Today I wanted to share a scalping strategy that works on any market. I mostly use it in Forex but I have also traded indices and precious metals using it. What I like about this system is that;
The Theory
This system isn’t new by any means. It’s just my way of interpreting other highly effective systems like the Wycoff spring. The ABCD pattern or many other patterns that just happen to present themselves at the time of trading. These all have one thing in common: market strength, powered up by accumulation. I have just taken bits and pieces of other strategies and backtested them, and I found something that is consistently profitable that I can relate to. So when you see this strategy and take a deeper look at the price action you will spot other supportive patterns at play.
Indicators
I understand a lot of people are against the use of indicators but with this system, they are used to filter price accumulation and strength. More important, they are used as a reset back to step one if momentum shifts. Which I refer to as a new campaign for a valid setup. Price is most important but there is no harm in putting as many tools in the toolbox as long it does the job of extracting money from the markets.
Let’s Put it Together
Buy Signal
Step 1. Wait for MACD to cross the ZERO line. (New Campaign).
Step 2. Wait for Price to pull back into the Bollinger bands. It doesn’t matter if the price closes below the bands.
(IMPORTANT! IF MACD CROSSES BELOW THE ZERO LINE THEN A NEW CAMPAIGN WILL BEGIN FOR A SELL SETUP)
Step 3. After the pullback into the bands, draw a resistance line at the highest point where the price hits before the pullback.
Step 4. Now sit on your hands and wait for the market to confirm its strength in buyer momentum. If and when the price breaks and closes above the high that was marked in step three. Place a Buy Stop order 1 pip above the high.
(IMPORTANT! IF THE PRICE DOESN’T BREAK THE HIGH BUT WICKS ABOVE IT. GO BACK TO STEP 3. THIS WILL MARK THE NEW HIGH WE NEED PRICE TO BREAK ABOVE).
This keeps you out as the market tests volume and liquidity at these highs.
When to Cancel Buy Stop order?
If the buy-stop order is not triggered. Cancel it when the price crosses below the zero line.
Stop Loss & Take-Profit targets
This is entirely up to you but it must be consistent. There is 3 ways to manage these trades and pocket the profits;
Method 1. Shoot for a 1:1 risk-reward ratio. For this method, you must place your stop loss 1 pip below the breakout signal candle and target for an equal amount of money between your entry price and stop loss price.
Method 2. Shoot for a 2:1 risk-reward ratio. For this approach, place your stop loss 1 pip below the lower band and target double the amount of money between your entry price and stop loss price.
Method 3. Make the most out of the trend. This approach is a bit more advanced but some backtesting will train your eye on exactly when to exit the trade. That would be to exit on an overshoot of the third touch or break of a wedge. This signals to many traders when to exit their trades. By using this approach you are squeezing as much as possible out of trends and have a higher chance of entering at the top.
THE OPPOSITE IS TRUE FOR A SELL SIGNAL.
I hope you all enjoy this one.
As with every new system, don’t forget to back-test until confident.
Any questions I am happy to answer
Merry Christmas and a Happy New Year
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- It prevents you from over-trading.
- You only need 1 to 3 trades daily.
- It is easy to understand and implement.
- It keeps you out of barbed wire and choppy markets
- Higher chance of best times entry.
The Theory
This system isn’t new by any means. It’s just my way of interpreting other highly effective systems like the Wycoff spring. The ABCD pattern or many other patterns that just happen to present themselves at the time of trading. These all have one thing in common: market strength, powered up by accumulation. I have just taken bits and pieces of other strategies and backtested them, and I found something that is consistently profitable that I can relate to. So when you see this strategy and take a deeper look at the price action you will spot other supportive patterns at play.
Indicators
I understand a lot of people are against the use of indicators but with this system, they are used to filter price accumulation and strength. More important, they are used as a reset back to step one if momentum shifts. Which I refer to as a new campaign for a valid setup. Price is most important but there is no harm in putting as many tools in the toolbox as long it does the job of extracting money from the markets.
- Bollinger bands - Period 10. Shift 1. Deviation 0.66
- MACD - Fast EMA 6. Slow EMA 17 and MACD SMA is 1.
Let’s Put it Together
Buy Signal
Step 1. Wait for MACD to cross the ZERO line. (New Campaign).
Step 2. Wait for Price to pull back into the Bollinger bands. It doesn’t matter if the price closes below the bands.
(IMPORTANT! IF MACD CROSSES BELOW THE ZERO LINE THEN A NEW CAMPAIGN WILL BEGIN FOR A SELL SETUP)
Step 3. After the pullback into the bands, draw a resistance line at the highest point where the price hits before the pullback.
Step 4. Now sit on your hands and wait for the market to confirm its strength in buyer momentum. If and when the price breaks and closes above the high that was marked in step three. Place a Buy Stop order 1 pip above the high.
(IMPORTANT! IF THE PRICE DOESN’T BREAK THE HIGH BUT WICKS ABOVE IT. GO BACK TO STEP 3. THIS WILL MARK THE NEW HIGH WE NEED PRICE TO BREAK ABOVE).
This keeps you out as the market tests volume and liquidity at these highs.
When to Cancel Buy Stop order?
If the buy-stop order is not triggered. Cancel it when the price crosses below the zero line.
Stop Loss & Take-Profit targets
This is entirely up to you but it must be consistent. There is 3 ways to manage these trades and pocket the profits;
Method 1. Shoot for a 1:1 risk-reward ratio. For this method, you must place your stop loss 1 pip below the breakout signal candle and target for an equal amount of money between your entry price and stop loss price.
Method 2. Shoot for a 2:1 risk-reward ratio. For this approach, place your stop loss 1 pip below the lower band and target double the amount of money between your entry price and stop loss price.
Method 3. Make the most out of the trend. This approach is a bit more advanced but some backtesting will train your eye on exactly when to exit the trade. That would be to exit on an overshoot of the third touch or break of a wedge. This signals to many traders when to exit their trades. By using this approach you are squeezing as much as possible out of trends and have a higher chance of entering at the top.
THE OPPOSITE IS TRUE FOR A SELL SIGNAL.
I hope you all enjoy this one.
As with every new system, don’t forget to back-test until confident.
Any questions I am happy to answer
Merry Christmas and a Happy New Year
1 post - 1 participant
Read full topic
