Scalping is a high-risk strategy, as it involves trading at short intervals. And on short intervals, where there are relatively small short volumes, market makers easily shift the price to the zones of accumulation of stops. On M1-M5, the price is almost unpredictable, but the excitement of trading is over the top – that’s why this type of strategy is still popular. You can increase the likelihood of success with the help of fundamental analysis. You will get acquainted with an example of a scalping strategy on the news in this review.
news scalping trading strategy
One of the most influential reports on EUR/USD is Non Farm Payrolls. An example of NFP trading has already been analyzed in the review “How to analyze Non-Farm Payrolls statistics”. But the strategy is so effective that it is worth paying attention to it again, focusing on some points.
Below is a screen with the results of statistics on changes in the number of people employed in the US in the non-agricultural sector.
July stands out against the background of general statistics. After the upwardly revised growth of 398K, analysts gave a pessimistic forecast – a slowdown in growth to 250K. The actual figure exceeded all expectations – an increase of 30%. The reaction of traders is the growth of the USD rate against EUR (the fall of the EUR/USD rate).
Exactly at 15.30 “2.08.05” (August 5, 2022), a strong downward movement begins on the M15 interval. At point “1”, the trader needs to quickly open a deal in order to have time to pick up the entire downward movement, which lasts 3 candles.
Then a doji appears with long shadows in both directions – a pattern showing that the forces after two long candles have come into balance. In a normal situation, this is a weak pattern, as there is no long-term downtrend. But in this case, this is a strong signal for a reversal. In a volatile market due to news, in a short interval, any such pattern is a strong signal due to the psychological perception of scalpers.
At point “2” on a strong pin bar, we reverse the deal. At point “3”, the “Bearish engulfing” pattern is formed – we turn the deal in the direction of a price decrease. At point “4”, the Bullish engulfing pattern is formed (weak for a long timeframe, since there is no 100% overlap, but strong for scalping on the news) – turn the deal upside down. At point “5” there is a clear reversal – we close the deal. The news has fully won back: small bodies of candles with short shadows indicate the attenuation of traders’ activity.
A few tips for news scalping:
- Use the economic calendar. You can earn on any news. And the more news you track, the more signals you will have. You can earn on stocks, currency pairs, oil, etc. Each asset has its own influencing fundamental factors.
- Follow the forecast. The EUR/USD example above shows that the price reacted sharply to a strong deviation from the forecast. After the August report, where the fact coincided with the forecast, there is no such movement. On September 02 at 15.30 there is no price movement.
- take risks. You need to enter the market in advance. To receive information within a few seconds after publication, you must have a paid subscription. In the media, analytical portals publish news with a delay of 15-20 minutes. Option – set pending orders 10 minutes before the news release (for the M15 interval), but keep in mind that there will be slippage.
Conclusion. News scalping is a working strategy that allows using pending orders on M15-M30 timeframes to take at least 20-30 points in 4-digit quotes on a strong movement. The strategy requires a quick reaction, instant recognition of patterns and key levels. The signals are relatively rare, but the effectiveness is from 80%. Good luck to you!