This is a guest post by Ahmad Hassam
Many traders use scalping as their main trading strategy. Scalping means quickly entering and exiting the market making a few pips every time. Most scalpers look for making a quick 10-20 pips each time they enter and exit the market. By making a few high probability scalping trades every day, you can make 30-60 pips easily.
There are many scalping strategies. This simple scalping strategy is known as the Lucky Spike and it is being used by many traders to make consistent profits each and every day scalping the forex market.
Successful traders follow the K.I.S.S principle. Whatever trading strategy you follow, the simpler you will keep it, the higher the probability of making a winning trade. Lucky Spike Scalping Strategy uses this K.I.S.S principle. Let’s discuss it.
Many traders use candlestick patterns in their trading signals. Lucky Spike uses a strong and easily noticeable candlestick pattern. Now, if you have been trading with candlestick charts, you will most probably be aware of the Shooting Star, Morning Star, Hammer, The Hanging Man, Doji and other similar candlestick patterns.
All these candlestick patterns are similar in the sense that they have small bodies and long shadows or wicks. These type of candlestick patterns are also known as indecision patterns as when they appear it means neither the sellers nor the buyers are dominating the market.
Lucky Spike Strategy can be used on smaller timeframes as well as on the daily, weekly or even on monthly charts. You will be trading only one candlestick in this strategy. First determine that the market is in a strong uptrend or a downtrend. You can use the Heiken Ashi Indicator to find out whether the market is in a strong uptrend or a downtrend.
Now, in a strongly trending market, a Lucky Spike Pattern can be anyone of the above candlestick patterns like the Shooting Star, Morning Star, Hammer, Inverted Hammer, Hanging Man or the Doji with a small candle body and one shadow longer than the other. When this pattern appears in a strongly trending market, it is a signal for a quick trend reversal. Instead of trading trend reversals, we will be only trading one candlestick. When you spot such a pattern, get ready for a quick trade.
In a strong downtrend when this pattern appears, go long at the open of the next candle with the stop loss placed just below the Lucky Spike Lower Shadow. Take profit on the close of the next candle that appeared after the Lucky Spike Candle.
Similarly, in a strong uptrend, go short at the open of the next candle that appears after the Lucky Spike with the stop loss just above the Lucky Spike Upper Shadow and take profit at the close of the next candle. Good Luck!