Many strategies available today are not meant for long-term trades, but rather for trades that are carried out frequently and are held for between one and five minutes aiming to produce small profits each time. This method of trading is referred to as scalping. Two distinct versions can be found in the rapid-fire strategy and the piranha strategy. Both can provide results if followed correctly. Our scalping trading tips will put you on the path to making small, profitable trades. However, don’t expect substantial gains from them.
Rapid-fire
In order to carry out this method successfully, you will be required to trade in the currency pair EUR/USD – the most liquid pairing on the market. Your selected time frame for each trade should be maintained at the minimum period allowed on the platform: one minute. The most effective tool of choice will be the Parabolic SAR with a default setting of step 0.02 and max of 0.2. The direction of the momentum will be identified using the simple moving average of 60, referred to as the SMA. Prices that go above the SMA 60 should indicate that you should go long. However, if below SMA 60 it should indicate that you go short.
Follow the steps and reap the rewards. Watch the market and identify the moment that the market price moves above SMA 60 but is still below the Parabolic SAR. Be vigilant and recognize the moment that the market exceeds the Parabolic SAR, enter a long position. Set your take profit target at 10 points above the price entered at and the stop loss should be set at 15 points below the price entered at. This trade strategy presents a 2% return against a risk that sits at 3%.
Piranha
The Piranha is a fish infamous for its razor sharp teeth and the method by which it feeds. The Piranha viciously bites its prey and doesn’t stop until it is entirely consumed. Using this method when trading will require you to trade often, taking many bites, accumulating small profits.
The currency pair of choice is the GBP/USD and the preferred time frame sits at five minutes. The Bollinger Band is the tool used in this method. The settings should be period 12, shift 0 and deviation 2 as the default. This tool is used to identify the trading band specific to the GBP and USD. Long trades should be entered when the prices are at the bottom band and short trades entered into when the prices reach the band at the top. This is a strategy which has been specifically designed to deal with trends when trading and should not be incorporated into your trading during periods where major events threaten the stability of the market.
Follow the steps when the market is at an even ebb and flow rather than when things are shaky and uncertain. Wait patiently for the prices to touch the bottom band and enter long. Your stop loss should be set at 10 points below the price entered at and the take profit target should be set at 5 points above the priced entered at. The strategy carries a 1.5% return against a 3% risk.
Trading in a nutshell
Trading is always going to incorporate some degree of risk. However, having a sound knowledge of the basic fundamentals and current affairs will allow you to minimize the risks involved or at least make calculated ones while still reaping the rewards. Start off slowly, read up on trade tips and learn how to invest – knowledge gives you power.