Five-Minute Bar Charts
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I have found over many years of trading that a five-minute bar chart
gives me the best view of intraday trend, chart patterns, and support
and resistance. If you trade a time frame that is less than five
minutes, you are too close to the aura of volatility that surrounds
the stock. If your strategy is to trade intraday trends, your objective
is to identify and stay with the trend without getting taken out by
the normal volatility of the stock. People who trade two-minute
charts are, in fact, too close to normal volatility and are taken out of
the trade too early. Another reason you, as an intraday trader, do
not want to use two-minute charts is that institutions trade in this
time frame. You cannot afford the commissions, slippage, and series
of losses that trading in this time frame will give you. Most individuals
mistakenly think they need to be as close to the beginning of
the price move as possible. What you really want is to ride an intraday
trend as long as possible. You will never be able to do this if you
are too close to the stick (price bar), because the market makers
will cause you to sell the stock by making you think the price is
going down. Using a five-minute chart will put you just far enough
out in time to establish solid intraday trend.When a five-minute
chart reverses, it tends to be a true intraday reversal. Chart patterns
that form in a five-minute chart tend to be very reliable and
easy to trade. You learned about intraday chart patterns in Chapter
4. A five-minute chart will become your best friend, keeping you in
trend and confirming entry and exit points.
I have found over many years of trading that a five-minute bar chart
gives me the best view of intraday trend, chart patterns, and support
and resistance. If you trade a time frame that is less than five
minutes, you are too close to the aura of volatility that surrounds
the stock. If your strategy is to trade intraday trends, your objective
is to identify and stay with the trend without getting taken out by
the normal volatility of the stock. People who trade two-minute
charts are, in fact, too close to normal volatility and are taken out of
the trade too early. Another reason you, as an intraday trader, do
not want to use two-minute charts is that institutions trade in this
time frame. You cannot afford the commissions, slippage, and series
of losses that trading in this time frame will give you. Most individuals
mistakenly think they need to be as close to the beginning of
the price move as possible. What you really want is to ride an intraday
trend as long as possible. You will never be able to do this if you
are too close to the stick (price bar), because the market makers
will cause you to sell the stock by making you think the price is
going down. Using a five-minute chart will put you just far enough
out in time to establish solid intraday trend.When a five-minute
chart reverses, it tends to be a true intraday reversal. Chart patterns
that form in a five-minute chart tend to be very reliable and
easy to trade. You learned about intraday chart patterns in Chapter
4. A five-minute chart will become your best friend, keeping you in
trend and confirming entry and exit points.