1M charts - old advice useless now?

Hi all

Been reading Jesse Livermore's book recently and have been studying markets and TA for years. It got me thinking: although some obvious rock solid lessons/advice will NEVER become useless in trading (eg: preserve capital, maintain discipline above all else, etc etc) many things have become useless to us "new breed" now. We are the pioneers of trading, you and I, as we sit in front of our internet connections watching candles build up and down.

Jesse couldn't trade quick in the bucketshops after they refused his business so he moved to the actual exchange but the delay meant he could no longer intraday trade, he had to go for longer term swings. But he freely admitted that if bucketshops would have still let him trade he would have stayed with them making easy sure money by betting on pops up and down - much like we day traders do nowadays with our internet platforms.

I remember Vegas in his 1hr tunnel method stating that you never trade below 1HR charts else you'll lose your account for sure. I think this is wrong. I have heard similar advice from many pros and veterans who mean well but I think much of this old advice is useless now as conditions have got better, markets move better, liquidity is better, technology is better, fills are better etc.

I have heard horror stories from traders on actual exchanges about 20-30 years ago having to deal with fills that would make the retail spreadbetter gasp in horror in this day and age LOL!!

So I trade intraday, I like 1M and 5M charts. I haven't been doing this for long, I used to trade longer frames when working full time. Now I have the time to trade longer at home.

Yes I have tried tick charts and yes they are good but so are 1M charts - my 1M charts are free my tick charts would be paid for, and I cannot see the value in paying for charts which are slightly different. A method is a method, now amount of chart fiddling will change the value of the method. Yes 1M run like the wind, but that's good for me else I get bored. Yes that's unprofessional and undisciplined but I believe we have to find our own comfort zone, right? Well I need action. I am happy to lose on a proper enter, I have the correct discipline to wait for the setup, but I do not want to wait days.

Anyway, I guess I'm asking people for their thoughts on this. Should we adhere to old advice about small intraday frames are bad? I am surviving but am I missing out on something big and amazing in longer charts I just haven't realised yet?! Remember I have been looking at longer charts for a long time and never found them to be especially great. Please don't say "bigger frames = bigger profits" coz that's not true - it's perspective - it's position size adjustment - I can make the same % gain on a 1M chart to a Weekly chart, it's all about position size.

I guess I get shakey when I hear people online (who may be great or cr*p at this game - we never know for sure do we?) say "oh I would never use less that 4H" or "1M are untradable" and I think I am sure to lose it all one day. But then I read people have been using 5M and under for years and doing well.

We are living in exciting trading times and we have never had it so good and it should get better!! So many veteran advice from the old boy's trading clubs of the 70's and 80's is now extinct, only good for rose-tinted memories and funny after-dinner stories?

Any old pros out there (and new pros) wanting to offer some advice?

Am I being stupid trading the 1M?!

Thanks for reading!

I think most what is said about the shorter timeframes is out of date as well. For me a 1 min chart is too choppy and i couldnt calculate my entry and £pp quick enough to use them, I often miss moves on a 5 min chart if its moving fast.

I normally trade the 5 min EUR/USD chart and i cant see any reason why it is any harder than an hourly or daily. The 5 min on EUR/USD is smooth as anything with well defined price action. My strategy pretty much exclusively involves pin bars, inside bars etc on the 5 min EUR/USD chart. You get several setups every day on the 5 min so you really can cherry pick the perfect looking ones. You might get one every few days on the hourly of one every few months on a daily chart.

Another aspect is capitalisation and risk. To trade price action on higher time frames the stops may be hundreds of points so even betting the minimum your provider allows will require an account balance of several thousand pounds to start. On a 5 min chart the stops are only 10-12 points on average so you really can start off with only £100 without feeling under capitalised. Sadly if you really do become good at the game having such small stops (therefore needing bigger £pp to stick to the same risk profile) will mean you wont be ably to progress your balance as quickly. One of the often mentioned problems with short timeframe trading is that it is not very scalable. I find this to be very true. You can grow a small account very quickly but you cant keep that up when (If you are good enough) your account balance increases.

Whenever I speak to a newbie trader and they are talking about M1 charts, I try to get them to check out dailies instead; this isn't because you can get mega pips or the speed but simply because if you're new to the game, are not bothered with the discipline or money management aspects and watching M1 and, for instance, looking out for pinbars, you're going to be trading like a degen alcoholic gambler on speed. "Full tilt" is the phrase poker players use and that's the state most newbies will attain with M1.

Good post, trade on anything you want if it works for you, I find I don't do well with chaos, and the lower down the TF I go the more chaotic I find the action. I can trade off any TF, however I'm not about to embrace pain and chaos I don't need into my trading plan.

In a small part of this presentation Andrew Menaker discusses how the SAS use chaos to prevent the enemy from thinking/acting.

I was talking to a recruitment guy recently who specialises in our industry, his opinion, based on a lot of feedback he's getting from his high level clients (major IBs etc) is that only position trading and or HFT will work on FX as we move forward. Make of that what you will, personally, after having a good long think on it, particularly on who, why and how the HFT space is occupied and how it's evolving I agree totally and we'll never be able to *do HFT* as a retail punter will we..?

http://www.screencast.com/users/Mar...rs/media/d033bd77-c103-45ac-a5ef-8e2ffb611537

The best trading methods, the really solid ones, will work on any chart from 1 min to a 1 year chart. It's all fractals at the end of the day which is why these methods work over all the different time frames.

But then you have to add in your personality. If you're hyper and always on the go then trading using the daily/weekly/monthly is just not going to work. Conversely, if you're laid back and a potter/plodder then the 5/30/60 charts also won't work for you.

But both the above traders can approach the markets using the same tools and analysis methods and earn good returns, just different time scales. However, a bit of tweaking/adjusting will need to be done to the trading methods, but not too much.

Wow great answers all!

Mata Nui: yes I truly believe the old school mentality of small frames = death doesn't apply nowadays for a host of reasons, but I didn't understand your point about building larger accounts? If you can build a small account then what's the difference once your account gets big? Are you talking about getting good fills at higher stakes? If not, what do you mean? £1 to £2 is 100% and so is a million £ to 2 million, as long as you find a good broker who can fill large orders quickly in the Forex surely there is no difference as your account grows large? (When using the largest liquidity markets in the world that is!!)

shadowninja: yes good advice for newbies but I think once you have been in the game a while and realise the importance of money management and psychology then I think all timeframe become the same. I can see why a 1M or 5M or even 1H chart may kill a newbie quickly, but I also see why a non-newbie can move onto them once they know a thing or two.


Black Swan: I didn't understand your post!! HFT is high freq trading yes? And that guy you spoke to said HFT is the way our fast markets are evolving now, that makes sense as it may get to the point when HFT is the only way to make money in markets due to the price momentum lasting only a short time and changing its mind over and over - I can understand that theory as that is part of the reason I now trade 1M and 5M... I really believe the market is too unpredictable to do long term trades on. But I didn't understand your comment "we'll never be able to do HFT trading as retail punters" - I'm doing that now and so are others it seems?? Sorry, were you being sarcastic and I missed it?! LOL forgive me but could you clarify!! I do see your point of saying "why go for unnecessary chaos" if that's what small TFs mean to you then yes, but for me the chaos breeds opportunity so fits my mentality well LOL!

anley: brilliant, you hit the nail on the head and reassured me! Yes all good methods should work on all frames, I love to hear that, and I suppose they will need a little tweak just to fit the extra speed of the smaller frames, but ultimately they stay the same. You have described me in your post: hyper. LOL!! I am hyper and waiting for days for a setup is not me, plus I basically quit full time work to trade whilst living cheap. It's an enviable thing to do I know, most people cannot quit their jobs, I am not rich, I have to work part time at weekends and live back with family in a box room with pennies in my pocket but I gave up the job and the life for trading. The idea is to grow an account to a point I can sustain myself financially, maybe in a few years. It's a sacrifice I had to make now as I have no kids, no wife, no mortgage so it's my last chance to do such a thing!! Longer term trading got me nowhere, win and lose, I was too impatient. Now I have all day to stare at charts I have to justify it by trading 1M and 5M and these speeds (on EURUSD) fit my "hyper" personality. Great answer!


Thanks to all, I feel less insecure now. Here's to the (financially well off) future through trading!!!

Pineapple

pineappleman said:

shadowninja: yes good advice for newbies but I think once you have been in the game a while and realise the importance of money management and psychology then I think all timeframe become the same. I can see why a 1M or 5M or even 1H chart may kill a newbie quickly, but I also see why a non-newbie can move onto them once they know a thing or two.

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That's pretty much what I said.

shadowninja said:

That's pretty much what I said.

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LOL indeed you did, indeed you did

Black Swan: Just had a flick around about HFT and realise I got it wrong. HFT seems to be what the so called pros do with multiple trades in the blink of an eye which, like you said, we retail punters could never do. I thought you meant retail traders sitting in front of a screen all day getting in and out, my bad.

Pine

PS: ShadowNinja, I clicked your links at the bottom of your signature, love that video of that loser trader LMAO that's very very funny, and yes I have been there, haven't we all. But on a serious note, your 115% system you were selling a while back, is it still available to buy?

pineappleman said:

Please don't say "bigger frames = bigger profits" coz that's not true...

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In my opinion, while this is right in theory, it is wrong in practice.

I believe that if you trade a higher timeframe you are more likely to achieve larger profits down the line.

So, in theory it should make no difference but that's just the way it almost always works out.

I've never met anyone that traded off a 1m chart that let a move play out over several days or more and caught hundreds of ticks in a significant trend.

The trader of those timeframes often becomes attuned to taking action and not seeing the bigger move play out.

Please note that I am not saying there is anything wrong with this, I am just saying that is usually the way it is. I do agree that from an R perspective it makes no difference (e.g. risking 3 pips to make 12 on a 5m timeframe is better than risking 40 pips to make 80 on a higher timeframe assuming the same w/l). However, it is also my belief that higher timeframe trading is more likely to lead to plays that result in more money e.g. holding for the bigger move, adding to a position throughout etc

For this reason, higher timeframe trading offers more potential to me but what I haven't mentioned is reasons of liquidity. I won't go into this now but it is far more significant than what I have written above.

On another note, I think you are mistaken with Livermore.

He made money in the quick plays but he also said that he was glad that he was banned from the bucket shops. Initially he regretted it because it was a way for him to make a quick stake but later, Lefevre writes: "If it hadn't been for their refusing to take my business i never would have stopped trading in them. And then I never would have learnt that there was much more to the game of stock speculation than to play for fluctuations of a few points".

Why don't you think he realised this when he was in the bucket shop? The man wasn't an idiot. He could have just thought, "I know, I'll crack Anaconda by watching the ticker like a hawk to time the exact entry and then bugger off fishing as usual and come back to have made a 350:1."

The fact of the matter is, when you are amidst the trees, you often can't see the wood.

trader_dante said:

On another note, I think you are mistaken with Livermore.

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But....

You say most smaller frame traders don't hold out for the bigger run, fair enough, but I am learning to do this. So I get the point but that's really a fallacy of "most" people, not of the method/idea of trading small frames itself. And like you say, as for R:R, it makes mathematical sense to trade smaller frames often as you can nail better R:R. I subscribe to the belief of absolute time is detrimental to a trade - ie: the shorter the trade in absolute time the better - coz less can change in 5 minutes than 5 days. Hence it's harder I feel to trade longer term charts.

As for Livermore, remember this: his money management was simply AWFUL!! He may have been grateful to find the bigger moves outside of bucketshops, but his lifetime equity curve was simply ridiculous. He is a legend, yes, but he failed in the MM area in my opinion. He had to re-learn to trade due to the exchange delays, which taught him how to bet the farm on a longer term general market move, basically. No wonder he was rich then poor then rich then poor. I don't wanna be like him!! I want a smoother equity curve than that!

pineappleman said:

But....

You say most smaller frame traders don't hold out for the bigger run, fair enough, but I am learning to do this. So I get the point but that's really a fallacy of "most" people, not of the method/idea of trading small frames itself. And like you say, as for R:R, it makes mathematical sense to trade smaller frames often as you can nail better R:R. I subscribe to the belief of absolute time is detrimental to a trade - ie: the shorter the trade in absolute time the better - coz less can change in 5 minutes than 5 days. Hence it's harder I feel to trade longer term charts.

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I subscribe to the belief that not letting the trade play out is detrimental to your curve.

Last night when I sold Gold at 1377.5, the only reason I managed to hold it for a $12 move was because I was looking at the hourly timeframe. (Actually that's not completely true - it's because I went to bed)

However, if I had traded that on the 5m, I would have taken almost nothing.

Since I don't use timeframes to trade (rather just to watch - the market is fluid) I probably got the same entry on the hourly as a trader could have got on a 1m or even a tick chart.

But check the two charts out. Although they both make the same move, which looks easier to hold to you...?

Come on now...

Don't try and tell me any 5m trader sat through that second counter trend rally.

Yet the retracement was there on BOTH timeframes. BOTH traders got the same drawdown during the trade.

So what I'm saying is illogical, right?

Once again it comes down to perspective.

What makes the difference to the "timeframe trader" is not what is actually happening but what it looks like.

trader_dante said:

I subscribe to the belief that not letting the trade play out is detrimental to your curve.

Last night when I sold Gold at 1377.5, the only reason I managed to hold it for a $12 move was because I was looking at the hourly timeframe. If I had traded that on the 5m, I would have taken almost nothing.

Since I don't use timeframes to trade (the market is fluid) I probably got the same entry on the hourly as trader could have got on a 1m or even a tick chart.

But check the two charts out. Although they both make the same move, which looks easier to hold to you...?

Come on now...

Don't try and tell me any 5m trader sat through that second counter trend rally.

Yet the retracement was there on BOTH timeframes. So what I'm saying is illogical, right?

Once again it comes down to perspective.

What makes the difference to the "timeframe trader" is not what is actually happening but what it looks like.

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Yes we are agreeing on this matter! That's what I'm saying! I'm learning to let things run for longer looking at the bigger picture. I don't agree that all frames give the same entries, but yes you must cut losses short and let winners run.

Or, more importantly, find your own comfortable way of winning.