Trading 5 and 15 Minute Charts From Inertia To Breakout

Ok, so now here are 2 charts today where we can witness how all things eventually change in time. While many times during the day traders wait for some new data and news to give them a new sense of direction and purpose, there will be always the opportunity for a trade when momentum suddenly builds upwards or downwards.

In the day short term traders can scalp by buying and selling within the framework of a minute. For example the 'buy' on the EUR/USD maybe 1.0635 and the 'sell' 1.0632. The spread would be 3 pips and usually within the space of under 1 minute the price may change  to 'buy' 1.0643 and the 'sell' 1.0640. Now if you have bought 1 unit EUR/USD at 1.0635 and if you had sold at 1.0640 in under a minute you may have made 5 pips on the trade. Scalpers thrive on momentum and weigh probabilities of a downward drive or upwards climb scalping all the way every 1 minute. Looking at the 15 minute charts scalpers pretty much understand that a decent run could last up to an hour before it fizzles out. Using these techniques many teen phenomena have emerged the last couple of years and making huge amounts of money in the process.

Lets start with the 5 min chart first.

On the EUR/ USD notice the last 2 red bars. That's 10 minutes where prices dropped from 1.0632 to 1.0625 which is a 5 pip range. Once momentum moves a scalper will sell and buy to close and then sell and buy to close inspecting the rate of change between the last candle and the preceding 5-10 candles on the 5 minute charts. Increases in the rate of change convinces the scalper to pile in and in some cases add more units on the scalp trade by scaling up to exploit profits on the window of momentum.

Lets start at the beginning and look at the 15 minute chart to see how the market developed today 8 hours ago.

As we can see 8 hours ago the market flatlined in a tight range. Notice that the flatline followed an explosive climb with an upwards bias. But all things run out of steam and so commonly the trajectory started to drift.

Now lets look the last 2 hours at the 15 minute chart to see what followed after the flatline.

Now notice that the flatline that followed after an explosive surge then resumed its course upwards over a 2 hr period. the market climbed from 1.06070 to 1.0655 in a massive momentum push.

So the lesson learnt is that with patience if you follow the flatline on inertia, a direction will eventually ensue to the up or downside and then you can capitalize on either by scalping every 1-2 minutes or by trading 5 minute or 15 minute candles.

It often pays to watch with keenness any lull and inertia because a market breakout becomes the essence of an intra-day swing trade. A good FX trader can keenly watch 5-6 strongly liquid majors during the Euro session and pile in trades with regimental stop-losses in place and often conclude a 6-4 winning ratio. Add the pips up in a day and that's significant. Therein lies the basis for many teen phenomena trading today. They simply have the stamina to rake in the trades with a brutal discipline to cut their losses and not think about it.