Just because I’m such a nice guy (okay, that’s not really true but, whatever), I’m going to give you yet another free forex trading strategy. Here’s a scalping strategy that a trader friend of mine makes his living with every day. It’s incredibly simple. Probably the hardest thing about using it is just exercising the necessary patience to wait for a trade entry signal. But in this case patience is indeed a virtue, and one that’s nearly always rewarded.
All right, here you go then: You play this strategy off the 5-minute charts, and it is strictly a scalping strategy. That is, you’re just looking to grab a quick handful of pips and get out (although – occasionally this strategy will allow you to get an outstandingly good entry at an intermediate, or even major, market top or bottom reversal point). Very simple – just pull up a 5-minute chart and load a 10 moving average and a 21 moving average onto it (I use an EMA – exponential moving average – but a simple moving average will work fine, too). Then sit quietly and wait for a pin bar to form at a price point fairly well off of the moving averages (say, about 10 pips or more either above or below the moving averages). As soon as the pin bar closes, jump in, enter the trade. Obviously if the pin bar is formed above the moving averages, you want to sell; if it’s formed below the moving averages, you want to buy. Place your stop just a pip above the pin bar high (if selling) or low (if buying).
Once you’re in the trade, you can play it one of two ways: The first, and preferred, strategy is to just close the trade out as soon as you have a 5 to 10 pip profit – this is, after all, designed as a short term scalping strategy. Or, if you think the market may have reached a near-term high or low, you can try to ride the trade for greater profit. If you want to use that second approach, I’d recommend closing out half of your position as soon as you’re just a few pips ahead, and then letting the remaining half ride – that way, you shouldn’t do worse than about breakeven overall even if the market turns round on you and stops you out on that second half of your position. (That second option is also why there are two moving averages plotted on the chart – to help guide you if you’re trying to ride the trade for a bigger profit.)
Here’s a chart illustrating this strategy in action:
I marked with a red, down arrow the sell opportunity that occurred around 10:30 (from the time as marked on this chart) on September 11, 2014. That’s not a classic pin bar – it’s actually a doji candle, but because it occurred both well off the moving averages as the strategy requires, and with a good long tail on the top side, I’d take that trade anyway. And as you can see from the chart, it would have worked out beautifully as a sell trade – immediately profitable, and if you cared to ride it out, good for almost 30 pips.
Let’s look at a more classic pin bar example, this one located, and again marked with a down arrow, right around the center of the chart below. You can see that this is another trade that almost immediately goes into profit, and that could have been held for a nice, short term swing-high to swing-low trade, too.
Now despite those two terrific looking examples, this trade doesn’t work 100% of the time. But in my experience it works well more often than not, plus it’s a very low risk strategy since you’re always running a very tight stop with it.
Anyway, my trader friend who showed this to me does indeed use it as his every day, “bread and butter” forex trading strategy. He watches several different currency pairs, and simply waits for one of these opportunities to arise – there are usually at least a couple of opportunities like this in any 8-hour trading session, and often there are two or three that occur within just an hour or two (which can make for a very nice, short workday for you).
Oh, like with all trading strategies, this one works best if you’re taking trades that are in the same direction as the overall trend, and/or if the trade entry signal occurs at a pivot point or other significant support/resistance level.
So, there you have it, a quick and easy, very low risk strategy to grab some pips every day. I told you this forex trading stuff was easy money. 🙂
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Best wishes, God’s grace,