In today forex faq, we have a question from one of our fellow traders.
Below is the question:
What setting I can safely use for trading on 5 minute Chart. I know sometime there is a surprise breakout with no reason?
I bet that you are a short term trader since you are using the 5 minutes chart. As a short term trader, I bet you are a scalper and therefore I will advice you based on forex scalping strategy.
When trading off the 5 minutes or lower time frames, you should be using support and resistance as your main tool for entry and exit. If you can identify areas of strong support and resistance, you can then enter trade based on that level.
You can use the Fibonacci indicator as well as the Pivot point to help you look for good support or resistance level. As for indicators to use on the 5 minutes chart, I will suggest you to go with oscillators like the RSI or Stochastic as they are good tools to use for entry and exit as well.
As for those surprise breakouts, there is no way you can prevent that or even predict it. However you can actually trade those breakouts as there are good profits from breakout. One thing you need to learn about breakout is how to identify fake out.
Once you are able to identify when there is a real breakout from a fake out, you will be able to profit from breakout itself.
As a scalper, you need to be able to execute your trade fast as there are little time for you to think. Therefore I will suggest that you practice your scalping strategy on a demo account first. Once you are able to trade with good accuracy, you then start a live account to trade.
I hope that I have answered your question and do feel free to give your comment below if there is anything you want to add.