The 5Minute Scalping Strategy

This    strategy    Is    very    simple    and profitable    for    scalping    the    market during    the    London    and    New    York sessions. I have used this system for a long  time  and  it  continues  to  provide great consistency.

It  is  important  to  remember  that  you must  not  over  trade  with  this  system, wait for the right setup at the right time and  it  will  pay  off  big  time  in  the  long run.

Setting up your charts:

Open a 5 minute chart for the EURUSD and add a 10ema a 21ema and a 50ema that’s it, told you it was simple! Choose different colors for each moving average, for the purpose of this article I will use: Blue = 50ema, Green = 21ema and Red = 10ema

The 10ema and 21ema act ask strong support & resistance when the market is trending throughout a session, in a strong trend we can use this  to  our  advantage  and  scalp  the  market  while  insuring  we  are trading in the direction of the short term trend giving us a good trading edge to take some quick pips. 

See diagram below for an example of scalping with the trend.

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System Rules:The rules of this system are very simple.

1.  Wait for a trend to show on the 5 minute chart, higher highs in a up trend and lower lows in a down trend, look at the 50ema for trend strength and direction. 
2.  Make sure you are not in the Asian session or at the end of the London or US session.
3.  Check  there  is  no  major  upcoming  news  about  to  come  out before you place a trade, your broker should have a calendar of this with times.
4.  Once price enters half way into the zone open a trade, sell for downtrend and buy for up trend.
5.  Set stop loss at 5 pips + spread.
6.  Move stop to break even at +5 pips.
7.  Set take profit at 10 pips.

Trade Examples:

Lets  look  at  some  examples  of  the  moving  averages  in  action  in  a good trend.

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If you look at the above example you can see that a nice trend was in place  making  higher  highs  and  returning  to  the  10ema,  when  price finds  support  on  the  10ema  this  generally  means  that  the  trend  is strong, what we are waiting for is a retrace back between the 10ema and the 21ema, I call this space between the 10ema and the 21ema the ZONE, see picture below for a diagram of the zone.

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The Zone is our heads up area, when all conditions are met and price enters  the  zone  be  ready  to  make  a  trade.  The  Blue  50ema  is  our gauge for the strength of the trend, in a good strong trend it should be pointing up or down at about 30 degrees from horizontal.Let’s  look  at  some  trade  examples  and  see  how to  enter  and  place your stops.

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In  the  above  example  price  shot  up  at  the  London  open  due  to  a news release.   Price eventually made its way into the zone where we are  looking  to  enter  into  a  buy  trade.  For  an  entry  to  be  valid  price must  make  it  half  way  into  the  zone,  most  of  the  time  it  will  almost touch  the  21ema  before  taking  off  again.  

Make  sure  you  have  your trading platform ready to initiate a trade as soon as price makes it half way into the zone, price will not normally hang around here for long.Our  stop  was  placed  5  pip  back  +  spread  so  in  my  case  I  have  a spread  on  the  EURUSD  of  1  pip  so  my  total  risk  on  this  trade  is  6 pips. Take profit of +10 pips was also set as soon as the trade was opened which was hit 15 minutes later.

This  session  only  had  one  trade  setup  but  there  are  many  session with 2-3 setups, although this is not a set in stone rule I don’t like to take more than 1 trade per session weather it is a win or loss, over trading is a very bad habit to get into and can result in the loss of your account if you don’t control it.

Below is another example of a trade during the London session, the first retrace back into the zone was not quite far enough to be classed as a buy trade so it was not taken. The second retrace was a perfect setup that missed the profit target by 1 pip, the trade then reversed and promptly stopped us out at break even.

If you look carefully at the end of this trend you will notice that they are barley managing to make new highs, this is an early warning that the trend is running out of steam so it may be a good idea to settle for 5 pips profit.
 

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The key to trading this system profitably is to be sure only to trade the London or NY session. You must not take any trade as ether one is opening, you must not make any trades as ether one is closing.Never take any trades in the Asian session.

On  the  chart  below  I  demonstrate  how  to  spot  the  perfect  trend forming  at  the  beginning  of  a  session.  As  you  can  see  the  Asian session is generally in a range with no trends forming at all, this is the reason we never trade this session.   About 1 hour after the London open the 50ema was pointing up and price has clearly broken out of the  Asian  range  signaling  a  good  up  trend.  

Price  came  nicely  back into the zone for the first buy trade which easily made our target of 10 pips.  This  is  personally the  point  I  stop  trading  for  the  day  with  this system, after 1 trade win or lose I’m finished for the day!

There was a second buy trade if you were still not happy with only 10 pips profit for the day which also resulted in a profit after a shaky start but notice how the trend was struggling to make higher highs! Good idea to take a small profit and get out.

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Below is a perfect trend in the NY session with 3 beautiful entries each one hitting its target easily.

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Ok so we know when we should be trading now its time to look more at times we should not be trading. Below is an example of a session you do not want to be involved in at all. The 50ema is sidways and you  should  focus  on  longer  term  charts  or  go  out  and  close  your platform.

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News: 
You will need to keep an eye on the news reports due to be released each day you  are trading. You can find this information usually with you broker.

Do  not  take  any  trades  just  before  a  news  item  is  to  be  released,normally the best setups occur after a new item has been released.The market tends to take a sudden move when news is released then retrace into the zone before shooting off again.

Patience:
If  you  are  a  patient  person  you  will  find  yourself  excelling  with  this system.  It  requires  a  lot  of  patience  and  discipline  to  not  start  over trading on every tick of the market. Remember  to  try  and  take  one  trade  a  day  win  or  lose  it  does  not matter, this will keep you from revenge trading which inevitably leads to loss of capital.

As you get a feel for the system and learn to follow the rules your win % will increase.I would like to point out that you can not expect to trade this system every day; you will have many days with no trend or a weak one.With The Blade Forex Strategies package you  will be focusing on the  longer  term  charts  mainly  for  your  large  pip  gains,  this  little scalping system should only be used when you have a obvious trend in place otherwise stick to planning and using the other core systems.
 
Below  are  two  tables  for  the  opening  and  closing  times  of  each session,  the  first  table  is  if  you  live  in  the  UK  or  GMT,  the  second table is if you live in The U.S or EST.

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Advanced Techniques: 
The advance technique of this strategy will be on my next post…but I strongly recommend that you concentrate on the basic part of the system for a  while  first  before  you  start  using  anything  from  the  advanced section on my next post.

Drop your comments below and feel free to ask questions!