Observing how a particular currency pair behaves at particular times of the day can reveal a few opportunities which forex traders can readily take advantage of.

Characteristics Of Particular Currencies

We all know that the forex market is pretty calm during Asian market trading. Any forex pair, especially if it does not include the JPY, which is an Asian currency, or the AUD, which trades pretty actively during the Asian market as Australia belongs to the earlier time zone, trades in quite a tight range during this particular time of the day.

The EUR-GBP, in general, is one of the more stable currency pairs in forex. The range at which the pair moves at any particular day is pretty tight. And if one would observe its movements during the Asian market, the tight range that it moves within is very much observable.

So you may ask: how can I make money with the EUR-GBP if it almost does not move at all?

The key here is that the EUR-GBP almost does not move at all during the Asian market. BUT it does move.

Scalping the EUR-GBP

The strength of this scalping strategy that I am going to describe to you lies in that same tight-ranging movement of the currency pair. If a currency pair moves within a tight range, it is quite easy to predict if the pair is already near its overbought or oversold levels. And since the EUR-GBP usually moves in a very tight range, a scalper should be targeting anywhere from 5-8 pips for any trade that he enters.

EUR-GBP Scalping Strategy: The Steps

So here’s the nitty-gritty of this strategy.

At 22:00 GMT up to around 5:00 GMT the following day, hunt for the perfect set ups for the EUR-GBP scalp.

Use the RSI (8) indicator and the Stochs (5,3,3) on the 5M chart to give you the signal of entry. You shall be looking for overbought and oversold price levels for the EUR-GBP.

If either the RSI or the Stochs touch the 20 level, buy. If either the RSI or the Stochs touch the 80 level, sell. You do not have to wait for the 5M timeframe to finish to enter the market. This is because most of the time the price would just touch that level but would not actually stay there up until the end of that particular 5M bar. So, if you see the RSI or the Stochs giving you a trade signal when the EUR-GBP reaches a certain price, be quick to the draw. If you do not catch the price that you want, it might be better to place a limit order so you can catch the correct price to enter.

Once you have already entered the market, adjust the Stop Loss level to 20 pips away and the Target Profit level 7 pips away. Some traders might raise their eyebrows on this SL-to-TP ratio since you are only expecting a smaller profit when compared to the potential loss that you can incur. That may be true. But this is a very high-probability trade. The chances of getting out of this trade with a profit are so high that it can actually compensate for this unfavorable SL-to-TP ratio.

Depending on your appetite for taking risks, a trader can incorporate some Martingale strategies or add up on their initial positions should the prices levels continue to hover within the overbought or oversold levels. This is usually done by placing orders at 3-pip price levels. Just bear in mind that you should constantly adjust the TP levels if you continue on adding positions. Your TP level should also be relative to the RSI and Stoch levels. This means that if the RSI or Stochs are already reaching the opposite end of the charts, be ready to close your positions even if the overall profit for the positions is not that big. Remember, you are just scalping the market with this strategy. You can always enter the market again with the opposite position is the indicators give you the proper signals.

It should go without saying that proper capital management should be observed with this strategy, especially if you decide to add up positions of use Martingale when adding positions. This scalping strategy gives a very high probability of winning. Demo trade using this strategy first so that you can get used to it before using it in your live trading.

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Tags: Asian market trading, EUR-GBP, forex strategy, quick trades, range trading, scalping, short-term trade

Posted in Trading Strategies