So I have been giving this thread a lot of thought. I have been trading for 10 + years and 5 of them has been in forex. This is my full time job, so I hope I can help with this thread. I think that there is a lot of possibility to this method, but one has to be smart about it. Counter trend scalps are perhaps the most risky of trades, so if you try this method, please be forewarned!
First off, one must consider the currency pair to use. There has to be a good movement in the pair, and the spread has to be low. Even if you are trying to snag 4 pips, and with a low spread, the movement of the pull back has to be at least the 4 pips you want, plus two pips spread in and out, so you need a movement of at least 8. If your pair only moves 60 pips a day, you will never win. I recommend looking at AJ, CaJ, EA, EJ, EU and GU. All are moving at least 100 pips/day and the spreads on most brokers are under 2 pips. Depending on your broker you may even get spreads of <2 on all the yen pairs. If you take a smaller TP, it will push your Risk to Reward ratio too high and one loss will put you way back, you have to win way to many to just break even. A RR of 3:1 needs to be at least 75% wining or you will lose overall. The concept of doubling the lot size following a loss is the basis for the martingale strategy with is famous for wiping out accounts. If your strategy has a less than 80% win ratio, ādoubling downā will just get you out of the game all that faster.
Secondly, we need to consider the break out of the PAC (Price Action Channel) The 5 smoothed high/low channel has been well used and you can find many threads on how to trade it. I know this thread has been using 5 ema and not smoothed, but you can play with what fits you best. I currently trade 5 smoothed PAC break outs. The 5 smoothed PAC is good because it contains the majority of the price movement, some say that all candles inside this channel are not good to take signals from because they often bounce back inside the channel and ride along it. It also nicely provides a border around the 14 linnear weighted, weighted close moving average which is also a very well known and well used ma. The trick here in this thread is to distinguish what I am going to refer to as a weak break out, vs a strong break out. I have been trading strong break outs for a while so I am interested in identifying the weak ones. For the purpose of this thread I will discuss only the weak break outs, you can PM me if you want to talk strong beak outs.
Ok, so to determine a weak break out, I am a fan of indicators. A weak break out is distinguished from a strong break out by the strength of the trend. A longer trend indi will confirm a strong break, a shorter trend will tell of itās exhaustion allowing a quick scalp. So I have been testing this for a few weeks and tried all of my tricks in my bag, and I have a suggestion for the group to play with. I originally thought that the RSI (2) might have some possibility, but in even a quick trend you will lose big. I propose a quick trend exhaustion method of three indiās: Awesome indicator set to (1, 5) and a CCI of 2, and confirmation with the ADX of 3. You need all thee in agreement to take the trade. All three red on top of the PAC, all three green at the bottom of the PAC.
Time frame will depend on your gestational fortitude. I donāt think the 1M is safe, not enough movement to get the 8-10 pip movement needed to make a profit. I personally trade the 5M, 4pip TP, 10 Pip SL, however, upon visual inspection it looks like the 15 and 30M would work as well, but with lower frequency of signals. It isnāt perfect, but it has potential. Of course any improvements are always the purpose of the threads and are always welcomed.
