In
the following article I show a scalping method based on the moving
average channel.
Setup
Strategy
Time
Period: 1 minute or higher
Currency
pairs: Major pairs
Technical
Analysis Tools:
–
34-period Exponential Moving Average (EMA) applied to the Close
–
34-period Exponential Moving Average (EMA) applied to the High
–
34-period Exponential Moving Average (EMA) applied to the Low
When
the price is above the EMAs (Exponential Moving Averages), our focus
is solely on buying as the price retraces to the EMAs.
(Conversely,
when the price is below the EMAs, we concentrate on selling as the
price retraces to the EMAs).
Our
aim when the price retraces to the EMAs is for it to hold and then
demonstrate its intention to continue.
We
seek this continuation signal in the form of a robust,
momentum-driven price bar.
(illustrated
in examples 1-3)
In
the chart, you’ll notice a surge in selling activity (indicated by a
long, bearish candle) after this retracement – this candle signals
a selling opportunity!
Given
our scalping approach, we monitor the market closely. You’ll observe
a swift decline in the market with the formation of a long, red
candle.
There’s
no necessity to wait for the candle to close – if you witness a
decline, initiate the sell! (However, as a beginner, waiting for
closure may enhance confidence).
(illustrated
in example 4)
This
trade would have yielded at least a 1:1 profit ratio – possibly 2:1
if you opted to hold longer.
So,
that essentially sums up this trading system:
1)
Wait for a retracement
2)
Enter when market momentum strengthens
3)
Exit when momentum decelerates (or if you’re not in profit within a
minute or two)
If
the market has already made significant moves during the day, I
refrain from entering expecting further movement in the same
direction.
(illustrated
in example 5)
Occasionally,
the market may progress slowly in a particular direction when you
initiate a trade, while at other times, it might swiftly advance
without hesitation.
(illustrated
in example 6)
Often,
a failed trade in one direction serves as a cue for the market to
move in the opposite direction – so stay vigilant!
