How To Use The Five-Minute Chart As A Filter

Today's piece, while brief, will be a valuable refresher course for all.  There is little doubt that the market is trading in a very deliberate, almost quiet manner.  For us HVT'ers, the opening hour is where we can really shine.  However, we do not always want to be coming out with guns blazing just because it is the first hour.  The charts below will illustrate how you can use the 5-minute S&P chart to help you filter out marginal HVT setups.

The 1-minute charts gives you the "All Clear" for a long entry. 

1.  Trend is up.

2.  Price action pulls back to support

3.  Stochastic looks as though it is about to cross back up.

But.... a quick look at the 5-minute chart and I arrive at a different conclusion. 

The 5-minute chart is getting "toppy" as evidenced by the overbought stochastic.  At this stage you have to wonder how much more upside is in the market at this time?  History tells me that more times than not, not much.  You are better waiting for the market to reset itself.

And sure enough, that quick look and analysis of the 5-minute chart saved me valuable capital.  I cannot bear to make marginal trades like that in any market.  This trade, if you took it, was so avoidable.

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As always, feel free to send me your comments and questions.