Short Term Trading On the 1 Minute Chart
Very short term trading strategies can be founded on a number of approaches. For example, they can exploit very rapid changes in the market with high frequency trading. For a human scalper the focus can be on momentum, which may in some cases be seen building based on chart price representations such as a candlestick chart. However on short term time frames for example the 1 minute chart, trends and ranges can be visible as they can be seen and traded on higher time frames. Thus the trade does not necessarily have to be on momentum but may be based on patterns as well even in 1 minute.
However perhaps more realistically as trends may take time to happen, the trader can combine momentum with market structure. That is they can utilise such factors as value levels (like big figures) and use these short term effects on the 1 minute chart to make short trades. On the scale of the market 1 minute is quite long, though on the scale of the human trader it is short and the trader may wish to trade more comfortably on longer term time frames.
On the 1 minute time frames volatility can be magnified as data moves into the market or as traders and computer programs follow and alter the movement of markets. Because this is a short time frame the trader may feel they need to make many trades. This may not be supported by a particular broker and if the trader is using an ECN broker which supports scalping, will normally result in the trader paying repeated commission charges.
The idea of trading on market structure is that it grounds the trade to some extent in higher time frames rather than relying on momentum which can sharply reverse as well as providing a rationale for the trade. An example of such a trade would be to examine a Forex pair as it comes down to the big figure (for example XX.00 in the case of USD/JPY). At the big figure a number of outcomes may happen, broadly speaking. For example the pair may bounce at the big figure or may cut through. If it bounces it may only bounce for a short while before returning. If it cuts through, then it may only go a certain distance than pull back up. These are market patterns which can be seen repeated but may not necessarily be repeated at a given time. Thus there are short term trades to be found around big figures. To a different extent this can also be found halfway between the big figures (for example XX.50 for USD/JPY).
The trader will need to have an exit route for a trade which does not do what is expected, but as complex moves happen around big figures and in general in the Forex market simply reversing a position may not work and may not be an optimal approach to scalping. Scalping trades can always turn into longer term trades thus the trader may wish to extend a trade into the longer term if it continues going in the desired direction. This provides a rationale for scalping as a way to start trades, exit from them quickly, but also extend them into more structured thoughtful trades, where the trader can learn more about the way Forex pairs and other markets can behave in the face of the myriad influences on their movement in value traced out on the chart.
