Trading without indicators on one-minute chart.

Many experienced traders are concerned about the technical analysis due to its lagging nature, especially when it comes to ultra-short timeframes such as a one-minute chart. That’s not a massive surprise as together with trading software development and usage of artificial intelligence and robot trading algorithms; the one-minute chart looks like calm water on a sunny day.

Another significant factor of this phenomenon is that financial institutions and investment banks started using automated algorithms and trading systems. Whole candlestick combinations incredibly form patterns never seen before, while bars inherent to strong trend action appear in reversal formations. The same story is in the trading volume as a period with large traded volume come together with thin candlesticks when the market does not have a significant action, and the whole bar consists of one single tick.

This example remarkably shows EUR/USD which is the most liquid currency pair in the foreign exchange market. It can demonstrate such price action even during the Asian trading session. Thus the main thing to determine in M1 trading is the trading hours used for the analysis. There’s no sense to open deals before Tokyo open at 1 AM GMT as those chaotic movements cannot be predicted, that would be pure guessing. Once Frankfurt and London exchanges open, major pairs’ liquidity spikes significantly, the price action gets certain meaningfulness, and local trends begin. Then, the liquidity usually gets lower two hours before the New York close, and the following Tokyo open should restart the cycle. In general, only 5-6 hours can be excluded from one trading day. Those hours aren’t good enough for M1 trading.

Another critical step is to choose the currency pair to trade on. As long as short-term deals are dominant, the key criteria are the spread value. Eurodollar has the lowest one traditionally. USD/JPY is also quite liquid for those purposes; thus the spread is comparatively small, and it will work for such a scalping method. One more advantage of dollar-yen is that the pair is active overnight starting from the Tokyo open. The British Pound versus the US dollar has a worse spread, the same ways as the Aussie versus the greenback. Nevertheless, that disadvantage is usually overshadowed by robust trends predictions.

Initially, candlestick models were designed for longer timeframes. In our case, we will look not at standard patterns designed for long-term trading but those which are applicable for M1 trading. The first thing to know is that the lowering range of candles’ bodies indicates that the recent trend has been exhausted and a reversal is likely to occur. An example of that pattern is shown below.

A useful trading signal might appear when prices bounce off strong resistance/support levels. Fibonacci Retracement tool helps to find those ranges. Traders can visually determine horizontal resistance/support when rates try to break the line but fail to close current candlestick above/below it. The only thing which is left on the chart is just a whipsaw, and it usually points to the fact that the different price action is coming, so traders should get ready to enter the market in that case.

Postponed orders are valid when it comes to trading on bounces and whipsaws as the action might be so quick that traders would not get in time with the reaction and by-market order execution. But is a proper analysis was made, and resistance/support levels were pre-determined correctly, then the trading platform will do the necessary job automatically without the human factor. That speed in the reaction is crucial for ultra short-term trading.

Generally, one-minute charts require some experience level for productive and profitable trading. Risk management rules have to be executed thoroughly; traders should remember about the profit/risk ratio to remain positive. Before pulling the trigger, traders should assess potential losses and consider whether that risk is affordable or not. On the one hand, you have five pips of possible loss but on the other, if you target 10-12 pips of potential gain, then it would be reasonable to open such a deal.