Strategies for Scalping Patterns

This article is a continuation of the guide on using scalping methods for trading forex.
Maximum number of scalpers is always trying to make profits from the price patterns in the markets. And, the scalpers who prefer the calm markets try to take advantage of formations such as flags and triangles, and those who love trading the news make sure that they make the most out of breakouts.
Remember that there is no one particular market type where scalping can be used for maximum benefits. The reason is that there are various types of scalpers. However, there are certain technical patterns offering highest projects to specific scalping strategies and these patterns are examined in the following paragraphs.
1. News Breakouts
Crucial and characteristic breakouts experienced on a trading day are the ones linked with critical news releases, without concern for their nature. Such an instability can be a result of unanticipated government statement or from the release of a startling statistics, or from some routine data that the markets prefer to construe in an altogether different way.
It has been found that such events cause an instant increase in volatility. This is characterized by a powerful early movement, which afterwards receives aftershocks, lasts several hours and generates swings and rise and fall, which the scalpers exploit very well. Scalping after an impact from a news release is dissimilar to scalping in an ordinary and stale condition with regard to the stop-loss need, a trade’s average life and the unwanted risk controls.
Even though this type of scalping may have some similarity with basic trading, but it is an entirely technical perspective. In addition, it doesn’t have much to relate with the real form or importance of the news or statistical release. You must understand that the meaning of a financial data or news cannot be assessed in just a few minutes when it hits and gets intense reaction from the market.
Therefore, it doesn’t make any sense to rationalize any basic meaning to the behavior of the market in such a time period. This is specifically more so when you take into account that news releases can get revised most of the time and in a drastic way after the first release.
A rule you must strictly follow, when the goal is to exploit the news breakout, is that you should avoid the market for this small period of time when the news is released. If you are not using automated systems for scalping, informed and rational decisions cannot be made during this short, restless periods. Even worse during this short time-period are the short but strong expanding of spreads that make technical plans an impossible task. On the other hand, a good scalper would use this short period of time to determine the market direction before jumping to take positions.
Reasons for Using Time Stop
As explained earlier, as a scalper you wouldn’t want to expose yourself to the markets for much longer. However, the market is not going to work on the basis of your expectations, and it may even not agree to hit either the take-profit or stop-loss points for longer period of time. The more the amount of time you are exposed to the movements in the market, the more the risk associated with sharper and abrupt movements contrary to your expectations. If you want to stop getting tangled in this type of uncertain and unsafe market, time-stop can be used as a safety outlet that would allow you to bail out of your position when things are not taking the direction as you expected in the beginning.
You can profit a lot from scalping news breakouts, as all the necessary conditions needed by scalpers are at hand. The speedy, huge moves that take place in the short time period, when scalpers are ready to get exposed to the market, enable the creation of profit-making forex scalping tactics.
2. Technical Breakouts
A technical breakout occurs when there is a break down in a range without any involvement of news catalyst. Even though news keeps getting released regularly around the world on a trading day, it is not possible to find the precise reason that links the news with chaotic action in the trading world. This is even when a news can get linked with a pricing action. It is these breakouts that are apparently incomprehensible, swift and difficult to anticipate that are known as technical breakouts.
When it comes to scalping this type of breakout, more conventional approach is required with regard to scalping the news breakouts. This is because there is almost no clearness with regard to what is happening and why, and the market can change its direction without any warning or indication. If you don’t want to get caught in such chaotic situations, it would be best to trade as small as possible and on rational stop-loss.
3. Range Patterns
When you try to trade a range pattern, you would try to find the time-period along with the price patterns that experience minimal activity. This is what you would be exploiting to make the profits. The concepts of trading ranges have already been elaborated in the general context. You would find them applied in more details in the following paragraphs.
When it comes to price charts they are like fractals. And, they can be self-similar at different time periods. They can also be similar to price range at half-hours and at times get accompanied with a trend on a 30-second charts. A scalper must take into account the minutely and the hourly price events when trading ranges. The hourly charts are ideal for ensuring the overall action of the market is quiet and the short-term price activity is used for finding and trading profit-making periods.
The USDCHF hourly chart displays an exciting situation for scalpers. The huge hourly range that lasts for many days is linked with reasonably powerful movements in both directions that require some skills in following the trends so that they can be exploited successfully.
When you observe such a price activity on the chart, you must find out if you can determine the strictness of the short-term instability by checking the charts that display long-term action. The answer to this question is a big no. Even though you can find out the main direction of the short-term price action by checking the long-term chart, but the instability on an hourly chart is not necessarily going to be copied on a short-term chart in the same way.
You must understand that the price can move around a hundred pips in just one hour, and you can see a green signal on the chart, but still this huge movement may have taken place in the last 10 minutes during trading. And, the previous 50 minutes may have shown boring and irregular conditions.
4. Flags
Most scalpers favor exploiting range patterns because they involve calm and disciplined conditions. In these conditions different strategies can be used without risking huge losses that would otherwise be there in the case of highly volatile conditions. The scalpers who prosper in such conditions don’t make any huge expectations from each single trade. In addition, they are entirely satisfied with the slow and tedious markets that don’t have much activity, as they view it from the perspective of a trend follower.