Forex Scalping Strategy

Pattern Scalping Strategy..Part III - Range Patterns...
This article is part of our guide on how to use scalping technique’s to trade forex
Most scalpers try to benefit from price patterns in trading the markets.
A scalper trading a range pattern will try to identify the time periods and price patterns where activity is most subdued, and will exploit them for profit. We have already discussed some of the general concepts in trading ranges, here we’ll try to apply them in greater detail.

Price charts are similar to fractals. They are self-similar at multiple time periods, with a price range at 30 minutes sometimes accompanied by a trend on a 30 second chart. While trading ranges scalpers must keep both the hourly, and the minutely price events in mind. We’ll use hourly charts to ensure that overall activity in the market is subdued, while using the short term price action to identify and trade profitable periods.

The hourly chart of the USDCHF pair presents an interesting scenario for scalpers. A large hourly range lasting for a number of days is coupled to fairly strong directional movements requiring some trend following skills for successful exploitation.

At this stage, observing the price action in the chart, we must ask ourselves the question: can we determine the severity of short-term volatility by examining charts which show long term activity? The answer is no. Although we can determine the ultimate direction of short term price movements by examining long term charts, volatility on an hourly chart, for example, does not need to be duplicated on a short term chart exactly. The price may move 100-pips in the course of an hour, and the chart would show a large green candlestick, but all that large movement could have happened in the last ten minutes of trading, with the previous fifty minutes presenting choppy, and boring conditions. In other words, the scalper must concentrate on the time period before him, especially if he is aiming to exploit random price movements that go nowhere (as in range trading), in contrast to scalping a strong directional trend. In the latter, the perspective provided by long term charts may be helpful, but in range scalping utmost attention must be devoted to the 1-minute, 5-minute graph which is being traded.

In the graph above the price is confined between 1.0654, and 1.0741. The three red arrows show us the opportunities where we can be confident that the range will hold: when the resistance line is tested for the third time, we will consider this an opportunity for sell-side scalping. When, at around 27th July 5 am the price rebounds from the support line for a second time, and later for a third, we’ll regard the market conditions as being ideal for establishing long positions repeatedly.

Forex Scalping Strategy 2009-10-23T22:18:00-07:00 Rating: 4.5 Diposkan Oleh: admin