A trend line scalper’s strategy is most profitably done on a 1 minute
price chart with a stochastic as the confirmation for the entry and exit
levels.
Forex scalping is not for everyone.
It involves being on top of your computer screen for an intense period of time
because scalping is a process where the trader opens and closes a position in a
short period of time. A scalping strategy usually lasts between 3 to 5 minutes,
although many scalpers are in and out of the market in about a minute. The
charting time periods used are the very short periods of 1 minute and 5
minutes. It is a demanding form of trading as the scalper makes a small profit
on each trade so he has to trade many times during the trading day. Sometimes
as much as 100 times a day so in this way small gains accumulate to become big
gains by the end of the day.
How to Trade a Trend Line Scalpers
Strategy:
A forex scalper needs volatility to
be able to make money in a very short period of time. Therefore the best
currencies to scalp are the EUR/USD, GBP/USD and USD/JPY. Also the best time
frames are between 1pm GMT and 3pm GMT because it is over this period that New
York opens while the European markets are of course still open and at this time
the most volume is traded.
A very good scalping trading
strategy using trend lines uses a stochastic in conjunction with the trend line
to signal the entry and exit points.
On the GBP/USD 1 minute chart above
a down trending line (left hand trend line) has been drawn commencing with the
price 1.5844. Notice how the GBP keeps below the line until it breaks it at the
1.5833 price. The scalping strategy here would be to open a sell trade at
1.5843 in conjunction with the stochastic which is dropping down out of the 80
overbought levels towards the 50 level. A stop loss is placed 4 pips above the
trending line at 1.5848. The price objective here should be in the region of 8
to 12 pips. Wait until the price breaks the trend line and then close out the
short position. Closing out at 1.5833 gives the trade a gain of 10 pips. The
second down trend line can be traded in the same way when the stochastic moves
down into the oversold area below 20. The position is closed out when the trend
line is broken or the stochastic moves up from oversold levels above the 20
level.
The scalping strategy for an up
trending line is the opposite of the down trending line. On the GBP/USD 1
minute chart above an up trending line has been drawn commencing with the price
1.5819. The strategy here would be to open a buy trade at 1.5819 in conjunction
with the stochastic which is moving up towards the 50 level. A stop loss is
placed 5 pips below the trending line at 1.5814. The price objective again
should be in the region of 8 to 12 pips. Wait until the price breaks the trend
line and the stochastic is moving down from an overbought condition below the
80 line, and then close out the long position. Closing out at 1.5832 gives the
trade a gain of 13 pips.
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