In this article, you will discover a simple scalping strategy that enables you to take small profits out of the Forex market. We will discuss the setup, entry, stop loss and exit stadium. This strategy applies to the major currency pairs EUR/USD, GPB/USD, USD/JPY and EUR/JPY. It works with the daily, hourly and 5 minute candle charts.
Preparation: draw support and resistance lines
First of all, you will make sure that your charts are ready to use for technical analysis. This means that you remove the support and resistance lines of the previous day, so that you have a clear workspace to work on.
Then you make sure, that the last 50 candlesticks are visible on your chart, and you look for the last and second last significant height. Draw horizontal support lines on these points. You can choose any color you want, but make sure that the colors are the same each day. Afterwards, you do the same for the resistance lines. You search for the last and second last significant low, and you draw horizontal resistance lines.
Do the same for each chart and each time frame.
Step 1: Check the setup condition
The setup conditions are as follows:
Step 2: Enter at the right moment.
When a second consecutive bar confirms the trend an it reaches the height of that bar, you can enter the trade on the condition that there is still room for at least 15 pips.
Fifteen pips are based on a target of a ten pips profit, and it takes a spread of 5 pips into account. This is the average spread that applies on a micro or mini account.
Step 3: Place the stop loss
The strategy advises a stop loss of 30 pips below the entry point. If it seems that you can get more than 10 pips out of the trade, you can trail the stop los to break even, to make a 20 or 30 pips profit. This only applies when there is enough room in a trending market.
Step 4: Exit the trade
You have two possibilities. Or you can exit the trade manually, or you can place an exit order. When you close manually, you have the freedom to get more out one trade, but you have to watch it all the time.
An automatic exit order should be placed 15 pips above the entry point for a long position, and 15 pips below the entry point for a short position.
A piece of advice
Since everybody has his own trading style and habits, I strongly recommend you to test drive this strategy on a demo account, so that you fully understand it, before you put money at risk. Secondly, it enables you to customize and fine tune the strategy to your own convenience.
Please note that this strategy is one of the possible approaches to Forex and that we decline any responsibly for your personal trading success or failure. Forex involves the risk of losing money and is not suitable for everybody.
First of all, you will make sure that your charts are ready to use for technical analysis. This means that you remove the support and resistance lines of the previous day, so that you have a clear workspace to work on.
Then you make sure, that the last 50 candlesticks are visible on your chart, and you look for the last and second last significant height. Draw horizontal support lines on these points. You can choose any color you want, but make sure that the colors are the same each day. Afterwards, you do the same for the resistance lines. You search for the last and second last significant low, and you draw horizontal resistance lines.
Do the same for each chart and each time frame.
Step 1: Check the setup condition
The setup conditions are as follows:
- The trends of the 3 timeframes must be the same.
- The market has to be trending. Whipsaw patterns are difficult to trade for inexperienced traders.
- On the 5 minutes chart, there has to be enough room to place a trade. This means that the entry point should be at least 20 pips away from the resistance line for a long position, or the support line for a short position.
Step 2: Enter at the right moment.
When a second consecutive bar confirms the trend an it reaches the height of that bar, you can enter the trade on the condition that there is still room for at least 15 pips.
Fifteen pips are based on a target of a ten pips profit, and it takes a spread of 5 pips into account. This is the average spread that applies on a micro or mini account.
Step 3: Place the stop loss
The strategy advises a stop loss of 30 pips below the entry point. If it seems that you can get more than 10 pips out of the trade, you can trail the stop los to break even, to make a 20 or 30 pips profit. This only applies when there is enough room in a trending market.
Step 4: Exit the trade
You have two possibilities. Or you can exit the trade manually, or you can place an exit order. When you close manually, you have the freedom to get more out one trade, but you have to watch it all the time.
An automatic exit order should be placed 15 pips above the entry point for a long position, and 15 pips below the entry point for a short position.
A piece of advice
Since everybody has his own trading style and habits, I strongly recommend you to test drive this strategy on a demo account, so that you fully understand it, before you put money at risk. Secondly, it enables you to customize and fine tune the strategy to your own convenience.
Please note that this strategy is one of the possible approaches to Forex and that we decline any responsibly for your personal trading success or failure. Forex involves the risk of losing money and is not suitable for everybody.
"Go with the trend" and may trading success be with you!
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