Now, let us take a detailed look at how to use this strategy for trading. Remember, unless otherwise stated, we will always use Eastern Time in the United States.
Suppose you first checked today’s financial calendar, and then you know that there will be an important data release at 8:30 am Eastern Time tomorrow, and then you set an alarm to notify you 15 minutes in advance.
At 8:25 Eastern Time, you opened a one-minute EUR/USD candlestick chart, and you also opened GBP/USD, and USD/CHF as references. Then you open the trading interface and prepare to set up the trading order.
You should notice that the price moves slowly in a consolidation pattern, indicating that it is waiting for the news to be announced. Now, you have to act quickly.
At 8:29 Eastern Time, you need to check the highest and lowest prices of the candlestick, and then add 10 pips to the highest price and subtract 10 pips from the lowest price. If the 8:28 candlestick has a higher high or a lower low, then you can use the two extreme prices of this candlestick as the basis for adding and subtracting orders.
Now you need to create two entry orders, these two orders are not market orders but limit orders, the buy limit order was placed at the highest price plus 10 pips calculated just now, and the sell order was placed at the lowest price minus 10 pips calculated just now.
At the same time, set a 10 pips stop loss, so that the stop loss order overlaps with the highest and lowest prices. In addition, you can choose to set two 20 pips take-profit orders.
What did you just do? You took the extreme prices of the recent price fluctuation range and then calculated the specific position of the order placement by adding and subtracting 10 pips from it.
You told the platform that if the exchange rate rises above the highest point, you will buy, and if it falls below the lowest point, you will sell.
At the same time, you also told the platform that if the price returns 10 pips later, it will automatically exit. If you set 20 pips to take profit, then you will automatically exit when the price reaches this position.
Since the price eventually rose, your buy order was triggered. If the price falls, then your sell order will eventually be triggered.
This strategy does not care about which direction the exchange rate goes, it only needs the price not to oscillate back and forth, especially since the N-shaped oscillation will bring the biggest loss.
A very important point is that within 5 minutes, one of your two orders must be traded, and you should cancel the other order.
Sometimes the market will oscillate, which means that orders on both sides may be triggered, one order makes money and the other order loses money.
These will be explained in detail later. Let’s review the above example. The high point at 8:29 is 1.2002, the low point is 1.1999. At 8:28, the high point is 1.2000, the low point is 1.1998.
Because the low point of 8:28 is lower than the low point of 8:29, we will use 1.1998. Now we add 10 pips to 1.2002, which gives us 1.2012.
We subtract 10 pips from 1.1998, which gives us 1.1988. Now you have placed two orders, one buy order placed at 1.2012, and another sell order placed at 1.1988. Then you placed a stop loss order, fixed at 10 pips.
This is very important, stop loss orders must be set at any time. For your buy order, the stop loss is placed at 1.2002, for your sell order your stop loss is placed at 1.1998.
Assuming you set a 20-pips take profit, then your buy order’s take profit will be 1.2032, and your sell order’s take profit will be 1.1968. For these calculations, you can make an Excel spreadsheet, and then fill in the numbers to automatically complete the calculation.
If you are proficient, you can follow the fixed steps to operate. Back to this example. Your buy order will be traded at 1.2012, if your take profit point is set at 1.2032, then you will get a profit of 20 pips, which is 200 US dollars for a standard lot.
It is very good to achieve such results in 5 minutes of work. If you are a beginner trader, then we strongly recommend that you use a 20-pips take profit. When you have experience and confidence, you can use the advanced strategy introduced below.
To use this strategy, you need to use timely market charts. Your forex broker will provide you with some free charts, and these are generally enough for you to use.
What you need to do is to get the real-time chart of the currency pair you want to trade. You need to make sure that the information on this chart is updated very quickly, and it must be able to display candlesticks.
Adjust the time frame of the chart to 1 minute, so that your price line will form one every minute. You can zoom in on the recent price performance, and when you put the mouse on a single candlestick, it should be able to display the opening price, closing price, highest price, lowest price, and date.
Note that the highest and lowest prices are used in this strategy, and they are the most recent ones. Practice more on simulated trading, and you can try small amounts on real accounts after you are familiar.