This is one of the best and easiest forex scalping strategies out there. It works for any currency pair at times when there is high volatility in the market. Volatility is present usually during fundamental events. You can use our economic calender to see which events will cause volatility in the market. After the Friday NFP report, we did trade this live with our paid members and many of them requested for more explanation on the strategy. We will be doing a live trade with Google hangouts soon using this strategy. Although for our signal service we prefer to use price action swing trading and occasionally we use this scalping strategy. Its suitable if you are a risk taker and do not want to wait for too long for your trades. It works best on 5 min and 15 min charts as you will see.
So lets get right in and start. The basic working of the strategy is to create a hedge i.e. buy and sell the same currency at the same time when there is high volatility in the forex market. Please note its not to buy and sell the same currency pair, its to buy and sell the same currency. The best way to explain is probably through an example. We are going to create a USD hedge with 2 currency pairs. In this example we will use AUDUSD and GBPUSD. We will be buying and selling the USD against these two currencies. In the chart posted below these orders were placed before and FOMC announcement. We were short the USD against the AUD and long the USD against the GBP. We set an order to buy AUDUSD and to sell GBPUSD. Each of the orders had a 30 pip stop loss and a 60 pip take profit.
As you can see we were stopped out on the GBPUSD and or Profit was hit on AUDUSD. So we had a net gain of 30 pips. This was in an easy 5 mins. If you were to ask yourself what allows this strategy to work? Its simple Risk to Reward. On both orders the Risk to Reward is 1:2 so when we loose 30 pips we gain 60 on the other and have a net gain of 30 pips.
The only problem comes in when you have mixed data coming out of fundamental events. If you were to take NFP for example, is the jobless claim is good but the unemployment rate is bad, you will have volatility but the market may not move in one direction. It usually forms an indecision candle like a doji. This can end up hitting both your stops. As any other strategy in the forex market, even this scalping strategy is not 100%. That is why one needs to apply proper money management to avoid huge losses.
We have written about many different strategies you can use in the forex market. Be sure to check them out. One of my personal favourite is the moving average crossover strategy, it can also be used for scalping and short term trading. We will be doing a live webinar soon using this strategy, make sure you stay tuned for that. Leave us a comment below and let us know what are your thoughts about this strategy.