This Forex Scalping technique applies to eMini scalping or actually any market as well. Christian Trader's or any trader for that matter, frequently get frustrated because the markets seem to be in consolidation a lot more than they are trending. But if we are to be successful at trading, we need to be able to adjust and to adapt to the current market conditions.
In any case switching back and forth from scalping to swing trading an intra day chart is actually harder than we would like to admit to. If we are constantly looking at scalping, then we tend to miss the huge moves that are in play on the larger time frames. So we may sit back and say "this is so cool, I scalped 60 pips or 100 pips today". Then when we bring up a larger time frame we see that the market did 300 pips in a straight line and we would have saved our selves a lot of work by just letting one trade ride it out.
So because scalping will be very important to our Christian Trader techniques arsenal, lets look at the chart below and see if we can glean some useful information form it.
(Click on Image to Enlarge)
This is my typical scalping method and it applies to sideways markets, extended
bull flags or bear flags or channels. However if it starts to resemble a
triangle or pennant, I won't trade it anymore. Instead I will wait for a break
out setup.
Anyway this technique uses a Regression Channel. If your platform does not offer a regression channel, you can use trend lines instead. The Regression channel plots a Mean or center line over the market data that you are watching. Then it adds or subtracts from this mean, a standard deviation value of your choice. In this example I am using two values...a 1 standard deviation and a 2 standard deviation.
The first rule is ONLY scalp in the immediate trend direction. In the case of these charts, that's pretty easy to be reminded of the rule because the bars are Red.......which gives us permission to take the trade when we also get a "S" symbol pop up and the HMA turns Magenta.
But we need all 3 signals in order to have permission to take the trade.
Now what if you don't have those "B" and "S" high lite markers on your charts? These markers use the CCI crossing it's 5 SMA so if you do not have this function you can manually observe the cross for your trigger.
And if you use the RSI instead of the CCI, well that's okay. You can add a 5 period simple moving average to the RSI and get pretty much the same results.
The difference is that the RSI is normalized or bounded by 100 and the CCI is not normalized or bounded. So there are conditions where the CCI may take off into a spiking condition and the RSI will tend to flatten out. Bottom line is that the RSI may give you less markers or triggers at times and some of these may be better or worse depending on when you are looking for a trigger.
By using the CCI.....you get to choose when you are looking for a trigger and you ignore the others. It's basically 6 of one and a half a dozen of the other.
You can see that every time the market starts to move in that direction.....you get larger range bars. You need to be on the winning side of the large range bars. This is only a 3 min chart and sometimes the trade is over in just a minute or maybe in just a few minutes.
So we need to adjust to the time frame we are scalping and be aware of the trade time cycle......or the duration of how long an anticipated trade will last. In other words if you are scalping a 1 minute chart or a 3 minute chart and you enter a trade......don't leave and make lunch in the kitchen. The large range bars can "pop" in seconds and if you don't have a limit exit order in place.....you need to be in the trading chair so that you can pop the trade out yourself.
And when using the regression channel with a 2 standard deviation line as well as a 1 standard deviation line.......the market pullbacks may not get back to the 2 standard deviation line.....it may only reach the 1 standard deviation line. Its okay if it does that as it is showing you that either weakness or strength is building.
Anyway this technique uses a Regression Channel. If your platform does not offer a regression channel, you can use trend lines instead. The Regression channel plots a Mean or center line over the market data that you are watching. Then it adds or subtracts from this mean, a standard deviation value of your choice. In this example I am using two values...a 1 standard deviation and a 2 standard deviation.
The first rule is ONLY scalp in the immediate trend direction. In the case of these charts, that's pretty easy to be reminded of the rule because the bars are Red.......which gives us permission to take the trade when we also get a "S" symbol pop up and the HMA turns Magenta.
But we need all 3 signals in order to have permission to take the trade.
Now what if you don't have those "B" and "S" high lite markers on your charts? These markers use the CCI crossing it's 5 SMA so if you do not have this function you can manually observe the cross for your trigger.
And if you use the RSI instead of the CCI, well that's okay. You can add a 5 period simple moving average to the RSI and get pretty much the same results.
The difference is that the RSI is normalized or bounded by 100 and the CCI is not normalized or bounded. So there are conditions where the CCI may take off into a spiking condition and the RSI will tend to flatten out. Bottom line is that the RSI may give you less markers or triggers at times and some of these may be better or worse depending on when you are looking for a trigger.
By using the CCI.....you get to choose when you are looking for a trigger and you ignore the others. It's basically 6 of one and a half a dozen of the other.
You can see that every time the market starts to move in that direction.....you get larger range bars. You need to be on the winning side of the large range bars. This is only a 3 min chart and sometimes the trade is over in just a minute or maybe in just a few minutes.
So we need to adjust to the time frame we are scalping and be aware of the trade time cycle......or the duration of how long an anticipated trade will last. In other words if you are scalping a 1 minute chart or a 3 minute chart and you enter a trade......don't leave and make lunch in the kitchen. The large range bars can "pop" in seconds and if you don't have a limit exit order in place.....you need to be in the trading chair so that you can pop the trade out yourself.
And when using the regression channel with a 2 standard deviation line as well as a 1 standard deviation line.......the market pullbacks may not get back to the 2 standard deviation line.....it may only reach the 1 standard deviation line. Its okay if it does that as it is showing you that either weakness or strength is building.
But if it reaches the 2 standard deviation line in the direction of the immediate trend direction...its most likely over....at least for that swing.
So no greed....just pop the trade out and be grateful that it was a winner.
And turns can be tricky depending on what the overall market conditions happen to be at the time. Sometimes you will get a bar that spikes and goes through the 2 standard deviation line and that was it. It was the last gasp of the move and the next attempt will fall short of the same level by a significant amount.
Then again the end of the swing may just not have enough steam to get to the 2 standard deviation line at all......and may start to slowly change direction.
In any case, the regression channel will show you real time health and strength of the swing that you are trading at the time.
So what is up with the standard deviation values? I have had the great pleasure of meeting some very brilliant money managers and fund managers through the Market Technician Association meetings in theBoston
And turns can be tricky depending on what the overall market conditions happen to be at the time. Sometimes you will get a bar that spikes and goes through the 2 standard deviation line and that was it. It was the last gasp of the move and the next attempt will fall short of the same level by a significant amount.
Then again the end of the swing may just not have enough steam to get to the 2 standard deviation line at all......and may start to slowly change direction.
In any case, the regression channel will show you real time health and strength of the swing that you are trading at the time.
So what is up with the standard deviation values? I have had the great pleasure of meeting some very brilliant money managers and fund managers through the Market Technician Association meetings in the
With these people and the large funds....the 2 standard deviation
value is the magic number for major decision making moves. Like get out...or
reverse the position.
So we should listen and ponder that statement. Perhaps there is a little glimpse into the big boy's trading rules.
If the regression channel is new to you, then most likely you may have heard of Bollinger Bands or a Keltner Channel. They are basically the same in theory except that the Bollinger bands and the Keltner Channel operate dynamically off of a moving average.....instead of a plotted mean over the length of the trend or swing.
The Bollinger Bands use Standard Deviations to print the bands and again they are calculated and added or subtracted to and from the center line which is a moving average.
The above screen shot shows a 3 minute EUR/USD using a Dual Keltner Channel to illustrate what we are talking about. So it is very much like a regression channel, except that it is dynamic and prints a line using a factor of Average True Range. It is using a 21 period simple moving average for its look back and center line....and then adds or subtracts the Average True Range factors from that center line, or in this case the 21 SMA.
So you can see how the 4 channel lines show support or resistance and in consolidation periods, price will stay between the lines easily and give you turning levels. However if a market begins to go into a strong trend.....it will break the 2nd line, exceeding the 2 factor of Average True Range.
And in addition, some newer versions of the Keltner Channel allow using an Exponential Moving Average for the center line and some prefer faster versions of MA's, such as a 10 period. But of course you could experiment and see what fits your particular trading style.
Hopefully, this gives you a good example of how the regression channel or the Keltner Channel is used in scalping. For most people, drawing a Regression Channel is a pain in the neck. And for the most part....I prefer to sit back and watch price react to dynamic zones such as moving averages....and the Keltner channel. Where the regression channel really plays a big part is when a market is in a long drawn out consolidation period.
But if price is active and turning actively with defined cycles, then the Dual Zone Keltner Channel is my preferred tool for that type of market price action.
So if you don't have the regression channel option on your charting platform you can try using Bollinger Bands or the Keltner Channel instead.
Or you can even just try using trend lines. If you use trend lines, most platforms give you an option of copying or duplicating an existing trend line and then pasting it or placing it in the new location. You can also divide that zone between the two trend lines and perhaps make a zone of perhaps 10 or 20%....top and bottom of the zone......in order to get a target zone for entries and exits.
Anyway....it may take you a while to get used to this as most likely this may be new to you. Well at least using a regression channel.....however....it is outstanding for scalping situations. Just keep an eye out for those large range candles or bars that change their minds....and pull back most of their move. Because if it is followed by a large range bar in the opposite direction.....the game has changed!
If the regression channel is new to you, then most likely you may have heard of Bollinger Bands or a Keltner Channel. They are basically the same in theory except that the Bollinger bands and the Keltner Channel operate dynamically off of a moving average.....instead of a plotted mean over the length of the trend or swing.
The Bollinger Bands use Standard Deviations to print the bands and again they are calculated and added or subtracted to and from the center line which is a moving average.
Click on Image to Enlarge
The above screen shot shows a 3 minute EUR/USD using a Dual Keltner Channel to illustrate what we are talking about. So it is very much like a regression channel, except that it is dynamic and prints a line using a factor of Average True Range. It is using a 21 period simple moving average for its look back and center line....and then adds or subtracts the Average True Range factors from that center line, or in this case the 21 SMA.
So you can see how the 4 channel lines show support or resistance and in consolidation periods, price will stay between the lines easily and give you turning levels. However if a market begins to go into a strong trend.....it will break the 2nd line, exceeding the 2 factor of Average True Range.
And in addition, some newer versions of the Keltner Channel allow using an Exponential Moving Average for the center line and some prefer faster versions of MA's, such as a 10 period. But of course you could experiment and see what fits your particular trading style.
Hopefully, this gives you a good example of how the regression channel or the Keltner Channel is used in scalping. For most people, drawing a Regression Channel is a pain in the neck. And for the most part....I prefer to sit back and watch price react to dynamic zones such as moving averages....and the Keltner channel. Where the regression channel really plays a big part is when a market is in a long drawn out consolidation period.
But if price is active and turning actively with defined cycles, then the Dual Zone Keltner Channel is my preferred tool for that type of market price action.
So if you don't have the regression channel option on your charting platform you can try using Bollinger Bands or the Keltner Channel instead.
Or you can even just try using trend lines. If you use trend lines, most platforms give you an option of copying or duplicating an existing trend line and then pasting it or placing it in the new location. You can also divide that zone between the two trend lines and perhaps make a zone of perhaps 10 or 20%....top and bottom of the zone......in order to get a target zone for entries and exits.
Anyway....it may take you a while to get used to this as most likely this may be new to you. Well at least using a regression channel.....however....it is outstanding for scalping situations. Just keep an eye out for those large range candles or bars that change their minds....and pull back most of their move. Because if it is followed by a large range bar in the opposite direction.....the game has changed!
Whether we are a Christian Trader looking to add to our trading techniques arsenal, or we are an eMini Scalping enthusiast, this particular technique may just be a new tool to add to your scalping tool box.
In any case....may God bless you in your trading endeavors!
In any case....may God bless you in your trading endeavors!
