60 Minute Wedge Set Up Topic: Intra-Day Hourly Trading

By Chris on 2013-08-25 in E-mini Trading (0) Comments

It's probably easier to simply watch the video for the hourly trading set up

Stock markets larger time frame direction for me is not a huge issue in this set up and I like to ignore my analysis for the most part. Understanding this is important as you'll see us get an idea of short term scalp direction as well as make entries. We use the Ninja Trader platform for charting and one indicator we found that makes it easier on us to spot this set up is the Multi-Period Candle Sticks indicator. Just simply do a google search for "Multi-Period Candle stick Indicator Ninja Trader" and you should be able to find it. So how do we use it? One way we've always traded was to look for clues in sentiment. Thus we knew that if we could figure out short term patterns developing on any time frame(ie: hourly ) we may be able to get an idea of where we needed to be. So what we would do is look at key times in the day such as 9:00 or 10:00AM(CT.) and 2:00PM(CT.). Points in time where we would typically see dynamic moves that we wanted to be a part of.

How to Set Up The 60 Minute Strategy

So we began to look at the highs and lows of the previous 2 hours, spotted short term swing points then drew in trend lines to get entries for these 2 hours. This worked well, but not enough for us to have any real confidence in it though we saw potential. So as we progressed with this day to day trading strategy we began to implement other variables such as an inside bar which to us signals a possible forceful move at break out. So with these 2 combined variables we came up with simply playing inside bars on an hourly time frame. What we in a sense stumbled upon was an easy way to find a wedge set up on a 5 minute or 1 minute chart. So we would simply draw in wedges as we saw them and when we had inside bars. The indicator we use now simply makes it easier to spot. We use a 5 minute chart with an hourly indicator setting. When we see the bars in the background(60 minute bars) complete and form an inside bar set up we simply connect wick to wick the inside bar as well as the previous bar like in the example below. (Wick high to high and wick low to low of 60 minute bars in background.)
Then we simply trade what we see out of a wedge. No indicators just simply reading the bars as they form and close. Once price begins to trade outside of the shaded area(at the close of the 60 minute background candlestick) that it is now fair game for entry. We are looking to buy on the lower trend line(Low 1 to Low 2) or sell on the upper trend line(High1 to High2). If we aren't buyers or sellers inside the wedge we are waiting until a breakout of the wedge and will be 97% of the time only buyers of a retest of the High1 to High 2 trend line. We wont short into retests of the wedge("Low 1 to Low 2" trendline very often, but will from time to time when we feel fit. So now lets look at some other examples.

Here we are in this example with price once again trading within its wedge and you can see there were 2 possible entries at this point. To take a trade short at the "High 1 to High 2" trend line or to take a trade long off of the "Low 1 to Low 2" trendline. Depending on your trade stop you may have been stopped out at the second highlighted circle. This means you would have had to wait until the next test after signs of strength at the 3rd and final retest of the "High 1 to High 2" trend line. Notice my careful choice of words "you would have to wait until the next test". I say this because just like any other setup you have seen you need to be patient and wait for entries rather than force entries. You do this so that you can be at the best possible area with regards to risk/reward.

Here's an example of price not following through on the wedge as shown in the first highlighted circle from the left. Following that is price in the form of 5 minute candlesticks forming a doji and in fact closing above the "High 1 to High 2" trend line. This is signaling us to be on the look out for an entry and that a retest would in fact be a good opportunity to take an entry. Now we look further down to the 3rd highlighted circle and one more final entry at a retest of the "High 1 to High 2" trend line. A key note to Remember as we stated before is we hardly ever take a retest of the "Low 1 to Low 2" trend

Chart Visuals For Description of Wedge Pattern Set Up

hourly trade set up visual

hourly trade set up visual 2

60 minute mini wedge set up visual 3

hourly set up end

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