Price Action Scalping Strategy - Singapore Forex Trading, Singapore Forex Academy, Singapore Forex Association

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Price Action Scalping Strategy

To scalp trade effectively you need to know how to do two things:
  • Spot and place support and resistance areas.
  • Identify continuations on small time frames.
On larger time frames I specialise in reversal trading. I take price action based reversal from areas of support and resistance.
On small time frames reversals do not work very well. This is because reversal trading relies on identifying the precise moment in which a trend dies. On small time frames there is too much noise to effectively identify the death of a trend.
So a different approach is needed for Forex price action scalping.
price action scalping trades
We will be trading trend continuations. We will be watching for price action signals which indicate a trend is strong. We will then trade a continuation when price pulls back to a area of support or resistance.
This may sound simple but it is very stressful. One key component of this strategy is that you must maintain a risk to reward ratio of 1:3 at a minimum.
So, let’s sum up the basics.
  • We will enter scalp trades only from areas of support and resistance.
  • We will only trade trend continuations.
  • We will only enter a trade if our target is 3x larger than our stop.
That third point is the stressful one. When a trade is two pips from target and then reverses five pips… many people just close it out. You cannot do that, you must maintain the 1:3 ratio. Even if it means your stop being hit, you have to stick to 1:3. I will explain this in more detail later.
For now, let’s look at the actual Forex price action scalping strategy.

Support & Resistance Areas

You will need to draw the support and resistance areas yourself. Don’t worry though, it is very easy.
Let’s start with the two golden rules of support and resistance. These rules do not only apply to scalping Forex price action, they are also used for my normal support and resistance areas:
  • Recent data is always more important. Always.
  • Body bounces are more important than wick bounces.
Rule one is very simple. When placing support and resistance areas, fresh data is always better than old data. This is even more true on small time frames. Price action formations that occurred twenty minutes ago are more significant than formations that occurred two days ago. So when placing support and resistance, make sure you prioritize recent data.
Generally I only look at the last .
Rule two may be a little harder to understand. I will explain it in more detail in the examples below.
Let’s break support and resistance placement down into a three step process.

1 Identify Bounces

The first step to placing support and resistance is to identify bounces on your chart. Ideally you will want several bounces that line up nicely.
Below is an AUD/USD 5 minute chart. I have highlighted three sets of obvious bounces. The lower set mark out a support area, they are highlighted green. The higher set mark out a resistance area, they are highlighted red.
placing support and resistance for scalping
Bounces will not always be this obvious. However, the more obvious the bounce the stronger the area; so you should only try to identify the most prominent bounces.

2 Draw a line to connect the bounces

Once you identify several bounces, draw a horizontal line between them and join them. You can see the AUD/USD image from above with support and resistance areas now placed.
Step 2 Placing two support and resistance
It is really that simple. You look for strong bounces and place lines there.
Support and resistance can be more complicated on larger time frames. However, on 5 minute charts, it really is easy.
Now remember rule two? Body bounces are more important than wick bounces?
You will notice in the image above I place my line at the candle bodies, not at the wicks. I do not like placing support and resistance at the wicks. I prefer to have my support and resistance where candles are likely to form.
I am considering adding a video on support and resistance placement. Feel free to send me an email to let me know if you need a video to clarify this subject.

Spotting Continuations

You should now have a good understanding of how to place support and resistance areas. The next step is actually finding trade setups. And I am going to show you exactly how to do that.
There might be a small problem though. If you do not understand candlestick pattern and trend basics, the stuff below might not make sense.
If you find that your are struggling with the concepts below, jump over to my price action basics in the Forex education section. In there I cover basic price action and candlestick pattern concepts. Once you understand those concepts, the stuff below will be easy.

What a trend continuation looks like

I am sure you have heard the old saying, “the trend is your friend”. Well in this case, that saying is kind of true. We want to use price action to determine the trend, get a good entry and ride it for a short while.
You should already know how to identify a dominant trend, I talk about this in the education section linked to above.
But the thing about trends is that they are rarely, if ever, smooth. If sellers control price for 24 hours on a five minute chart (288 candles) price won’t move down smoothly every candle for 288 candles. Trends move like this:
Real trends are messy
See how buyers push back up to the former support after sellers break through it? (marked in green)
That is how a trend works. In a bearish trend, sellers are in complete control of price. Buyers try to take control all the time. Sometimes buyers take control briefly but sellers regain control and continue trending down
Here is an example of how trade continuation scalps play out. The image below is a gif, it will play like a video and show you how trade continuation trading works.
strategy trade examples
The basic concept is to trade with the trend. Using candlestick analysis with support and resistance allows you to determine if the trend is still alive. If the trend is still alive, you enter a trade for a quick 10-20 pips.

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