A pure Forex scalper exits a position quickly if the market doesn’t go his way. He will make a number of trades a day, between 10 to a couple hundreds, and he doesn’t hold on to a losing position hoping or praying that it will turn around!
The main aim of the Forex scalper is to buy (or sell) a particular pair of currency at the bid (or ask) price and then quickly sell them a few pips higher (or lower) for a profit. When the Forex scalper uses this strategy, small profits can be easily compound into large gains if a strict exit strategy is used to prevent accumulating large losses.
Most Forex scalper mostly makes use of 1 min, 5 mins or hourly charts to scalp for small profits in the Forex market. Most of the good Forex scalper will choose a brokerage house that provides a reliable platform with instant execution of orders, which is highly crucial to his profits.
I was fortunate enough to know and work with some of the best day traders that scalps for a living. They have shared with me some of the main ingredients, which they use to scalp the market.
In this post, I am going to summarize the scalping strategy which i have incubated, into 8 simple steps;
Go to http://www.forexfactory.com to check important data release time
Record the previous day OHLC (Open, High, Low, Close)
for all the 4 major currency in your diary.
Identify candlestick studies(i will reveal more next time) on the daily charts
Identify major trendlines, support and resistance on the daily charts
Determine the market sentiments (Bullish or Bearish?) for the day.
Go to hourly charts and determine the support and resistance
Lookout for candlestick (We will talk more about it in our next article) formations on hourly basis.
* For reversal candlestick signal;
– Wait for better signal or staggered your lots
– Enter only near support or resistance level
Adjust your risk to entry level when you are 10pips in the money.
* Scalping Risk Reward Ratio
Risk : 10pips
Target Profits : 20pips
I hope you have benefited from my summary above, on the steps to scalp the Forex market. In my next article, I will be focusing more on the Japanese Candlestick Studies.