A trader explains how to use the first five-minute candle after market open at 9:30am ET to set your levels. Watch for a fair value gap on the 1-minute chart, enter on an engulfing candle retest, and target a 3:1 risk-reward ratio.
The first five minutes of the trading day have more volume than any other 5 minute period of the day. Yet most traders completely ignore this one candle. And that is exactly why I built my entire strategy around it. Every morning at 9:30am Eastern Standard Time the first five minute candle of the day opens. And at 935 it closes. Then I mark the high and the low. Those two levels tell me where the maximum buying pressure and maximum selling pressure stepped in during the highest volume period of the day. And these are the only two levels that I care about. And then I drop to the one minute chart and I wait for one thing. A fair value gap breaking through one of those levels. A fair value gap is a three candle pattern where the middle candle moves with such force that it creates a gap between the first and the third candles. Wick and this tells me whether buyers or sellers just took control. But I don't enter just yet. I need one more confirmation to filter out the losing trades. I wait for the market to come back and retest the fair value gap. And when it does, I'm looking for an engulfing candle. This means that the retest candle is fully engulfed by another candle. And once I see that I enter the trade stop goes at the first candle of the fair value gap and my target is a fixed three to one risk to reward. This means on winning trades I make three times as much as I lose when I'm wrong. Now save this video so you can study it when you trade.
