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The Best Scalping Strategy for Forex Trading in a Higher Time Frame
Scalping in Forex trading generally refers to the strategy of making a small profit over a large number of trades. This requires fast reactions and good risk management, especially when the trading timeframe increases.
For example, you may scalp on the hour chart, but in order to make more profit, you will have to go up to the 4-hour or daily charts to enter and exit trades quicker. Here are some of the best Forex strategies for scalping in higher time frames with an emphasis on how it can be done on the daily chart.
Have a plan
Before scalping in a higher time frame, it is important to have a plan. The best scalping strategy will take into account the following: the currency pair you are trading, the time frame you are trading in, your risk tolerance, your profit goals, and your entry and exit points.
Take partial profits
One way to scalp successfully in a higher time frame is to take partial profits along the way. This means that if your trade is going well, you can take some money off the table and let the rest ride. This can help you lock in profits and limit your risk if the market turns against you.
However, it is important to watch the overall trend so that you don't end up taking too much profit from a profitable position because of fear of losing more.
Trade with breakouts
When trading with breakouts, you're looking for a price to move outside of a defined level of support or resistance. This can be accomplished by using technical indicators or chart patterns. I prefer to use candlestick patterns myself.
Once you identify a potential breakout, you can enter a trade and set your stop loss just below the level of support or resistance. Then it's just a matter of setting your take profit target at a 1:1 risk-to-reward ratio or higher.
Set Take Profit Targets in advance
When scalping in a higher time frame, it is important to set your take profit targets in advance. This will help you stay disciplined and not take profits too early. A good rule of thumb is to set your take profit target at least two times your stop loss.
For example, if your stop loss is 10 pips, your take profit target should be at least 20 pips. The use of the Fibonacci retracement levels can also help traders identify high probability points.
Don’t chase moves too far
The best scalping strategy won’t have you chasing moves too far. You’ll want to get in and out of trades quickly, with minimal effort, so you can free up your time to scalp more. This means that you shouldn’t try to pick tops and bottoms.
Instead, enter your trades when the market is already moving in the right direction, and exit when it starts to turn.
Use lines and fibs as support/resistance areas
When scalping in a higher time frame, Fibonacci lines and support/resistance areas can be extremely helpful. By finding these key areas, you can make trades with a much higher success rate. Here's how to do it Find the current high and low of the trading session (or the highest high or lowest low if that is what you're interested in).
Then take the difference between those two points and find the nearest Fibonacci line on your chart. Once found, use this as your resistance area. Look for any signs of reversal candles - which are usually bearish or bullish - inside this area at the end of a trading session to have an increased chance of winning trades.
Use time frames above and below the current one
When scalping in Forex trading, the best strategy is to use time frames that are both above and below the current one. This way, you can catch both the short-term and long-term trends. For example, if you are currently trading on a 5-minute chart, you would also look at charts with time frames of 1 minute, 15 minutes, and 1 hour.
Never go all-in on one trade
When scalping in a higher time frame, it's important to never go all-in on one trade. This is because the market can always turn against you, and if you're too heavily invested in one trade, you could end up losing everything. Instead, it's better to take smaller positions and scale out of them as the market moves in your favor.
That way, even if the market does turn against you, you'll still have some money left over. But don't get greedy: Just because you've had success with your strategy thus far doesn't mean that this will continue indefinitely. Be sure not to get greedy and think that this strategy will work forever - just stick with what has been working for you so far.
Conclusion
If you want to scalp in a higher time frame, the best strategy is to wait for strong trends to develop. Once a trend is established, you can look for scalping opportunities by picking up a few pips at a time. Remember to use stop-loss orders to protect your profits, and take profits when you have them. With practice, you can develop a feel for when the best time for the scalp is. While it may seem counterintuitive, waiting until a trend has matured will give you the best opportunity for the scalp.
Make sure that your stops are tight enough so that small moves against you won't wipe out all of your gains from earlier trades. An important part of scalping is knowing when to take profits and when not to be greedy; otherwise, losses will outweigh profits and the endeavor becomes futile. There are several strategies for scalp trading on longer time frames in Forex trading; some are more successful than others.
