Trading 30 minute candles in conjunction with 5 minute charts

I love trading narrow 30 minute candles for several reasons:

1. They provide huge risk to return ratios.
2. They don't require constant monitoring.
3. You can easily set up a "bracket trade" and let the market do its magic.
4. They provide a narrow 2 to 3 hour time frame for trading entries.
5. It can be much easier to spot a trend on a 30 minute chart.

I've learned that trading 30 minute candles indiscriminately, however, doesn't provide a trading edge. There are hundreds of stocks that paint narrow 30 minute candles every day. Very few of them go on to provide a nice profit.

But, by combining 30 minute candles with other time frames can provide an extremely probable and profitable setup that's hard to beat. Let's look at an example from today on MOS.
The narrow candle at 11:00 provides a great entry point. If you placed your stop right above the candle (red dotted line at $43) and sold short when the 11:30 candle broke down below the close of the 11am candle (orange dotted line at $42.40) you would have risked 60 cents per share ($43.00-$42.40). Holding on to your MOS trade until the end of the day (about $35.95) would have made you $6.45 per share. That's 10.75 times your risk ($42.40-$35.95)! Risking $1,000 on the trade would have made you $10,750. Nice.

Let's look at the 5 minute chart to see if there are any clues that this is a decent trade.
At the exact entry point in our 30 minute chart, the 5 minute chart shows two edges--a bollinger band break and a moving average crossover right at yesterday's closing price. To manage risk you could use the 5 minute chart to trail your stop along the 50 EMA. If you are more agressive, you could just leave your stop all day. I like to move my stop to break-even as soon as the stock has made 1 times my risk (in the case of MOS 60 cents).

Using multiple time frames (you don't have to get fancy) can really boost your confidence and help you see trades that may need some confirmation before you take the plunge. In the case of 30 minute narrow candle trading, the 5 minute chart confirms the 30 minute chart giving us a high probability trade with huge returns and little risk.