One Minute Forex Strategies
Here is a short list of techniques a trader can use for his or her Forex 1-minute trade strategy:
- Choosing brokers with tight spreads and no commissions
- Executing trades manually
- Setting profit target 2 or 3 times higher than the risked amount
- Using 50 and 100-period exponential moving averages
- Using Heiken Ashi candlesticks
Let us go through each of those methods in more detail.
Choosing the right broker
Before moving on to the exact methods, it is important to mention that before traders start using one-minute strategies for Forex, it might be useful to consider broker expenses. Firstly, it is important to avoid commissions. Some providers do charge a $5 or $10 fee for trading 1 lot, which is the equivalent of 100,000 units of a given currency.
The successful Forex strategy on the 1-minute timeframe relies on dozens of trades per day. Therefore, those types of expenses can easily add up to an extent where a trader could be spending $100 to $500 just in commissions, which can significantly reduce his or her potential payouts. Fortunately, there are plenty of brokers who do not charge commissions for trading.
Another major consideration here is the size of the spreads. For such a short timeframe as 1 minute, a trader might be only aiming at 5 or 10 pip gain, therefore brokers having tight spreads is essential for success in this style of trading.
Here it might also be helpful to point out that most liquid major currency pairs typically have better spreads, than their less famous counterparts. Consequently, market participants, using one-minute strategies for FX, traders might consider executing most of their trades with the most popular pairs.
Avoiding the use of stop-loss and take-profit orders
In scalping, every second is important, especially when it comes to trading with a 1-minute timeframe. Consequently, the majority of professional traders usually prefer to execute both buy and sell orders manually, instead of wasting some precious seconds on preparing stop-loss or take profit orders.
The only exception to this rule is the time during the major economic announcements. Some traders might choose to avoid trading at those points altogether. However, those who open positions during important news releases do place stop-loss orders, as an insurance policy against potential losses.
Setting the appropriate profit and loss ratio
Many Forex traders believe that achieving more than 50% of winning trades is very important for building a successful trading career. However, there can be no guarantee that an individual can always achieve this, especially when it comes to such a high stressed environment, such as 1-minute trading.
However, there is one simple way to improve the odds of success. For example, a trader can aim for a 10 pip gain for each position and at the same time limit losses to 5 pips. Clearly it does not always have to be 2:1 ratio. For example, a market participant can have a goal of winning 9 pips from every trade and put close positions at 3 pip loss.
This approach enables traders to earn decent payouts even in cases where the winning ratio of their trades is 45% or 40%.
Utilizing exponential moving averages
One of the most popular 1-minute strategies is the use of the traditional candlestick charts in conjunction with 3 technical indicators. The first two of them are the 50-day exponential moving average (EMA) and 100-day EMA. This is meant to help a trader with trend identification.
If the current price is higher than exponential moving averages, that could suggest that the given currency pair is in an uptrend. If the 50-day EMA crosses and moves above 100-day EMA, this can be another important bullish sign. The opposite is also true if a 50-day exponential moving average crosses and goes below its 100-day counterpart, this is usually considered as a bearish signal.
The third final component of this analysis is the stochastic oscillator. This indicator is measured as a number, which can range anywhere from 0 to 100. Simply put, if this measure is 80 or higher, this might suggest that the recent move upwards was too strong and the market is likely to experience some pullbacks and corrections. At the same time if the stochastic oscillator is 20 or lower, then this might be a sign that a recent downward move had too much strength and the given currency pair might recover in the short term.
In order to see how those indicators can work together, let us take a look at this
1-minute EUR/JPY chart:
As we can see from the above, the Euro was rising against the Japanese yen, however, at the same time, the stochastic oscillator was well above 80, which pointed at the fact that the correction was likely. Sure enough, the single currency fell significantly, with the 50-day EMA crossing below the 100-day exponential moving average, which was another bearish sign.
This downtrend continued for some time until the Euro was able to turn the tide and once more return close to the previous high levels. Here again, the stochastic oscillator reached extremely high levels, which was followed by pullbacks.
As we can see from this chart, this time the Euro is rising once more, trading well above the 50-day and 100-day exponential moving averages. There is one concern, however, the stochastic oscillator now is nearly at 100, which suggests that this recent upswing was too strong and we might expect some pullbacks.
So, from this example, we can see that those 3 indicators used together can help traders not only to identify the latest trends, but also to predict the possible reversals as well. However, just like any other Forex strategy, using this method can not guarantee a 100% success rate, there can be other factors in play, which can substantially alter otherwise predictable patterns.
Using Heiken Ashi candlesticks for quick technical analysis
Another simple, yet potentially effective 1-minute strategy could evolve around the Heiken Ashi charts. This might be very beneficial for those traders who are not comfortable with analyzing several different indicators in such a short period of time.
On the other hand, the Japanese candlesticks speak for themselves in terms of showing the latest trends and even potential reversals. In order to illustrate this let us take a look at this 1-minute GBP/JPY chart:
As we can see from this chart, the GBP/JPY pair moved sideways for a while, until moving on to quite a lengthy downtrend in the middle. This large move was sometimes interrupted by very short green candlesticks, however, the overall direction of the market remained intact.
It was only at the end of the chart, where we can see several longer green candles, which signaled a reversal and the pair regained roughly two-third of their losses.
As we can see there were some individual points in this chart, where it was a bit tricky to correctly guess the trend, however, most of the time it was quite obvious. This is not as much of an issue since trades do not need to have 100% winning trades in order to succeed. In most cases having more than 50% is quite enough.
Despite those arguments and all of the advantages of using Heiken Ashi candlesticks, there can be some scenarios where traders might get confused with mixed signals. To see one example of this, let us take a look at this
1-minute EUR/USD chart:
Here just like in the previous chart, we can see that most of the time trends are well defined, basically, during this period the Euro had experienced 2 uptrends and 1 downtrend.
However, there are points, where traders could potentially run into problems. Just to bring one example, the first upward trend was interrupted by 5 red candlesticks in a row. In fact, the 3rd and 4th candle seems quite solid, so some traders might have concluded that this was a sign of reversal, however, later the old trend resumed.
So, therefore, we might conclude that the Heiken Ashi charts can certainly help traders to improve the ratio of winning trades, but it can not always be a guarantee of success.