Scalping is a special type of trading strategy that helps the trader to make significant profits on minor price changes. In this strategy, the trader needs to make a minimum of 10 trades within a single day in order to capitalize on any minor price changes.
A strict exit strategy must be implemented in order to minimize any potential losses. In this particular strategy, the holding time is 5 minutes. This method requires precise execution and nimble trading. Circles 1 show the first buy signal and circles 2 show the second buy signal. The small support trendline is shown as the dotted black line. The price action accurately reverses in the war zone and continues higher.
Circles 1 show the first sell signal and circles 2 show the second sell signal. The target is hit two hours later, and the stop on the second half is moved to breakeven. We then proceed to trail the second half of the position by the period EMA plus 15 pips. The second half is then closed at 0.
In the chart below, the price crosses below the period EMA and we wait for 10 minutes for the MACD histogram to move into negative territory, thereby triggering our entry order at 1. Based on the rules above, as soon as the trade is triggered, we put our stop at the EMA plus 20 pips or 1. Our first target is the entry price minus the amount risked, or 1. It gets triggered shortly thereafter.
The second half of the position is eventually closed at 1. Coincidentally enough, the trade was also closed at the exact moment when the MACD histogram flipped into positive territory. As you can see, the five-minute momo trade is an extremely powerful strategy to capture momentum-based reversal moves.
However, it does not always work, and it is important to explore an example of where it fails and to understand why this happens. As seen above, the price crosses below the period EMA, and we wait for 20 minutes for the MACD histogram to move into negative territory, putting our entry order at 1.
We place our stop at the EMA plus 20 pips or 1. Our first target is the entry price minus the amount risked or 1. The price trades down to a low of 1. It then proceeds to reverse course, eventually hitting our stop, causing a total trade loss of 30 pips. Using a broker that offers charting platforms with the ability to automate entries, exits, stop-loss orders , and trailing stops is helpful when using strategies based on technical indicators.
When trading the five-minute momo strategy, the most important thing to be wary of is trading ranges that are too tight or too wide. In quiet trading hours, where the price simply fluctuates around the EMA, MACD histogram may flip back and forth, causing many false signals. Alternatively, if this strategy is implemented in a currency pair with a trading range that is too wide, the stop might be hit before the target is triggered. This trading strategy looks for momentum bursts on short-term, 5-minute currency trading charts that a market participant can take advantage of, and then quickly exit out of when the momentum starts to wane.
The 5-Minute Momo strategy is used by currency traders looking to take advantage of short changes in momentum and could therefore be employed by day traders or other short-term focused market players. Scalping is the process of entering and exiting trades multiple times per day to make small profits. The process of scalping in foreign exchange trading involves moving in and out of foreign exchange positions frequently to make small profits.
The 5-Minute Trading Strategy could be used to help execute such trades. The 5-Minute Momo strategy allows traders to profit from short bursts of momentum in forex pairs, while also providing solid exit rules required to protect profits. The goal is to identify a reversal as it is happening, open a position, and then rely on risk management tools—like trailing stops—to profit from the move and not jump ship too soon. Like with many systems based on technical indicators , results will vary depending on market conditions.
Technical Analysis. Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. Table of Contents. What's a Momo? Rules for a Long Trade. Rules for a Short Trade. Long Trades. Short Trades. Momo Trade Failure. The Bottom Line. Key Takeaways The five-minute momo strategy is designed to help forex traders play reversals and stay in the position as prices trend in a new direction. The strategy relies on exponential moving averages and the MACD indicator.
As the trend is unfolding, stop-loss orders and trailing stops are used to protect profits.
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|Forex strategy for 5 minutes||The Bottom Line. To be a successful forex trader you need to find out what works for you in the forex market. Rules for a Long Trade. As the trend is unfolding, stop-loss orders and trailing stops are used to protect profits. What's a Momo? Long Trades. The second half is eventually closed at|
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|Forex strategy for 5 minutes||At the time, the EMA was at 0. One of the skills you need as a scalper is concentration. Rules for a Short Trade. It gets triggered shortly thereafter. Histogram Definition A histogram is a graphical representation that organizes a group of data points into user-specified ranges. Using a broker that offers charting platforms with the ability to automate entries, exits, stop-loss ordersand trailing stops is helpful when using strategies based on technical indicators.|
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The strategy relies on exponential moving averages and the MACD indicator. As the trend is unfolding, stop-loss orders and trailing stops are used to protect profits. The following is a 5-minute scalping forex trading strategy for the EURUSD, GBPUSD, USDJPY and EURJPY currency pairs. Scalping is a special type of trading. Wait for a trend to shown on the 5 min chart, higher highs in an up trend and lower low in a down trend, look at the 50 EMA for trend strength and direction.