Scalping

I’ve been following a great blog (http://forexbird.blogspot.com/) for a couple of months now and it’s inspired me to spend a week or two playing with a reduction in trading timeframe.

And I have to say that while trading is without doubt a serious business, I haven’t had so much FUN in years.

Despite his excellent performance, the strategy used by the ForexBird trader doesn’t appeal to me personally; in particular jumping on momentum moves. But I’ve found my normal approach adapts quite nicely to the lower timeframes.

My ‘normal’ trading involves what many already consider to be small timeframes, as follows:

  • 60 or 30 min chart – used to define an S/R structure to the market
  • 5 or 3 min chart – used to define the market environment and the trend which exists within the higher timeframe structure, and to develop a feel for bias
  • 1 min chart – used to fine-tune my analysis and bias and to work my entries and exits

For the last few nights, I’ve been operating on slightly quicker charts:

  • 3 min chart – used to define an S/R structure to the market
  • 1 min chart – used to define the market environment and the trend which exists within the higher timeframe structure, and to develop a feel for bias
  • 10 sec chart – used to fine-tune my analysis and bias and to work my entries and exits

Setups are no change – pullbacks in a trending market, and tests of S/R, breakout failures and breakout pullbacks in a sideways or volatile-trending market.

The only difference is there’s a whole lot more of them.

Here’s the opening 20 minutes on Thursday, which after a large overnight fall of around 200pts setup with a beautiful sideways channel…

No, I didn’t get them all. Some happened too quick. Some I hesitated just a little too long.

And sometimes price just gaps over my orders leaving no fill.

But that’s part of the game.

The important thing is that there’s no shortage of opportunity.

Scalping like this is not something I’ve ever really considered before as a possibility for the retail trader. However the last few nights have shown me that this approach has great potential. In particular for the many traders who face the challenge of fitting their trading in around family and a job. Typically I’ve recommended these people investigate longer timeframes, in particular daily charts, as that allows a reduced daily session for analysis, order placement, open trade management and review. Scalping offers other possibilities for those (like me) who are not psychologically suited to the longer timeframes, fitting the trading plus review sessions into only an hour or two per day.

This style of trading will NOT suit everyone – obviously. But it’s well worth trying on a demo platform if you have limited time with which to trade. Stick to the most volatile time periods, such as session opens. Ensure you have no doubts at all about your position sizing and risk management rules, because there’s no time for making up your plan on the run. As with any approach, you’ll have a few losses, a few wins and quite a few breakeven results. Aim to contain all the losses to minimize damage, allowing you to profit if you can get even just one or two of the winners to run.

Oh, and if you haven’t seen the ForexBird site, check it out: http://forexbird.blogspot.com/

Enjoy!

Lance Beggs


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YourTradingCoach – Admin

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