Scalping with SR levels

We can see that the pair of currencies did return to the support and resistance levels and then rebounded. So how is money made?Money is made by buying or selling as the support and resistance levels are approached. When welook at the resistance level diagram, the currency clearly touches the resistance level and reboundsback from it in the short term. This could have given us two sales.

So how are the levels defined?

So we know that the resistance and support levels are key to scalping. And here is where I can givemy thoughts on the methods used to define them.The level will be the price at which there would be a bounce that goes to either oneside or another.The more classical technical analysis tells us that the probability of the next bounce is above 90%.

It’s interesting at this point to

make a comparison between the scalping levels and the positiontrading levels again.Position traders will be looking for the price to bounce by at least 100 pips in the right direction

not just the 20 to 30 pips. However the amount of these types of bounces are much less commonthan the 90% probability where there is a 20 pip jump in price; which then goes back to the level and jumps up again by 15 pips and could then have a bad bounce or go through the level.The goal of every scalper is to gather up each of these bounces and put them into our account.So to continue to define the levels we can look at a number of criteria using various timeframeshowever they will always have similar definitions.Defining of 30M and 1H levelsMy view is that it is easiest to trade using 30M and 1H trade levels and it is the highestand the lowest points on the diagram that are used for that.Currencies will often hang between these points so we need to draw up resistance and support linesand wait for the currency paid to move to either level.It can appear as though the currency pair is trapped and not able to find a way out from this positionand would eventually go up or down.But if the currency is over the highest point or below the lowest point you just need to mark it andwait until the currency pair approaches it.Defining of trade levels on 30M and 1H

Defining of levels on 1M 5MThe levels of 1M and 5M trade are marked differently. In this situation, the lowest and the highestpoints that are obtained within 3-4 hours are marked and the levels of trade are then stated at thatpoint. Any trade operations will be processed once these levels are reached.

Entry rules

With the 1M and 5M, you buy or sell when trade levels are reached according to if the price isnearing either the resistance or support lines. However with 30M and 1H this changes.The issue here is that these levels are more powerful and can be seen by a lot of people. This is whymore people will enter into the market before the price is able to get near to the current level andthe bounce arrives too quickly.This is the reason that I decide to trade even when prices are not nearing the current level and I frequently walk away with between 5 - 20 pips of profit. Occasionally, the price will get to the level indicated so I will open up a position with a double lot once more.

This image shows that the p rice didn’t reach the marked level on 14 pips.

Volume of market entry

As with defining trade levels, the volume when entering a deal is also important when scalping.Although this is not as complicated, you need to know and understand it. Everyone knows that themore volume there is at the point of entering the market, each pip earned generates a greateramount of profit. But we cannot overlook the issues that every unprofitable trade will make us aloss.As touched upon earlier, as scalping  can create high profits and losses, it requires an alternativecapital management method.Of course, we aim to minimize all losses while looking to get the largest possible profit and as suchwe should only be looking to enter into the market with a large volume when we are very confidentthat a bounce will occur.30M and 1H can give us that confidence and we can sum up this approach with the following:

With a larger time frame comes a bigger volume and a smaller timeframe a smaller volume.

Our concern is to get hold of specific figures; namely certain volumes in a certain timeframe.As an example, with a trade deposit of 5K I will look to use the following volumes in my tradingsystem:10% to 20% of the deposit will be used in the deals on the 1M, 5M20% - 50% of the deposit will be used in the deals on the 30M, 1H

So what if the currency pair does not go our way?

Scalping has high risks and as such you can’t relax. Whereas a position trader can take a loss, thescalper can’t afford to

do so as the volume of trading is a lot greater than when position trading and

any unprofitable trades that aren’t quickly closed can cause big losses.

 As a rule, any position that is showing a loss in excess of 25 pips should be closed apart from any thatwere opened with less than 10% of the deposit. These ones should be closed down only if theirlosses get to 50 pips.

Profit targets

Scalpers make money by taking smaller profits frequently and make up to several hundred trades ina day.So this means

that large profits aren’t pursued as the main criteria is to achieve a profit many times.

I used a trading strategy for scalping the yields of between 5 to 20 pips and these are driven by thebehaviour of the currency.Should a specific level be achieved and a bounce occurs quickly I will wait for a 20-pip profit. But Iwill fix the profit at five pips if the bounce is slow.

How currencies can behave when specific levels are reached

When a resistance or support level is reached the currency can react differentlyOccasionally a swift bounce will happen; there might be a minimal movement exactly around thelevel indicated.As already discussed, we now understand how to respond on either level but there are somerelevant points to make at this juncture.Once the bounce has happened and the position has been closed, wait for a short while before goingback into the market, as there can be quite a significant bounce.As currency constantly maintains a specific trend, we should wait until the point at which it gets to aspecific limit.Frequently, once a bounce has occurred, the currency will approach the level that it had reboundedfrom once more and so the deal can be repeated. This can be done a number of times and buying orselling will occur again and again according to the currency pair nearing either the support orresistance level.