It is important to prepare yourself because a great deal of your time is about to be consumed now when you trade a 5-minute chart effectively. Of course, trading in the 5-minute chart is quite different from trading in the other time frames, but it is quite time-consuming.
You need to perform a whole methodology to trade a 5-minute chart effectively so that the probability can step into a trader’s account. And to have a high profit, it is essential to follow excellent money management and key risk-reward methods.
A 5-minute chart illustrates the summary to highlight the stock’s activity every 5 minutes within a trading session. If we talk about the core market session, it is 6.5 hours per day.
In this way, a 5-minute chart will have 78 five-minute bars printed over every full trading session.
Most of the day, traders are trading 5-minute charts to identify some short-term trends. This will even help them to execute the trading strategy of their own choice.
This strategy is specifically designed to help the traders play reversals and stay within the positions if the price trends are fresh. Hence, this charting strategy is wholly based on the exponential moving averages and the MACD indicator.
If the trend has started to unfold, trailing stops and stop-loss orders can protect profits.
How to set up a 5-minute chart for a long trade?
You should look for the currency pair trading below 20-period EMA and the MACD within the negative territory for the long trade. You should wait for the actual price to cross above the level of 20-period EMA.
You also have to ensure that the MCAD has crossed into the positive territory within the previous 25 minutes. Again, this can be either five bars or even less on a 5-minute chart.
For aggressive trading, you need to place a stop at any swing low on the 5-minute chart. But when it comes to conservative trading, place a stop of 20 pips just below the 20-period EMA.
How to set up a 5-minute chart for a short trade?
Search for the currency pair that can be traded just above the 20-period EMA and MACD, which should be positive.
Wait for the time till the actual price crosses below the level of 20-period EMA. Note that the MCAD should not be longer than 5 bars ago. Go for the shorter 10 pips just below the 20-period EMA.
You need to place a stop at any swing high on the 5-minute chart for aggressive trading. But when it comes to conservative trading, place a stop of 20 pips just above the 20-period EMA!
To end with, a 5-minute chart strategy is helpful for the traders to gain some profit through short bursts of momentum within Forex pairs. It even provides some solid exit rules to protect the trading profits.
Similar to the rest of the systems based on few technical indicators, the results of 5-minute chart trading will vary based on market conditions.