If we want to trade on the 5 mins time frame we need to start our analysis on a higher time frame. Preferred combination 4hr + 5 min.
- In 4 hours setup we do our analysis look for key levels, where are we in the bigger picture and then we will make our way down. So on the higher time frame we want to get a little bit of structure here. Lets start with the simple chart.
- 1st lets start the analysis by looking at where are the key swing points, where are the major support and resistance levels and mark the swing points.
- Then just use the horizontal lines and marks these levels.
- Mark these levels and see if these levels are valid and do they make sense. W can see just 2nd one is no longer respected.
- It was very good resistance level in the past, as can be seen in the left side. It didn’t seem to hold any value any more and here the market no more care at all. So we can safely ignore this one and then we end up with 3 levels.
- We also notice that we have support here at the demand zone
- Then market is in down trend.
- The market is overall in a range and in this bullish and bearish waves are alternating.
Trading Plan No. 1
- We are in the down trend and we want to participate in the down trend. But as we can see the market is at the support level. Its a major support level it has held in the past and also we want to make sure market is getting out of this consolidation level. In the down trend you will often see market going up and down, back and forth and if you want to trade a move to the down side you you want to make sure that those corrective waves are over and that the market is resuming into the initial trend direction which is downtrend here in this case. We are therefore looking for either breakout or a break and re-test. So that is our plan.
- We can see the breakout occurred and market is trading below the support level which is great the close this candle is below the last close.
- Its a confirmation that the market is resuming into the trend direction. And now we want to capture this part here in the trend direction. Lets drop to the 5 mins time frame and in this time frame you will notice this beautiful pattern. A triangle continuation structure helps us here to get proper entry into the trade.
- This is exactly we want to see here. We know that the market had a very long strong impulse wave to the downside then the triangle is the consolidation and as we have already seen in the higher time frame market waves going in up and down side same is equally true in the lower time frame. With all this information we now have we can really nicely time our trades using this wave rhythm.
- Now we want the market to get out of this triangle pattern now. Always make sure you don’t trade within those patterns, trading within consolidation patterns is a very low probability trading plan because there’s already so much noise in those patterns and you can increase the odds significantly if you wait a little bit to get out of those patterns.
- So this is what we see, market is clearing those lows, what does that means, it means that the market is resuming here the trend structure of lower lows and lower highs within those triangles or within the consolidations you will often see that the market is making higher lows this is not what you want to see when you’re in a down trend. But now you can see since the market has cleared this low here now the market is continuing to make lower lows. Now you can after the market has cleared this level, the ultimate low of this impulsive wave.
- You can now make entry at the breakout of this pattern and also at the breakout of the last low. If you are little bit of conservative trader and you want to wait for the market to completely make a lower low that’s totally fine as well.
- You can set the stop loss above the pattern formed here in the lower time frame.
- For the targets you can use the fibonacci retracement and plan the exit as per your risk level.