Forex Scalping Strategy

Pattern Scalping Strategy..Part IV - Flags Pattern...
This article is part of our guide on how to use scalping technique’s to trade forex
Many scalpers prefer to exploit range patterns as they present quiet, tame conditions where various strategies can be utilizied without the danger of large losses which would arise in conditions of high volatility. Scalpers who thrive in these conditions have no great expectations from individual trades, and are perfectly content with unexciting, slow markets where “nothing is going on”, from the point of view of a trend follower. In spite of the brief lifetime, and small profit of individual trades, great gains are realized as profits of several hours are combined at the end of the trading day.

In this fifteen minute chart of the USDCHF pair we observe a strong hourly trend only briefly interrupted by the highlighted flags. Although the formations are not perfect, they are perfect as continuation patterns, and present quite, subdued periods where the scalper can test his skills. Of the three flags highlighted in this chart, the first and the third are the tamest, and the easiest to exploit. In both of these the price moves up and down in a simple range, and doesn’t possess directionality.

How does the trader exploit this situation? In essence we’ll regard the flags as small range patterns the upper and lower bound of which can be used as trigger points telling us to reverse the direction of our trade. When the price rises and approaches the upper edge of the flag, we won’t trade, but wait until it is reversed and a sell order is possible (we don’t want to enter a sell order immediately because of the possibility of a breakout). After that we’ll enter and exit small and quick sell orders trying to exploit the established range pattern. Conversely, when the price falls and touches the lower bound of the flag pattern, we’ll wait until it begins to rise again, and then we’ll scalp the market with buy orders.

It is quite simple and easy to scalp the market when there are flags appearing. But flags are very strong continuation patterns, and we must be careful not to get caught in the breakout when the flag pattern dissipates and gives way to the momentum of the main trend.

Triangles can be traded in the same manner as well, and any consolidation pattern can be used for scalping within the range established. As we mentioned before, the rules of range trading can be applied, along with the appropriate strategies, while using the necessary risk controls inside the preferred brief time frame of scalpers.

---- by; forextraders -----

Forex Scalping Strategy 2009-10-24T21:33:00-07:00 Rating: 4.5 Diposkan Oleh: admin