Some tools and indicators for trading one minute FX

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The one minute trading systems can suit everyone, if you show a little patience though, as it may be required. A trader with the proper frame of mind and temperament that is aligned with, his or her trading system can profit handsomely from it. The one minute trading system is ideal in many ways because it lets the trader in and out of the market in a shorter period of time. Everything is closer, the time spent, the spacing of the candles and the time it takes to complete a trade. In addition, many trades can be conducted throughout the day time in Asia, which is excellent for a large portion of the trading populous, as the market need not range massively to produce results.

One can finish a trade or two, with a modest profit, even before breakfast is ready. It is quite a challenging type of trading approach, yet with the right system it is possible. In this article I am going to tickle you with some ideas, but not satisfy you with definite answers, as your system and you must be aligned. You have to work some of it out yourself. Sorry.

Ok, as all manner of trading systems will have their own set of challenges when applying them to the FX market, what challenges will you uncover and more importantly how can you overcome them is the ten thousand dollar question. So let's get into some specifics and examples to see if we can help.

Price action: With any system the actual price action and movement needs to be something you understand, not a distillation of that movement, using lagging indicators, like averages, but the intuitive understanding that people drive prices and people do some crazy things.
If you are going to trade a one minute trading system successfully, you had better understand the market, and price action is the only starting point.

The phases of a trade: Most strategies are basic in concept, yet can use more and more complexity, although a great trading mentor of mine, Derek the Trader, always said there are two parts to a trading system that is all, the set up and the trigger, and if you cannot make money with two instruments, like an indicator and a trend line to achieve this, you are highly unlikely to achieve it with 78 squiggly lines and an atomic structuring system using fractal Geometry.

The use of candlesticks: Candlesticks are a popular way to display data, yet most people do not realise that candlesticks themselves can be used to assist in predicting certain price movements. Which ones, show me how, I hear you cry, don't get carried away.

The only real use of candlesticks as a trading tool, other than displaying data is to assist in identifying price reversals, as certain patterns like engulfing lines or Pinocchio bars (pin bars for short), can help identify the turnaround in the price. There are fake outs, fakies or false breaks, that also assist in a trader identifying a move has been rejected, therefore the market may reverse back the other way. These are important aspects to trading.

Candlesticks are components of every popular trading software on the market and will assist you to see, that is all, it does not assist you to analyse, you need other tools for that.

Candles display the four key pieces of data that are required to plot any time frame, they indicate the opening price; the closing price; the highest price for the period; the lowest price for the period; and whether the price increased or decreased at the close of that particular time frame being measured.

One minute charts and four hour charts can have the same look about them if you take the legend and scales off them, give it a try. This article is focusing on short term chart movements especially the one minute candles or bar, and with the shorter the time frame, the less tools you should probably add to your trading set up condition the better as you do not have the time to analyse again and again.

When at least two adjacent candlesticks create familiar and meaningful patterns, they can be useful in predicting the direction of future prices. The shorter the time frame the less relevant the candle patterns are.

Experience and training will teach the trader about all of these patterns. One example is the so-called engulfing pattern. This is a simple but powerful signal that strongly indicates that a reversal is taking place, on a 1 minute chart, this is not so, it occurs so often as to have no meaning.

The moving average: Moving averages are one of the most popular technical indicators used in charting and these are superimposed on price charts and over the candles. They show the ever changing average of price candles they are superimposed over, they are constructed over different time frames and can be combined with similar averages of different time frames to create a longer medium and short view of the price to compare with the candles themselves.

It is a helpful indicator that provides information on the overall price trend and gives meaning to the fluctuations of the prices displayed, they are though lagging by nature and actually confirm what has happened and do not predict what is going to happen.
Moving averages are constructed using different mathematical calculations but are basically the same family; they are used by traders to confirm the market movements as if prices rise the averages should confirm this, as it is a smoothing of the price.

Trendlines: Trendlines are powerful trading tools that can be placed on a chart by a trader to show when the trend or direction has altered in some way.
These are by far the most important trading tool of all, and there are two types, sloping or diagonal and horizontal.
They are applied in a similar fashion, but have a completely different method of application.

Horizontal trend lines are used to mark support and resistance levels in the price action, areas where the market has paused before, these areas can become more critical if these levels effect the price direction. They are more powerful if they are identified by more traders; as they actually become a fulfilling prophesy.

Sloping trend lines can mark sloping support resistance, and can assist to indicate trading channels and trading patterns. For example, a succession of higher highs and higher lows indicates a trending channel which can be used to predict where prices may travel along for a while and a break from this channel allows traders to act, it is a trigger condition.

One minute trading requires the use of trend lines to define when exactly to get into a trade, they are very subjective, but can be very helpful, in fact I would not trade a one minute chart without the use of both horizontal and sloping trend lines. They are a great trading tool.

Support and resistance: Support is a floor where the prices seem to prefer to rest or pause before continuing down, prices bounce off support. Support is a floor.
Resistance is a ceiling and prices are said to have hit resistance, when they crash up into a ceiling and pause. Resistance is a roof.

Both support and resistance are constructed using horizontal trend lines. They can be built using trend lines or boxes (depending on support area or support line, both are valid).

A plummeting currency will often stop at a previous support level, so it may be a great point to re-enter the market or close a sell trade to maximise the profit, created as the price falls and reaches a possible point of reversal. A climbing currency will often create a mirror image opportunity, and if a known level of support can be identified then it does give the trader a trading edge.

Trading system: Your trading system is the logic, rules and trading principles you apply to the market, you should be consistent and you should be disciplined, you need to wait till all your trading rules set up and then trigger and your trading system should give you a trading edge.
A trading edge is where you have a better than 50/50 chance of success.

A good overall strategy in trading includes indicators, trading concepts and principles, support and resistance, trend line analysis and of course the one minute candle.

If you can put these key elements together you can make trading a lucrative way to create wealth, the one minute chart is a specific method of trading and if you feel the need for more info on a trading system that contains most of the above ideas and tools visit www.impatienttrader.com.au

In time, one can fine-tune the senses and develop enough intuition to detect what chart indicators and patterns really point to. One can then take full advantage of the FX market and your trading system. Allan Foulkes

 


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