How to Trade the Five-Energy Methodology - dummies

How to Trade the Five-Energy Methodology

By Barry Burns

The five-energy method is fundamentally quite simple. Ideally, you want all five energies to give a buy or sell signal at the exact same moment. However, the markets, like most things in life, aren’t so neat, tidy, and generous as to give you all five energies aligning at the same time. So you can allow yourself to take a trade if a minimum of four of the five energies align.

Three out of five energies aligning isn’t enough. Although you may think it would still put the odds on your side, because more than 50 percent of the energies are aligned, that slight edge is offset by the expenses of trading, such as the following:

  • Slippage: The difference between the price you intended to enter the market and the price at which you were actually filled.

  • Commissions: The price your brokerage firm charges for transacting your trade.

  • Exchange fee: The price the exchange charges for processing your order.

  • The bid/ask spread: The difference between the price you can buy that market and the price you can sell it.

  • Fixed expenses: Your charting software, computers, Internet connection, and so on.

Put the five-energy method together in one coherent methodical approach. When you look at charts, look at them in the same way and follow these steps:

  1. Identify the trend.

  2. Determine whether it’s a strong trend or a weak trend.

  3. Figure out when to enter.

  4. Bounce off resistance/support.

  5. Filter trades with the energy of scale.