Forex Trading – More Scalping Strategies


There are many strategies in scalping and one strategy that does not involve any prior knowledge of candlestick patterns is the Fibonacci levels scalping strategy. These levels are generally used to determine the direction in which the market is moving. This should not be confused trend following because scalping involves very short time frames and there could be very short term trends within the longer term trends. It still continues to be true that you should not be trading against the trend but as you can see from the following example, there can be short windows of opportunity when the market moves against the trend.


Scalping Strategy-bearish-trend




The above is a 2 weeks EUR/USD chart where you can clearly see short periods in which the trend goes against the overall trend for that time frame. In fact, at times, the trend reverses quite sharply and this is ideal for the scalper who profits from sharp movements in either direction.


Here is the same chart for a 5 minute timeframe


Scalping Strategy-Using-Fibonacci-Levels

Scalping Strategy-Using Fibonacci



The Fibonacci levels have been drawn on the chart so that we can identify entry and exit opportunities by identifying levels at which there will be retracement from support or resistance levels. You should also be able to pinpoint the beginning and the end of price movements with a new trend is likely to be created. As you can see for yourself, there is a sharp downturn in the direction of the 38.2% level before a sharp rebound over the 61.8% level before coming to the 0 level. You will also notice that there is a strong support level that has built up at the 61.8% level. This is a strong indication that the next move is going to be sharply upward and the scalper should be ready to take advantage by opening a long position.


Short term trend scalping


Because scalping involves short term trading, it is important for scalpers to learn how to judge short term momentum of trends. Though conventional wisdom says that scalping is concerned with short term trends, it is sometimes difficult to identify buying and selling opportunities without looking at  a broader range of price movement. This is why sometimes it is preferable to identify momentum on charts that involve longer time frames before zeroing in on shorter time frames. One way of doing this is to divide the chart into blocks of time representing different days to establish the direction of the market trend.




If you look at the example above, we can begin to divide our analysis to confirm that the market trend is moving steadily downwards  over a period of one week. In this case, the trend is clearly downwards because both blocks of data show a trend in a similar direction. If the trend is different from one block to the next and, for example, the first block shows a high and the second block shows a low, there is no identifiable scalping opportunity and it is therefore time to look at something else. In this case, because of the identifiable trend, you should go short on the EUR/GBP currency pair which is the subject of the chart.


The role of automated trading


While many traders do not recommend automated trading as your primary trading system but automated trading systems can help to ease the stress because scalping can be extremely time consuming for the retail trade


Short term scalping – Using Timezone Fibo

rs who have other jobs and do not rely on Forex trading for their livelihood. Automated trading is no guarantee for success but it can help to monitor the price movements in the market without your being in front of your terminal. In other words, it cannot ensure success but help you to improve the odds in your favor. These systems can be extremely helpful if you understand clearly what you are doing. For instance, they can help you to determine your stop loss and take profit levels and you can use the time saved to concentrate on other aspects of your analysis. If you can control your automated trading system adequately, you can greatly streamline the efficiency of your trade.


The importance of the right broker


Because some brokers are not particularly sympathetic to scalping , their platforms are not particularly friendly to scalpers and their own limitations can prevent them from providing a helpful environment. Because your choice of broker is critical to success in scalping, and the choice of broker is critical to your success. Do some homework and if you find that a particular broker is not helpful say in terms of capping the number of trades, just move on. You should next studied the spreads offered in the currency  that you wish to trade at the times that you choose. Most brokers will provide you with information to help you with your assessment. You can even go one step further and establish the helpfulness of your broker by trading on a demo account. Because of success that scalping depends entirely on technical analysis, you should also ensure that your broker who offers you a complete selection of adequate tools. Finally, your broker should provide quotations that are as close to the real market situation as possible because you simply do not have the time to waste.