Yes, 5 min chart can be used for day trading. But there is a procedure and system involved before using it. If you use 5 min chart in isolation then you would end up trading noise and false signals instead of finding trend and price action.
Lets check out a better way to use 5 min chart.
First you need to find the overall trend on higher time frames before jumping on 5 min chart. I personally use daily and hourly time frames to get the eagle view of the overall trend. This is very important. You will sense the market move well in advance by following such practice. I will try to explain this step by step using today’s Infosys chart.
Infosys on 1D time frame
Try to observe the graph closely. You can clearly find that today the Infosys stock was approaching a very strong resistance level which was established way back in June-July 2017. I have marked the level with black line. If you use the 5 min chart then you wont be able to see the historical support and resistance levels which were formed years ago. Just for a double check you can look at the RSI reading which clearly shows over-brought status. So, this is how I got my first green signal for a possible short selling.
Lets check 1 hour time frame of Infosys
Now, I drew Fibonacci levels in order to find my targets and immediate support levels. As the stock was falling after it fail yesterday to break the strong resistance level which I showed you in the daily time frame chart. I knew that the downside would continue today till it reaches the 23.6% Fibonacci level.
So now on the 5 min chart you didn’t have to do anything except placing the short sell trade. This is the way professional traders use multiple time frames to find the trend.
- Higher time frames (like daily) give you good understanding about strong support and resistance levels use them to increase your consistency.
- Medium time frames(like hourly) are used for analysing price action and see if there is any momentum. Use Fibonacci, Gann levels, trend lines etc.
- Lower time frames like 15 mins, 5 mins are used just to make sure you enter early and exit late and take the benefit of entire move.
Stock market has a powerful memory. It remembers all the historical moves it made. Hence all the future moves of a stock is just a reaction to the historical data. We should use the data to our advantage and try to make charts speak to us about their past.
Happy learning :)
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