It’s a proven fact that just about all traders start craving the lower timeframes.
At first, it looks as if a simple strategy to make a fast buck…
…to start out raking in those big wins…
…and fulfil your dream of constructing trading your major source of income!
But then, what normally follows?
Losing streaks begin…
…accounts are potentially blown up…
…you turn out to be completely mentally drained!
Eventually, you begin to “outgrow” searching for lower timeframe profits and begin moving into higher timeframes.
But what in the event you decided to provide lower timeframe trading yet one more shot?…
…to actually grasp the techniques needed to trade on the 1 hour timeframe?…
Do you think that it may very well be value it?
I actually do!
That’s why in today’s guide, I’ll show you exactly the right way to trade price motion within the 1 hour timeframe.
Specifically, you’ll learn…
- What specific price motion setups you ought to be on the lookout for on the 1 hour timeframe
- What that you must look out for on the day by day timeframe before trading the 1 hour timeframe
- A step-by-step process on the right way to trade price motion within the 1 hour timeframe
- The “unheard” trading tricks to succeeding trading the lower timeframes
Ready?
Then let’s start.
Methods to trade price motion within the 1 hour timeframe: What price motion setups do you have to be on the lookout for?
I’m sure you’ve a number of burning questions straight away…
“What setups will we trade?”
“How long should a trade last?”
“Do I want to look at the charts each hour?”
Don’t worry, my friend.
Because I’ll answer all of those in the next sections.
For now, let’s start with the fundamentals after which work out the small print.
It’s crucial to know the context and the “why” of every concept until eventually, all of it comes together.
Sound good?
So, at this point…
There are a ton of videos and guides on the right way to trade price motion, corresponding to these:
The Price Motion Trading Strategy Guide
And I agree, price motion is actually a broad topic to cover!
That’s why on this guide, as a substitute of feeding you the fundamentals of price motion like a baby…
I’ll share the essential three setups that you must achieve trading on the 1 hour timeframe.
Let’s begin with the primary one…
Break of structure
Just because the illustration shows you…
This setup is a 3-step process.
First, the value must break above a trend line area of value…
Second, the value must make a flag pattern or a consolidation…
(Ensure that you mostly keep in mind that the second step is probably the most crucial to this setup!)
Third, the value must break out from that flag pattern…
It’s here that our entries lie, as you’ve to attend for the candle to shut beyond the flag pattern before entering the trade.
Now, you is perhaps considering…
“Why this setup?”
Good query!
And the reply is more easy than you’d think.
This setup not only detects market reversals but in addition gives you the chance to ride that reversal without “chasing” the market.
Take a look at this instance of the value approaching a serious area of resistance…
Are you able to see it?
Now, the second setup is something you may already be aware of…
Buildups
What does this mean?
Well, it’s about waiting for a flag pattern at an area of value.
Are you able to see a flag pattern hovering at resistance?…
Good, since it shows that the buyers are already on the gates – about to interrupt them open!…
A really bullish setup!
It’s actually similar to waiting for a “buildup” at the world of support, just in the other way…
Make sense?
Alright, then why this setup?
The major reason is that by waiting for a buildup, you avoid being “prey” to false breakouts more often than not, as you let the market play its hand first by showing a buildup!
Got it?
Lastly, we’ve…
Trend Continuation
At any time when there’s a bear market or a choppy market, trading the markets becomes difficult, right?
Tons of false signals!
A lot of “market manipulation!”…
But once there’s a trend in play?…
Every thing seems so easy!
It’s these market conditions which might be probably the most ideal to trade.
Nevertheless, regardless of how far the trend goes, you mostly must enter objectively, corresponding to by waiting for a flag pattern…
Easy trend, easy setups!
At this point, I’m sure you realize that we’re trading a bunch of flag patterns.
And also you’re correct!
So simple as they’re, flag patterns give you probably the most objective strategy to enter the markets.
But most of all, they permit you to have a greater risk-to-reward ratio.
As an alternative of placing your stops above resistance on breakout…
Waiting for a flag pattern would provide you with a greater reference point on where to put a tighter stop loss…
Pretty powerful stuff, right?
The flag pattern lets you have a greater risk-to-reward ratio, but at the identical time, it also quickly alerts you in case your trading idea has been invalidated…
One thing, though.
It’s value remembering that “there’s no such thing as a guarantee” definitely applies here!
The flag pattern can fail as well, identical to all setups on the market.
But now that you’ve a setup that may trade trends, reversals, and breakouts…
I’ll share with you why integrating the day by day timeframe into your 1 hour trading is essential (and what you ought to be on the lookout for)
Why that you must have a look at the day by day timeframe for the right way to trade price motion within the 1 hour timeframe
One word…
Market selection.
At times, you may hear traders ask:
“Out of all of the hundreds of stocks on the market, how do you select which of them to trade?”
A stock filter, after all!
“How do you select which forex pairs to trade?”
On this case, a currency strength meter!
“How about crypto?”
You may decide to trade crypto based on market capitalization!
There could be some ways to pick out markets to trade, however the major takeaway is that this:
You may’t just select which markets to trade based on other people’s opinions or evaluation.
You have to have a market selection rule…
…a consistent strategy to select markets to trade!
So, how do you select which markets to trade on the 1 hour timeframe?
Take a look at the day by day timeframe
The lower the timeframe, the more crucial it’s to hunt confirmation in the next timeframe!
In fact, some would argue that you could just stick with one timeframe.
Nevertheless…
the day by day timeframe not only gives you a consistent strategy to trade price motion within the 1 hour timeframe, but in addition increases the probability of successful trades.
And also you is perhaps considering…
“Alright, what exactly will we search for on the day by day timeframe?”
Here’s the deal:
I gives you two methods which have worked for me in addition to for a lot of students and coaches.
But before trading it survive the markets…
You have to do your individual back testing first, as you need to never take every little thing at face value.
With that agreed, let’s start!
Previous day highs and lows
Of the 2 methods I’ll share with you, this one is the simplest.
That’s because you’ll be able to execute it even without an indicator (though having one will help).
The concept is easy – just take the highs and lows of the day by day timeframe…
After which simply go down the 1 hour timeframe…
Mainly, the previous day by day highs and lows act as an area of value in your chart…
Take note that we don’t consider the “current” day by day highs and lows as you’d wish to reference the previous day by day highs and lows!
So, the right way to trade price motion within the 1 hour timeframe using this method?
Well – wait for reversals via break of structure!…
This is especially useful, as you don’t necessarily need to have a look at the day by day timeframe.
Nevertheless, the indicator (which is named the Highs & Lows by UnknownUnicorn on TradingView) shows the info from the day by day timeframe.
But there’s one caveat to this method…
During trending markets, the value will are likely to break its previous day’s high or low.
On this case, you employ the buildup setup across the previous day by day highs…
Mainly, wait for a bull flag pattern forming around yesterday’s high or a bear flag pattern on yesterday’s low.
Got it?
For taking profits, you’ll be able to all the time consider placing your targets before the previous day by day high (if long)…
But for trending markets, consider trailing your stop loss using a short-term moving average corresponding to the 20 MA…
Extreme MACD levels
I even have to confess.
I learned this method from Darek Dargo which you’ll be able to try in his interview with Rayner here:
The Forex Trader With 86% Winning Rate (With Darek Dargo)
So, it’s only fair to provide him credit for this method!
But mainly…
You wish to have a look at the “extremes” on the MACD histogram (default values) on the day by day timeframe…
Spotting these extremes on the day by day timeframe will take practice!
It is advisable to learn what’s an extreme level and what isn’t…
But once you see one…
It’s only a matter of time before the market snaps back, like an overstretched rubber band!
Now, how are you going to use this to trade the 1 hour timeframe?
First, spot an extreme level on the MACD histogram on the day by day timeframe that’s beginning to reverse…
When you see it, go all the way down to the lower timeframe and trade price motion within the direction of the potential reversal…
This method is especially useful because it doesn’t just allow you to easily spot potential reversals available in the market and helps you see setups in your watchlist, which I’ll share with you later.
Now, as for taking profits…
Darek often uses a 1:1 risk-to-reward ratio to maintain this win rate high…
But you’re also free to compromise by having a partial take profit after which taking complete profits at the closest area of value…
Make sense?
Great!
At this point, you’ve learned multiple price motion setups to trade on the 1 hour timeframe.
Not only that!
You’ve also learned the right way to select markets to trade.
Nevertheless, there’s one specific topic that traders don’t often discuss, if in any respect…
And that’s the trading routine.
Let me share more with you in the subsequent section…
Methods to trade price motion within the 1 hour timeframe: When do you have to check your charts?
This topic is usually probably the most ignored yet crucial.
Why?
Because you would like to treat trading as a business as a substitute of a hobby!
You wish a consistent trading routine on when and when not to envision your charts.
Because let’s face it…
On markets corresponding to forex and crypto, you’ll be able to’t be awake on a regular basis!
So, going back to the query – when do you have to check your charts?
Well, a trading routine during a day could be segregated into three parts:
- Watchlist constructing (early morning)
- Execution (interval checking throughout the day)
- Journaling (every weekend)
Let me explain…
Watchlist constructing (early morning)
That is where you’re taking an in depth have a look at your watchlist to see potential trades for the remaining of the day.
I suggest you do that within the morning.
When you’ve analyzed every market in your watchlist…
You’ll hone it to a number of markets that you’ll monitor or execute throughout the day.
Let’s take forex for example.
As you’ll be able to see below, that is my watchlist for the GBP crosses…
If we take Darek’s extreme MACD method for example…
Which of the markets are currently at their extremes?
That’s right! You have got EURGBP and GBPCHF…
Now, what this implies is that for the remaining of the day, you’ll closely have a look at those pairs exclusively and find setups within the 1 hour timeframe!
This leads me to the subsequent step…
Execution (interval checking throughout the day)
Unlike day trading or scalping timeframes corresponding to the 5-minute or 15-minute timeframes…
…the 1 hour timeframe is less sensitive to volatile market sessions.
This implies if you would like to scalp the markets, you would like to focus trading only on market sessions that provide probably the most volatility.
Akin to the London and Recent York session overlap for Forex…
Source: ForexFactory
But because you’re trading the 1 hour timeframe, you’ll be able to trade all market sessions.
Note again that you just shouldn’t be checking each hour!
Why?
Because the value motion of the market takes time to develop.
Which means I suggest checking your narrowed-down watchlist once every 4-hours.
For example…
- 8 am – watchlist constructing for the day
- 12 pm – execute trades or monitor honed watchlist
- 4 pm – execute trades or monitor honed watchlist
- 8 pm – execute trades or monitor honed watchlist
After 8 pm, you prepare for bed or spend time along with your kids and family.
No charts during that point!
It’s essential to balance trading and lifestyle
In fact, you’re free to change this schedule depending on the markets you trade, but you get the concept.
Journaling (every weekend)
Luckily, there are some detailed guides on how you’ll be able to journal your trades here:
A Complete Guide To Creating And Using A Forex Trading Journal
However the major takeaway is that this…
Don’t overcomplicate it
You wish to journal your trades in a way that is easy enough so that you can repeat the method over and once again.
If you’ve to input 20 details on each trade, are you able to realistically maintain it for the subsequent 1,000 trades?
Very tedious, right?
So, keep it easy by:
- Taking an image of your trade as you enter it
- Taking an image of your trade when you’ve exited it
That’s it!
For those who want more advanced metrics, then let automated trading journals record them for you, corresponding to Myfxbook or Fxblue.
Finally, that you must learn the right way to use your trading journal!
Which means every weekend you would like to collect data of no less than 10 finished trades and ask these questions…
- Out of all of your trades, for what percentage of them did you follow your rules?
- For those who broke your rules on most of your trades, how are you going to improve your trading routine, or is your mental health okay? Should you’re taking a break?
- For those who didn’t break your rules however the week turned out negative, how are you going to improve out of your losses? Tighter stops? Fixed targets?
From there, you’ll intend to make changes to your trading plan for the approaching week.
Again, slight changes only – you are attempting to optimize your trading plan as a substitute of rewriting it!
One other thing to pay attention to is to only do that over the weekend when the markets are closed.
A closed market keeps your mind focused in your trading journal as a substitute of being attached to your open trades.
Vital stuff, right?
So, as you’ll be able to see, having the correct trading routine is about trying to attain a balance…
…between maintaining your lifestyle and having a trading business…
…in a way that they don’t interfere with one another!
You’re free to change these processes to your liking, just make certain to have the three phases of a trading routine in mind.
In the subsequent section, things are going above and beyond as you have a look at the business aspect of trading!
Methods to trade price motion within the 1 hour timeframe: How do you have to manage your risk and when do you have to add capital?
Here’s one thing to take into accout…
The lower the timeframe, the lower your risk per trade must be.
Why?
Because lower timeframe trading means that you just’ll have higher frequency trading activity…
…which in turn means that you just’ll have constant feedback in your trades.
It’s exactly this sort of feedback that may affect your emotions probably the most easily.
So, to counter this, you would like to risk 0.5% per trade or lower.
The rationale is easy!
The lower your risk per trade is, the less volatile your trading portfolio might be overall…
…as you increase the frequency of your trades in comparison with trading only on the 4-hour or day by day timeframe.
And if you’ve an enormous account or are managing funds, then chances are you’ll even want to contemplate risking 0.25% per trade.
Speaking of trading accounts…
When do you have to add capital?
Ideally, you would like to start small.
Whether that’s $50, $500 or $1,000 to you, that doesn’t matter!
By starting small, there’s less emotional impact.
Now, in the event you find you’ve been consistent in your actions for no less than 2 months…
…then it is perhaps time to contemplate adding more funds to your account!
Mainly…
You don’t wish to trade on a giant account without confidence.
So as a substitute, construct your confidence on a small account.
Once your trading confidence arises, it can turn out to be easier mentally to handle a bigger account.
Make sense?
Good, because that’s all there’s to it!
I even have laid down every little thing I do know to make it easier to not only construct your trading account within the 1 hour timeframe but to also make it easier to sustain it.
So, with that said…
Let’s have a recap of what you’ve learned today!
Conclusion
Don’t get me fallacious.
It’s totally okay to only trade the upper timeframes in the event you wish!
But in the event you’ve reached this far, it means that you just’re well in your strategy to trading the 1 hour timeframe.
This guide is designed to make certain you achieve consistency.
Here’s what you’ve learned today:
- Trading the 1 hour timeframe could be so simple as having three price motion setups: break of structure, buildups, and trend continuation
- On the day by day timeframe, you’ll be able to either select to have a look at the previous day by day highs or lows or search for the intense MACD levels as a strategy to select and filter markets to trade throughout the day
- A trading routine consists of constructing your watchlist every morning, executing or monitoring your charts once every 4 hours, and journaling your trades
- On the lower timeframes, consider risking lower than 0.50% per trade, in addition to starting with a small account, after which adding more funds as you construct confidence and consistency in trading
So there you go!
An entire guide on the right way to start in 1 hour timeframe!
Now here’s what I need to know…
Do you already trade the 1 hour timeframe?
In that case, have you ever learned something recent here today?
Or perhaps you are feeling the 1 hour timeframe just isn’t for you?
At any rate, share your thoughts within the comments below!