Video Lesson 3 – Why using the 5 minute chart makes sense | Front-running trades using limit orders

Video Lesson 3 – Why using the 5 minute chart makes sense | Front-running trades using limit orders


Hello everyone. My name is John Paul. DayTradeToWin.com.
Today is video lesson 3 in this series. In this third session, I’m going to talk about
why the 5-min time frame is the best for day trading. I’m also going to discuss what the
term “front running” means. First, let’s talk about why the 5-min time frame is the best
if you’re a day trader. Regardless of the platform you’re using (NinjaTrader, MultiCharts,
TradeStation, thinkorswim, Sierra, eSignal, etc.), you will see there are defaulted time
frames listed. Most traders are using a 60-min, 30-min, 15-min, etc. I would say a 2-min is
not that popular. In using a 5-min time frame, you can catch any move based on what everyone
else is looking at. For instance, if there’s a move that occurs after a news event, it
usually happens within a 10-min or 15-min interval. These times are divisible by 5.
If you’re a 60-min trader, you have to wait until a full hour has plotted on a candle/chart
in order to make a decision to go long or short. If the move already happened, I am
able to catch it using a 5-min time frame. It’s the best time frame to use. Now, on to
front running. Front running is a term, that back in the 80s and 90s had a bad connotation.
It occurs when you place a trade to enter or exit into the market ahead of everyone
else. Back then, traders with inside information would exit a trade or stock just before it
collapsed. This was a big no-no. Many traders and brokers got into trouble for insider information.
If you fast forward to 2014, the days of the boiler rooms don’t really exist like they
used to. However, you can still have some manipulation based on front running. The type
of front running I will show you is a little bit different. We’re not using any type of
insider information. Instead, we have a specific entry or target. For example, if you wanted
to enter short here, say at 1776, see how this candle broke down and you had a stop
or stop with limit waiting to get short at 1776, the term front running would imply an
order at 1776.25. What you’re doing is jumping ahead of everyone else to get into the trade.
This can occur when you’re entering the market and with a target. If you know a specific
target you want to achieve, say 1774. I use the ATR to tell me that. I’ll go into detail
later. I’m going to front run my target one tick in front of that, so it happens to be
1774.25. If everyone is waiting for 1774 and you have a limit order. We’re going to place
an order 1 tick in front at 1774.25, so when it does reach it, the likelihood of getting
filled is better instead of waiting where everyone else is at 1774. You loose a tick,
yes, but that’s fine in the bigger scheme of things. It’s better to get in, get out,
and wipe your hands clean. My name is John Paul. Stay tuned for the next video trading
lesson coming up in the next few days. If you have any questions, please reach out to
me at [email protected] Until next time, good trading.

9 Comments

  • BillG37

    April 3, 2015

    I'm using Pathfinder Trader from fastbrokers, and I have my chart set at 40 seconds! I want quicker bars. I don't want to even wait 5 minutes for a new bar. I'm also a day trader. I want to get in and out fairly quickly & trail my stop.

    Reply
  • Trifin Soup

    July 1, 2015

    one tick = 1/4?

    Reply
  • Zapan Trader

    March 9, 2017

    I just started using the 5 min chart to day trade. Was way to stubborn using the 1 min chart. God damn, so many unecessary and dumb trades ive taken because of the 1 min chart, while the 5 min would show me the best setups. Now ater the first 3 mins of the day I switch to strictly 5 min

    Reply
  • Lincoln C Mitchell

    May 7, 2017

    good video

    Reply
  • Ktoma7

    March 14, 2018

    Great video. I've tried/tested all charts: 1min, 5min, 15min, 30min, 45min, 1hr, 4hr., daily, weekly and monthly. It''s really hard to say which one of these worked best but for me, I noticed I did better with the 4hr. chart BUT far as entries, I did 5min & 15min.

    One thing I like about the longer time frames like 4hr/daily is that if that price action candle goes your way, there's usually a lot of pips within that candle, which can results in better returns. 4hr/daily tends to cut out all the price action noise associated with shorter time frames as well. The downside, you need to have extreme patience and if it goes against you, you'll lose a lot more too and there aren't as many good set ups like they are in the smaller time frames.

    What I like about The 5min/15min charts is that like you say, you can get in trades more early and potentially see where price action is going. There's far more set ups! Downside is too much noise and you can't see an overall longer structure. I've been testing a strategy on the 5 & 15min charts involving just two moving averages: 200ema & 800sma. On MT4 platform, I zoom the chart all the way OUT so I can get an overall picture and idea of past candle structure for the past 5 days and see all the support/resistance levels. Then I trade accordingly.

    Reply
  • Donnie Reid

    April 7, 2018

    Well taught sir. Filled with information for us newbies. Front running is something new to me. Thanks for sharing. If you dont mind Id love to use that in my strategy going forward.

    Reply
  • James Howard

    May 6, 2018

    But you know it's going to go way past 1774 and then 1447 and then 774 and then 447 until everyone is tearing their hair out and the thing just won't stop falling and then all the sudden, when you least expect it, it just casually and stealthily starts moving in the opposite direction, most likely when you are down the pub

    Reply
  • True Blue You

    May 18, 2018

    5 min works best for cryptocurrency Also – real tight timeframe is catching quick action – short shorts etc. – scalps—catching more action than with the 15 for sure —great post

    Reply
  • Temp Email

    June 1, 2019

    Wouldn’t a 1 minute chart allow me to front run the 5 minute chart traders? Or is that not the same idea? FIFO…First In First Out. 😂

    Reply

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