesday night.
It was never like this before, why is the support and resistance level working now, when I struggled on the five minute or fifteen even when I was aware of these levels.
I think it is because I am looking for obvious places where the market is showing repeated short term support or resistance, depending of course if I am a buyer or a seller, which I determine based on a long term EMA, if the price is above I am buying the currency pair, I can only buy and if the price is below, I am only selling, ever. Simple again see.
When I am wrong, it is often over very quickly, so there is little concern when I am in a trade, in preparation and set up mode, I watch for obvious thrust away from the support or resistance level where the price is creating a clear breakout away from the marked level, usually the breakout is through a slightly sloping or horizontal breakout line and a quick breakout entry trade is placed.
I set the stop loss behind the level of support or resistance, so every trade has a different risk in pips, so I use a calculator I have built to calculate the number of pips back into one percent of my capital and that calculates my position, every trade is risking one percent and my target is always two percent.
If there is a serious support level between the open and the target price I usually choose to ignore the trade and wait for the next one.
It is the ninth of October 2012 and I am up seventeen percent on my account since the beginning of October.
Not rocket science, going back to what makes sense to me, this approach works for me because it fits my view of the world and I am using support and resistance, recognised short term support and resistance, as the place to calculate my stop and this is the magic ingredient. Value and simplicity.
It is simple, yet when I explain what I am doing to my trading buddies, they all say the same thing, €Oh it cannot be that easy€, is it clarity or is it just that for once, one of the most recognised principles in trading is working for me, because I trade it and I believe it gives me an edge, I believe I have an edge now and so It seems I do. This is a very interesting outcome for me, I am now looking at my main account and all I have to deal with now is slippage on the size of the positions I need to take, as I am trading a one minute bar remember.
Frame the article
Explanation
Discussion on Long term support and Resistance
€ Relate
€ More meaning
How does it work
€ Is it reliable
€ Putting the ### in context
Summary
Overall you can use ### on a one minute chart
A really good example of how this is in the Impatient Trader trading system that relies on break out sfrom levels of consolidation and also applies stop loss strategies around these areas as well Link
