Categories: Steve Rising's Trading Success Series
This is a good example of, we've got range-bound conditions USD/JPY on our daily chart, that's the first chart we look at to evaluate what type of trading strategy we're going to put into play. Currently our top of range is being tested.
So, moving over to our ten minute chart, which is the chart that we trade off of, the ten minute time frame being the prime time increment to be able to trade the forex market on an intraday basis so that the directional bias doesn't get into trouble, and we can currently see that we're testing this number here at our top of range, so we're waiting for our entry strategy to develop. We use one of our two entry strategies based on the pattern that's formed. Currently we're trading at a significant number.
And as a reminder, the forex is consistently range-bound, and we look for reveral activity in those range bound conditions, and then ultimately the top or the bottom of the range is tested, and then we get momentum-based activity to come into play. So we're not using any type of trend following techniques - ABC patterns, wave theory, wedges, we don't look for Gartleys or crowns or any of those things when trading the forex market because the directional bias gets us into trouble.
Developing Your Entry Strategy
So we wait here for the test of our significant number and then our entry strategy to develop as we test the top of the range here ... number coming into play here as we also look now for a net 10 pip profit target. The reason we look for 10 pips is because the average the average size move in the forex on a 10 minute candlestick is about 30 pips. So we look to scalp a piece of that move. That's the benefit of a scalping technique as we look for a fixed profit, and the average size once again is net 10 pips. And the way we grow our account is we simply look to add more lots, in other words we could make this a 50 pip trade simply by going for the net 10 pip move and then trading 5 lots on that net 10 pip move.
So we can see here we just need price to move up a little bit more. And one of the areas where people get into trouble with trading the forex is they're always trying to find the big move. And what happens is the directional bias of this marketplace is constantly shifting, so it makes it difficult to go for the big move all the time; you have to trade with much larger stops, and so it typically doesn't follow most people's equity management. Trading this style of trading, the thinslice trading methodology, what we do is we typically work off of a 10 pip stop.
So actually here, just right now, we're actually at net 9 pips, so we'll go ahead and we'll exit out here because we can start to see price is starting to slow down here, and once again we watch minute by minute each candlestick. And so there we can see where we had out top of range breached, and we now have a net 9 pip move in this case, just playing it safe. It's always better to lean on the side of being conservative, because once again, a one lot trade net 9 pips is $90, a 5 lot trade net 9 pips is $450, and we know what we're watching for, the reason for the early exit is the candlestick is just about to come to the close here.
Scalping With The ThinSlice Method
So there we go, looking to scalp using the thinslice trading methodology, where our significant number, strategy #7 that we teach in our trading program, price breaching the top of range in our range-bound condition, once again looking for a net 10 pip opportunity.
So now 20 minutes has passed since our net 10 pip move here, and this shows why we look to scalp typically 10 pips, is one is we know as we move into mid-afternoon, price has a tendency to slow down, two is we know that the average size move is around 20 to 30 pips; in this case the size of the move was just slightly under 20 pips. Market conditions always steer us to what size trade we're going to look for. We look for anywhere from 10, 15, to 20 pip moves on average; once again we add more lots. This is a setup that occurred earlier today, as our significant number was cleared here at this point, also going for a net 10 pip scalp. Price did run a little further, but its much safer to add more lots and go for a fixed profit target.
To learn more about our thinslice trading methodology, a forex scalping technique, I encourage you to participate in one of our free online webinars that we host weekly. To register, you can do so directly on our website, theforextradinginstitute.com.
I'm Steve Rising with The Forex Trading Institute, thanks for viewing the video and I look forward to seeing you in one of our online presentations.
