Forex Strategy – EUR – GBP Scalping

Learn to use timing and statistics in your trading. While you can never be able to foretell when and how the forex market will move, it is always best to have the background knowledge of how the particular currency pair that you are trading has moved historically.

For example, statistically, most currency pairs begin sudden and bigger movements at certain hours of the trading day. At 6:00 GMT, when the European market opens, there is almost a clockwork tendency for the market to move. Asian market trading is usually sleepy. And a trader can easily sense that European traders are entering the market at around 6:00 GMT when volatility starts rising and trading volume begins picking up.

It is the European market which usually makes the initial movement and gives direction to certain currency pairs, particularly those connected to the European region. Certain pairs are almost frozen in tight ranges during the Asian markets. A perfect example would be the EUR-GBP pair. If you would observe this pair for quite some time, you would notice that from 22:00 GMT up to until 5:00 GMT of the following day, the EUR-GBP almost always trades in a very tight range. Now, you may wonder how would you be able to make money if the currency pair almost does not move during this particular time. Remember one of the golden advantages of the forex market: there is always opportunity to make money in trading forex!

Even in a situation such as a currency pair ranging for a couple of hours, there is opportunity to make money. And it is pretty easy to do so. A currency pair which ranges is a perfect playground for scalpers. 5-8 pips for every little upward or downward movement in the market is all a scalper targets.

Since you are there to scalp, you expect to be in and out of the market in only short amounts of time. In fact, when scalping, the quicker it is, the better. So it is usually best to use the 5M time frame when timing your entries in the EUR-GBP. The secret lies in using the correct indicators to know when you will buy or sell. Exit levels vary depending on how fast the market can reach your profit target. But always remember that this is just a scalping strategy. Never be greedy for more pips since you are just targeting 5-8 pips per trade. If the market is not really cooperative, you may even have to exit with just 1 or 2 pips in the bag. Better safe than sorry.

Depending on a trader’s risk appetite, some scalpers even add positions or use Martingale strategies once they get in the EUR-GBP market. Since he truly believes that the market would bounce back to the levels where he bought his initial entry, he might as well take advantage of the opportunity of an oversold EUR-GBP, and buy some more lots before the price eventually turns around and hits all of his profit targets.

Of course, it goes without saying that there should be proper capital management when scalping. Know the limits of how much you can expose in one particular scalping opportunity. And stay within those limits. Stoplosses are also very vital in this strategy.

Opportunities are there every trading day in the forex market. Just know how to trade each type of trading environment. And stick to your trading plans and capital management guideline.

Source by George M. Patterson

Comments (0)

Leave a Reply