Scratchpad of the Forex Scalper

In relation to my Doctrine of the Forex Day Trader article

When I say precision in trading, what do you think of?

1-minute charts? Precisely drawn trendlines?

In high precision scalping none of those have any use.

You will need the following things:

  • knowing how much the given instrument can move with muted volatility
  • a ruler measuring counter directional volatility on the Hourly chart
  • a stop watch signaling the top of the hour

and I would suggest a well composed trail stop to be added to this list.

See, scalping is a counter directional trade until the counter direction becomes the new direction.

Drawing lines and expecting a turn within a handful of pips is gambling.

Spotting range extension candles and defying them 2-pips out for a quick gain is precision scalping.

Knowing the instrument is important. The flcutuation size of the EUR/USD is 32 pips. When it is on mute in one direction, the movements would seldom exceed half of that size. Factoring in that you may not get a good fill, may not get the last pip both on the entry and the exit, you can realistically aim for only 8 pips and consider anything beyond an extra.

Therefore, you need a trail stop that would lock in say a 2-pips protective stop loss upon going into 8-pips of gain.

We take the turn that occurred with the human logic switching from green to red. Now red is the new holding direction.

We start paying attention to volatility changes.

We notice the muting on the upside becoming the theme.

We measure these counter-moves.

You also measure the length of the clean breaks.

Say you have some short holdings, but just woke up and feel like you missed out on the prime continuation entries (first image, RSI2 boxes), but you want to make money for the day.

Your first long entry for the scalp would be after the second 28-pips long leg printed. Right after the top of the hour when this length was made, you place a pending order with good size at a 2-pips beat. The counter move coming out of it caps out at around 13.4 pips.

You let your trail stop lock in the 2 pips protective stop first by using the right code (i.e. 0.2 for long, 2.0 for short) and then sit and measure getting close to the lowest upside volatility value gets approached and you cut the trade somewhere near that – or at least try to. You could also use the target price as a code, 2.0 for longs and 0.2 for shorts, so that the protective trail stop could be made idle (when the order becomes CODEless, other trail stop functions may take over and start ratcheting the trail stop further that may not always be beneficial.)

It goes without saying that you should not try to scalp the same level again.

Now, as for scalp 2 – you already have the makings of a turn as evident on the 30-minute chart by the two S2 prints and on the hourly chart by the plots placed under the “scorching”.

Shooting, Scorching, Crash. That’s final.

Your entry was again 2-pips below the hourly low that qualified for exceeding your measured 28-pips length. You could use the 2-pips lock in protective stop loss, and this time whilst being conscious of the crash happening, you start aiming for the nearest resistance level: the pink zone was made qualified again by a volatility breach on the way down.

Difficult? Yes. It is a profession.

…let’s make it fluent, see what we can get…

(at which point the Channel Target was 1.2081 – actual low: 1.20815)

This is how I could picture a scalper – advisor:

This was the block you were supposed to buy:

My actual trail stop – decided not to modify

Naked and Filled Volatility Breach Scalp & Buy Lines

Not every swing low is a game, as you can see.