One very useful trading strategy is known as the Forex One Minute Strategy, which is used to great success. Forex trading requires putting together multiple factors to formulate a trading strategy that works for you.
Choose your quick section of our Forex One Minute strategy below.
A Quick Overview of our Forex One Minute Strategy Review:
- ✔️Forex One Minute Strategy Overview
- ✔️What type of strategy is the Forex one minute strategy?
- ✔️Which types of traders will benefit from scalping?
- Advantages of scalping
- Disadvantages of scalping
- Applying the 1 minute scalping strategy
In this article, we explore the Forex one minute strategy to find out how it works and discover which traders might benefit from this system. Read on to find out more.
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Forex One Minute Strategy Overview
Said to be one of the largest exchange markets, the Forex market is gaining immense popularity.
The possibility of earning large profits adds to the appeal. Although trading in this market is not easy, it can be, provided you find a proven and profitable Forex trading strategy.
A forex trading strategy defines a system that a forex trader uses to determine when to buy or sell a currency pair.
There are various forex strategies that traders can use including technical analysis or fundamental analysis. A good forex trading strategy allows for a trader to analyse the market and confidently execute trades with sound risk management techniques.
As such, Forex strategies can be divided into a distinct organisational structure which can assist traders in locating the most applicable strategy.
There are countless strategies that can be followed, however, understanding and being comfortable with the strategy is essential. Every trader has unique goals and resources, which must be taken into consideration when selecting the suitable strategy.
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What type of strategy is the Forex one minute strategy?
The Forex one minute strategy is a scalping strategy, which is a very popular approach that can be profitable for those who implement it correctly.
Forex scalping is a trading style used by Forex traders to buy or sell a currency pair and then hold it for a short period of time in an attempt to make a profit.
A forex scalper looks to make a large number of trades, taking advantage of the small price movements which are common throughout the day.
While scalping attempts to capture small gains, such as 5 to 20 pips per trade, the profit on these trades can be magnified by increasing the position size.
Forex scalpers will typically hold trades for seconds to minutes, and open and close multiple positions within a single day.
Forex scalping strategies can be manual or automated. A manual system involves a trader sitting at the computer screen, looking for signals and interpreting whether to buy or sell.
In an automated trading system, programs are used to tell the trading software when to buy and sell based on inputted parameters.
Scalping is popular in the moments after important data releases such as the U.S. employment report and interest rate announcements.
This is because these types of high-impact news releases cause significant price moves in a short amount of time. This is ideal for the scalper who wants to get into and out of trades quickly.
Due to the increased volatility, position sizes may be scaled down to reduce risk. While a trader may attempt to usually make 10 pips on a trade, in the aftermath of a major news announcement they may be able to capture 20 pips or more, for example.
Which types of traders will benefit from scalping?
Scalping is best suited for those who can devote time to the markets, stay focused, and act swiftly.
It’s usually said that impatient people make good scalpers as they tend to exit from a trade as soon as it becomes profitable. Scalping is for those who can handle stress, make quick decisions, and act accordingly.
Your timeframe influences what trading style is best for you; scalpers make hundreds of trades per day and must stay glued to the markets, while for example swing traders make fewer trades and can check in less frequently.
Advantages of scalping
- Fast-paced environment – Scalping is a very fast-paced trading style, making it an ideal choice for traders who don’t want to wait for days to take a trade. There are always trading opportunities present on the 1-minute or 5-minute charts, and new setups arise as fast as old go. If you don’t have the patience to trade longer-term timeframes or want an exciting trading environment, then scalping may be the best trading style for you.
- Large number of trades – Scalpers usually take a very high number of trades during a day. It’s not uncommon to take dozens of trades on short-term timeframes if your trading system gives you the green light. A large number of trades also means a higher profit potential, given your analysis is correct and you close your trades in profit. This is why risk management is very important when scalping – you have to let your winners run, cut your losers short, and exit out of a scalping position as soon as there forms any sign of a reversal.
- Short holding period – Scalpers hold their trades for very short periods of time – from a few seconds to a few minutes. This means that there’s no overnight risk in scalping as is the case in swing trading for example. Scalpers know whether they’ve made a profit on a trade soon after they place a trade, which increases the attractiveness of scalping over other longer-term trading styles.
Disadvantages of scalping
- High trading costs – Scalping doesn’t come without certain risks and disadvantages. The main disadvantage of scalping is the relatively high trading cost. Scalping allows us to open high position sizes as the stops are relatively close to the entry price. Higher position sizes mean higher transaction costs. Multiply that by the number of trades that scalpers take on a daily basis, and you’ll have to make a few profitable trades only to break-even. To avoid very high trading costs (wide spreads), you should focus on the most liquid market hours which provide the tightest spreads.
- Scalping requires the ability to focus – To become a successful scalper, you need to be able to put all your attention on the charts for several hours during a day. Unlike longer-term traders, scalpers need to manage their trades constantly as market conditions can change from minute to minute on short-term timeframes. Add the focus required to analyse the market and to pull the trigger as soon as a trade confirms, and you’ll soon realise that scalping requires nerves of steel.
- Market noise – Market noise is inevitable when trading on short-term timeframes with a scalping trading style. Market noise refers to sudden price-movements without an obvious cause and is usually the result of capital flows, investor repositioning and bank transactions that can move the market to a certain extent. If you place your exit targets too tight when scalping, chances are that market noise will stop you out of your position or miss your profit target.
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Applying the 1 minute scalping strategy
The basic idea behind scalping is opening a large number of trades that usually last seconds or minutes.
The 1-minute scalping strategy is a good starting point for Forex beginners, as it is quite a simple strategy to follow.
However, you should be aware that this strategy will demand a certain amount of time and concentration. If you are not able to dedicate a few hours a day to trading, then it might not be suitable for you.
The strategy involves opening a certain position, gaining a few pips, and then closing the position. Because you are only gaining a few pips a trade, it is important to pick a broker with the smallest spreads, as well as the smallest commissions.
This strategy is based on both trend-following and mean-reversing, which lowers the number of false signals to a minimum.
Still, you need to apply strict risk management rules and only risk a small part of your trading account if you want to become successful in the long run.
You can use this trading strategy around the clock, but the best results are usually generated during volatile market conditions.
For this reason it is recommended to make the bulk of your scalping trades during the New York-London session overlap.
These few hours (from 8:00 AM to 12:00 PM EST) offer the lowest trading costs and highest liquidity which is very important to scalpers.
Also, most US market reports are released early in the New York session, creating market volatility and increasing the profit potential of your trades.
The strategy uses two moving averages and one oscillator. Here’re the indicators and their setting that you need to apply to your chart:
- 50-Period exponential moving average
- 100-Period exponential moving average
- Stochastic oscillator with a setting of (5,3,3)
The requirements for this strategy are as follows:
- Instruments: every currency pair
- Time frame: 1-minute
- Indicators: stochastic oscillator (5, 3, 3) and two exponential moving averages, 50 & 100
- Preferred sessions: London and New York – high volatility
While you can use this Forex scalping strategy with any currency pair, it might be easier to use it with major currency pairs because they have the lowest available spreads
Step 1: find the short-term trend
The two moving averages are used to identify the current trend in the 1-minute timeframe. The 50-period EMA calculates the average price of the past 50 minutes, while the 100-period EMA calculates the average price of the past 100 minutes.
The 50-period EMA is faster than the 100-period EMA, which means that it reacts to price-changes more quickly.
If the faster 50-period EMA crosses above the slower 100-period EMA, this reflects that average prices are starting to rise and that an uptrend is likely to establish.
Similarly, a cross of the 50-period EMA below the 100-period EMA signals that average prices start to drop and that a short-term downtrend is about to form. Only take trades in the direction of the short-term trend.
Step 2: wait for the pull-back
Once you have determined the short-term trend in the 1-minute chart based on the location of the slow and fast EMAs, it’s time to wait for a pullback to the moving averages.
This step is important because prices tend to return to their mean value after a strong up- or down-move.
Waiting for pullbacks prevents you from entering into long and short positions immediately after a strong price-change. Profit-taking activities often cause the price to reverse after a sustained move, which can lead to fake signals and losses.
Step 3: Watch for the stochastics indicator to move above or below positions
The stochastics indicator serves as the last filter and helps us take only high-probability trades.
The Stochastics indicator is an oscillator that oscillates between 0 and 100, depending on the strength of recent price-moves.
A reading above 80 usually signals that the recent up-move was too strong and that a down-move can be expected. This market condition is usually referred to as overbought.
Similarly, a reading below 20 signals that the recent down-move was too strong that an up-move may be ahead.
This market condition is usually flagged as oversold. After the price completed a pullback to the EMAs, Stochastics will usually become overbought/oversold as a result of the recent price-move.
Conclusion
The 1-minute scalping strategy is a good starting point for Forex beginners, as it is quite a simple strategy to follow. However, you should be aware that this strategy will demand a certain amount of time and concentration.
Forex scalping is one of the main trading styles in the Forex market, along with day trading, swing trading and position trading.
The main difference between scalping and the other trading styles is the trading timeframe and holding period of trades. Scalping is an extremely short-term and fast-paced trading style, where traders hold trades for a few seconds to a few minutes.
In order to find such short-term trading opportunities, scalpers have to rely on very short timeframes, such as the 1-minute and 5-minute ones.
Scalping carries unavoidable risks which come with trading on very short-term timeframes. Scalpers face higher trading costs than longer-term traders since they open much more trades on a daily basis.
In addition, market noise and news releases can easily turn a profitable trade into a loser or even hit your stop levels. Still, scalping can also be very profitable if you follow the rules and understand price-movements on short-term timeframes.
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