One way to trade Forex is by scalping the market. What this means is you enter a trade with the intentions of taking a small profit in a short amount of time. This article will discuss a great way to scalp the Forex markets for 10 pips. This strategy uses a 1:1 reward to risk ration but it has a very high probability of success.
We normally are looking for minimum reward to risk ratio of 3:1 but if you can get a high enough percentage of winning trades you can be successful with a lower ratio. With a 1:1 reward to risk ratio your break even point is 50% winning trades. With this strategy you should get about 90% winning trades.
In order to utilize this strategy your trading platform must have a volume indicator that allows you to plot volume over a specified time range. For this strategy we want to plot volume through the previous trading session. If your platform does not have this capability you can get a subscription to tradingview.com. You will have to pay $29.99 per month because the free version does not have this indicator.
Take a look at the chart below of USD/JPY. The blue shaded area represents the previous day’s trading session. The magenta line represents the price where the highest amount of volume was traded. At the open of the current session price was well below this point so the trade would be to sell USD/JPY when price hits the magenta line. You would place a buy to close 10 pips below your entry and a stop at 10 pips above your entry.
As you can see in the 5 minute chart this trade was closed for a 10 pip profit in less than 15 minutes after the trade was entered.
The chart below represents a trade on June 13th with the USD/JPY currency pair. The red arrow shows our entry based on the rules for this strategy. The green line shows the target and the red line is where the stop was. Notice that there was a strong supply zone above our entry price. In cases like this you may want to wait for the price to come into this zone before you enter the trade.
Even though the trade worked, it took several hours for price to reach our target. If we would have waited until the price moved into our supply zone we would have exited the trade in about two hours instead of almost seven hours.