Learn to use time and statistics in trading. Although you will never be able to predict when and how the foreign exchange market will move, it is always better to know how the currency pair you are trading has moved historically.
For example, according to statistics, most currency pairs start sudden and larger movements at certain hours of the trading day. At 6:00 Greenwich Mean Time, when the European market opens, there is an almost clockwise trend in the market. Trade in the Asian market is usually sleepy. And a trader can easily feel that European traders enter the market around 6:00 GMT when volatility starts to rise and trading volume starts to grow.
It is the European market that usually makes the initial movement and gives direction to certain currency pairs, especially those related to the European region. Some pairs are almost frozen in narrow ranges in Asian markets. A perfect example is the EUR-GBP pair. If you watch this pair for quite a long time, you will notice that from 22:00 GMT to 5:00 GMT the next day, EUR-GBP is almost always traded in a very narrow range. Now you may be wondering how you will be able to make money if the currency pair is barely moving at this particular time. Remember one of the golden advantages of the foreign exchange market: there is always the opportunity to make money on forex trading!
Even in a situation like a currency pair that operates for a couple of hours, there is an opportunity to make money. And to do that is pretty simple. Currency pair with ranges – the perfect playground for scalpers. 5-8 points for every small upward or downward movement in the market is all that a scalper puts before him.
Since you are there to scalp, you expect to appear and leave the market in just a short period of time. In fact, when scalping, the faster the better. Therefore, it is usually best to use a 5 million time interval when measuring your EUR-GBP entries. The secret is to use the right indicators to know when you will be buying or selling. The level of yield varies depending on how quickly the market can reach your profit target. But always remember that this is just a scalping strategy. Never be greedy for more points as you are just targeting 5-8 points per deal. If the market isn’t very cooperative, you’ll even have to come out with 1 or 2 items in your bag. It is better to be safe than sorry.
Depending on the trader’s risk appetite, some scalpers even add positions or use Martingale strategies as soon as they enter the EUR-GBP market. Since he really believes the market will return to the levels where he bought his initial entry, he could also take the opportunity to resell EUR-GBP and buy a few more lots before the price eventually flips and reaches all its target profits.
Of course, it goes without saying that scalping should have proper capital management. Know the limits of how much you can reveal in one particular scalping opportunity. And stay within those limits. Stoplossy is also very important in this strategy.
Opportunities are there every day in the forex market. Just know how to trade each type of trading environment. And stick to your trading plans and capital management principles.