USD/JPY Scalping Strategy

USD/JPY Scalping Strategy

USD/JPY Scalping Strategy

USD/JPY is a major Forex pair. It is highly liquid and is affected by major news events involving USD, perhaps to a lesser extent that EUR/USD, but can react in a volatile manner to JPY events such as BOJ Interest Rate decisions. USD/JPY will show the same kinds of patterns and reactions to market structure (such as value levels) as other major Forex pairs. Its most volatile period will tend to be during the Asian market sessions, but as a major pair it can be expected to react during all sessions.

So is it good for scalping. Its position as a major liquid pair not quite as much in the firing line as EUR/USD may lend itself to short term trading.

So what market conditions may result in short term tradable moves of USD/JPY. The trader may wish to focus on moves at and between big figures, which is the case of USD/JPY are moves at and within 1 unit increments or decrements to the immediate left of the decimal point. The reason for this is that the very act of moving means that USD/JPY moves to and within big figures all the time. The idea is that while there may be short term moves, there may also be longer term moves which play out longer than 1 minute or so.

Big figures can tend to provide bounce or acceleration of a move, as the pair fails or succeeds in breaching a significant technical value level. This means that there can be short term scalping moves consequent on the big figure. Value between the big figure can provide places where the pair may stall or reverse back up in repeated (but not predictable) patterns (for example around .50/.75/.25 and with respect to the big figure: .85/.15), providing again short term moves.

The problem with scalping is that it requires many trades but if the move is allowed to continue into a longer term trade, then it can make scalping potentially more viable. However the complexity and randomness of the Forex market makes any strategy problematic when continued over time. Another problem with scalping is that it is dependant on spreads more than other trades. Brokers may also not allow scalping, and those which do may charge a commission charge each time a trade is made (though the actual spreads may be low).

Scalping can perhaps be seen as a way to better understand the market as it moves on the short term and a way to start trades on the 1 minute chart and continue them into medium and longer term trades. In essence to scalp is to trade on the movement of a Forex pair on short term charts. However like any time frame patterns can be seen, but volatility can disrupt patterns. The trader may wish to consider trading on momentum but momentum can be interlaced with volatility.

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