Understanding the Change From 5 Period SMA 5m Filter

The "Change From 5 Period SMA (5 minute)" filter in stock trading is used to compare the price of the last print for a stock to that of the 5 period simple moving average on a 5-minute chart. This filter is designed for short-term, intraday trading analysis due to its focus on small time increments and rapid SMA calculation. Here's how it's constructed and used:

Simple Moving Average (SMA)

5-Period SMA: This is an average of the stock's closing prices over the last 5 periods, where each period is 5 minutes long. In other words, it's the average closing price of the stock over the last 25 minutes of trading.

Dynamic Indicator: The 5-period SMA on a 5-minute chart is a highly dynamic indicator that changes quickly as new price data comes in every 5 minutes.

Calculation: The values entered for this filter are percentage (%). The formula is (Percent Change) = ((Last Price) - (SMA)) / (SMA) * 100.

A positive number means that the current price is above the moving average. A negative number means the current price is below the moving average.

Change From 5 Period SMA 5m Filter Settings

The settings of each Trade Ideas filter are defined in the Window Specific Filters Tab located in the Configuration Window of your Alert/Top List Window.

Here is how to setup the filter in your configuration window:

• Set the min value to 1 to see only stocks in which the current price is above their 5 period SMA on a 5 minute chart.

• Set the max value to -1 to see only stocks in which the current price is below their 5 period SMA on a 5 minute chart.

Using the Change From 5 Period SMA 5m Filter

Several trading strategies can be employed with the Change From 5 Period SMA 5m filter. Here are a few examples:

Intraday Trend Analysis: This filter is useful for day traders to identify the very short-term trend direction within the day.

Momentum Trades: Day traders might look for a significant positive change as a momentum entry signal or a significant negative change as a potential signal for a short trade.

Scalping: Traders employing a scalping strategy may use the filter to take quick, small profits from minor price changes, entering and exiting trades rapidly.

Pullback and Breakout Trades: Some traders look for moments when the price temporarily pulls back to the 5-period SMA during a larger uptrend as a buying opportunity, or when a price breaks well below the SMA during a downtrend to initiate a short position.

FAQs

What does a positive change from the 5-period SMA indicate?

• A positive change indicates that the current stock price is higher than the average price over the last 5 five-minute periods, suggesting upward momentum or a potential bullish trend in the short term.

How do I interpret a negative change from the 5-period SMA?

• A negative change means the current price is below the 5-period SMA, indicating that the stock may be experiencing short-term downward momentum or a bearish trend.

Can the "Change From 5 Period SMA (5 minute)" filter be used for long-term trading decisions?

• This filter is specifically designed for short-term, intraday trading analysis due to its responsiveness to immediate price changes. It's not typically used for making long-term investment decisions.

Is this filter suitable for all types of stocks?

• The filter can be applied to any stock that is actively traded, but it may be more effective with stocks that have higher liquidity and volatility, as they present more opportunities for short-term trading.