Forex Scalping Strategies Swing Pivots
There are many scalping Forex strategies used by experienced Forex traders, but we want to review
several quite simple but reliable strategies that have proved effective over time.
Before we start there are a couple of technical terms relevant to these strategies:
Pivot point is a maximal or a minimal point which was reached by price action before touching the day minimum or maximum.
Swing is the oscillation from one pivot point to another (see Pic 1).
Scalping Strategy of Parallel Motion
The first scalping Forex strategy is a method of parallel motion (see Pic 2).
This trading method is used on long upward or downward movement for using retracements. It is based
on the assumption that the movement size of CD should be equal to the movement size of AB. The most
profitable transactions are the ones opened as soon as price passes no more than 25% of the movement
from C to D.
- Open a buy transaction as soon as price has passed 25% above the pivot point C and immediately place a stop-loss right below the point C
- Move a stop-loss to the level of entry to the market (i.e. to zero) as soon as price has moved 50% to the specified milestone
- As soon as price has passed the point B, we place a trailing stop (the amount should be 25% of the movement to your milestone)
- Close a transaction at a profit in the point В or wait until a transaction closes by trailing stop
This Forex strategy can be used if you are going to trade along the main trend. Don’t try to use this
strategy for catching small movements against the trend. Remember that your goal is to catch complete
oscillatory motions on the market. It is quite possible that you would have to perform transactions and
enter the market several times when using this strategy, moreover, when complex consolidation is
Small Market Trends
If you trade on small trend movements, you should avoid multiple trading systems based on performing
buy transactions on new maximums and sell transaction on new minimums. You should move along the
trend until its complete reverse.
There are some highly appreciated trading systems, including tactics on drawing a stop-loss closer to the
level of entry to the market. But, in general, the system of buying on new maximums is the worst of the
possible variants, which only leads to double losses as soon as the market is in its correction phase. All we can say in support of this trading system is that it is very useful at significant market oscillations.
Scalping in Trend Channel
Trend channel (see Pic 3) is a line connecting 2 pivot maximums and two pivot minimums.
Perform buy or sell transactions at pivot points of the formed trend channel and fix profitable
transactions at 50% or 75% of movement to the next supposed oscillatory milestone, depending on
price movement direction of the market.
If the market is in an ascending trend, close profitable transactions on trading sell positions at 50% of
movement to the supposed lower milestone, or close profitable transactions on trading buy positions at
the 75% point of the market rally.
If the market is in a descending trend, we close trading sell positions at the 75% point of the market rally downwards, and close trading buy positions at the 50% point of the market rally upwards.
Start placing stop-losses at a distance of the width of the formed price channel from your point of entry to the market. Then we move a stop-loss to the level of entry to the market as soon as price has moved 50% of distance to the specified milestone. We speak about moving a stop-loss to the closest pivot point right after the market started its movement in your direction so it is sensible to mention the formation of this pivot point. It is quite possible that you would want to perform buy or sell transactions at reaction or rally points. Perform only buy transactions at the 50% point in the presence of the ascending trend and perform sell transactions at the 50% point in the presence of the descending trend.
These should happen on the second day of market movement against the trend (see Pic 4).
Then fix the received profit at the level of the previous pivot point. Your stop-loss should be placed at a distance of the width of the formed price channel from your point of entry to the market.
Move a stop-loss to the level of entry to the market as soon as the market has moved 50% of price action to the specified milestone. So you should move a stop-loss to the pivot point, which was formedat a price movement in your direction. Do the following if the market price rebounds from the border of the formed channel (see Pic 5) and consolidation of the first trading day covered the distance of 50% from the width of the given channel:
Perform buy transaction in an ascending trend or perform sell transaction in a descending trend at the
75% point. There are several variations of this approach. In an ascending trend, some traders buy on
descending closing of the second trading day (see Pic 6).
Here they are trying to catch the intraday price retracement upwards and/or market price movement backwards to the last pivot point.
It appears from this that if the profit was not fixed within two trading days and the market price closed
on your side (see Pic 7), you either should close profitable transactions or move a stop-loss to the stopout level (plus/minus 1 point).
The classic example of short-term trades may well be the transaction pattern АВС as shown on Pic 8.
If a Forex trader predicts this price formation using his own analysis (for example, Eliot analysis), it
means that he should sell at point C, at the level of the pivot point A, and close profitable transactions as soon as the price has passed 75% of distance from the pivot point 1 to the point C.
Mixed Scalping Forex Strategies
Look at Pic 9.
Here you can see a sell-stop order under the point C as soon as price has moved 25% of the distance
from point A to point B. This point of entry to the market should be below the level of trading day
opening and below the closing level of the previous trading day. Trading position is closed at reaching
the level in the point B or your specified milestone. Pic 10 shows 2 quite strong intraday downward
movements. At the same time, exhaustion of “bears” for the second trading day occurs.
After opening the third trading day, it is possible to predict the beginning of the price rally upwards.
Perform a buy transaction on the level of closing of the previous trading day and fix the received profit
following the closing results of the third trading day.
Forex Market Squeeze
As soon as the market is in the squeeze phase, we find 2 days with ascending closing.
At the same time, at least 1/2 of the range of the second trading day should be above the level of closing of the first trading day (see Pic 11).
Place a pending sell order at the level (a) at a distance of the intraday range from the point of closing of the second day. If the given order was not activated at the level (b), place a pending sell order one point below the level of closing of the third trading day. Trading sell position should be closed at the first day of downward price movement. This should be at the level of movement from closing of the previous trading day to the range of the second trading day (for the variant (a)) or simply at closing of the first descending day (for the variant (b)).
There are exceptions such as when the market formed the figure ABC at upward price movement. In this case you should wait for the second day for closing profitable transactions. We place a safety stop-loss at a distance of 1.5 intraday range above the top of the day of entry to the market.