Do 'indicators' apply in small time windows? Let's share what you read in this worked example!

Beginner Questions Candlesticks, Chart Patterns, and Price Action
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Hi all!

I am looking at GBP/USD and trying to learn to identify indicators and signs.

I am looking at some candlestick signs, things like Three Black Crows, Three white soldiers, T Bar and trying to marry those signals with other information like the volume, Support and Resistance and Fibonacci.

I am trying to use candlesizes of M5 - M15 , as well as longer periods like 1 hour for getting a wider idea of what is happening.

My main question is, are signals like I am looking at, relevant in small window time frames < 1 hour? I suppose I am trying to figure out strong signals for short term ‘scalping’. Clearly ‘zooming out’ to longer time frames gives more certainty of a particular bearish or bullish trend, but for now, I am trying to study the smaller windows. I somehow feel these ‘signals’ are only strong where periods are longer?

For example, this morning on GBP/USD at M15 candlesticks:

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What I see:

  • I can see 5 ‘T’ candlesticks suggesting an upward trend in recent candlesticks

  • I also see in the more recent edge a ‘Thor hammer’ downward strong candlestick 4 sticks before the current…this really confused me, because this was followed by a strong T bar, which now has the pair increasing in value…what causes this flip?!

  • Support and Resistance lines suggest market will climb to previous low

  • In the previous 2 hours we can see indecisive ‘small movement’ up and down, which means trading in those 2 hours without definitive signals is not a great idea, do people agree?.. A bit more patience until I see the real direction might have been helpful, but how do you know when the big shift is going to happen?! It would be useful to know if the general thought around the pair increasing in value back to near my previous resistance line is likely to happen, then I suppose the “When” isn’t that important, as the trade can be schedueled with appropriate Stop loss and take profit protection?

Ultimately, it looks like the pair will now climb , which is what I originally thought when looking at the chart about 4 periods earlier. However, I fluctuated my thoughts main times in that hour trying to figure out what was happening (I was thrown by the hammer…!)

Can those with more experience list out what you see and read in this section of the chart. I am certainly mistaking and misreading alongside missing information here! Thank you for your help reading and interpreting this chart example!

All advice is greatly appreciated.

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Technical analysis on intra-day time-frames follows the same principles as on the D1 time-frame - so e.g. in D1, if price falls for several; days, then falls all today but recovers to close at the highest price of today’s range, that can be taken to be very bullish price action. The candle shows a change from selling to buying and it might look like a bullish pin-bar, or it might be a bullish outside bar etc. etc.

Similarly, intra-day, if price has been falling for several hours and then prints a M15 candle with a high close, that is equally bullish.

But is that pattern as reliable on M5 as on D1? No, simply because it takes only a fraction of the market deploying a fraction of the capital to raise price for 30 seconds or a minute as it does to overcome the consistent selling of the entire world market over 23 hours.

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I would have waited for the 15m candle starting at 7am GMT+1 to close because there is usualy increasing activity at this time. Next i would have waited for a breakdown under the 06:30 T bar or a breakout over the 6:45 bar. The little 1-5m pullback is a good spot to place a SL. I trade always a 1:2 RRR.

My trade based on this chart would look like this:

But i usualy trade indices on the 5m chart.

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@tommor very helpful advice. To me it suggests that trading in short windows, M5 → H1 is riskier because the ability to use these signals is harder?

@Worker_Bee Thank you so much for your take on this - that is exactly what I was hoping for. Let me play your understanding back to you so I can make sure I understand fully:

Given my M15 chart marked with 2 red arrows:
image

You are saying you would:

  1. At my first red arrow(06:30), waited to see if the green T bar at 06:30 would hold or break. This candlestick to me doesn’t represent a T bar? Am I defining a T bar wrong?. – this ended up breaking I think, as the 06:45 is red, so it was indeed a breakdown?..so what would you have done?
  2. At my second red arrow(06:45) You are saying OR you would see if there was a breakout over the bar at 06:45. Well This didnt happen, as the next candlestick was red again.
  3. The little 1-5m pullback – you mean between 07:10 and 07:20? When you say place a SL, you mean Stop Loss i.e a Sell order hitting an appropriate low? How were you sure at this time that the price would continue to fall after the small ’ 15 minute pull back’?
  4. When you say you work a 1:2 RRR, you mean for every $1.00 you risk, you reward $2.00. So Risk Reward Ratio. I.e in you trade you would have a ‘buffer’ of 24 pips on the climn, (Is this a buy limit?) and then a SL to sell of 35 pips? This doesn’t look like 1:2? Shouldn’t it have been 48 pips? I guess you are being approximate or I could be misunderstanding something!
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Yes, all TA patterns, rules, guidelines, indicators, price action behaviours, chart formats, support/resistance, trend channel boundaries - everything - has been developed from D1 price charts. And we already know their reliability on these is limited. All these features will work worse for you on less than D1.

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I am just ‘playing’ with some of the indicators available to us! This is a 1H chart for the same time period.

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Here we see the Fibonacci Retracement. I am not sure if I am using it correctly (need to lookup from which point I should be connecting the line, however it looks like the bearish downward trend follows the 61.8 ‘level’ which I think also guides the strength in the decline of the pair. Am I reflecting on this correctly?

OR is this actually meaningless because we are assessing this pattern of 2 sets of 8 hours rather than a full day?

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  1. No. I think we have a misunderstanding because i made a mistake with the time zones :roll_eyes:. I wouldn’t trade before the first big red bar starting at 6:00 YOUR TIME because i know that around 6:00 and 7:00 there is money coming in.
    After this big red 15m bar closed i would think long above the recent high created by the big green bar starting at 5:45 your time and short under the recent low created by the pinbar starting at 5:30. I dont know if it is a T bar or not i dont care for such things.

  2. No, at this time i would have been already short.

  3. No, i mean the little green bar on the 5m chart. I marked it with an arrow on this 5m chart.

  1. I dont know what you mean. Sorry. I would have gone short at exactly 6:29 your time @ 1.238 with a stop loss @ 1.2393 (13 pips) and a take profit @ 1.2354 (26 pips)