Mastering Price Action Trading: Proven Strategies for Scalping and Day Trading

No. 2

Mastering Price Action Trading: Discover the Unique Japanese Approach to Scalping and Day Trading

When performing scalping or day trading, especially if trading is based on price action, short time frames are commonly used. However, to maximize the effectiveness of price action, utilizing multiple time frames simultaneously is more efficient. Here is a detailed guide on using time frames based on your trading style:

1. Scalping (Trading within a few minutes)

In scalping, extremely short time frames such as the 1-minute (M1) or 5-minute (M5) charts are primarily used to capture rapid price movements.

• M1 or M5: Used to observe detailed quick price movements and detect patterns like pin bars or engulfing candles. These are particularly useful during active market hours.
• M15: A slightly longer time frame that helps analyze the overall market trend. For example, if a pin bar appears on M5, it can be confirmed on M15 to see if the trend supports it.

2. Day Trading (Trading within a few hours to a day)

For day trading, slightly longer time frames such as 15-minute (M15), 30-minute (M30), or 1-hour (H1) charts are used to identify market trends and movements.

• M15 or M30: Effective for identifying short-term trends and possible reversal signals.
• H1: Helps visualize the overall market direction. If there is a strong trend on H1, entry points can be identified using shorter time frames.

3. Combining Multiple Time Frames

To fully utilize price action, combining higher and lower time frames is recommended.

Example strategy:

• H1: Analyze the overall trend direction (uptrend, downtrend, or ranging).
• M15: Confirm potential entry points and check support/resistance levels.
• M1 or M5: Identify the exact entry timing, especially during active market hours.

4. Active Market Hours (Tokyo or New York Session Open)

During active hours, such as the opening of the Tokyo or New York session, market movements are faster. Key considerations:

• M1 or M5: Use for real-time price action observation. Signals such as pin bars or engulfing candles frequently appear during these periods.
• M15 or H1: Analyze higher time frames before active hours to check trends or key levels, which helps in risk management.

5. Example of Price Action-Based Trading

• Entry: If a pin bar forms near a support level on M5, wait for confirmation on M1 before entering a trade.
• Stop Loss: Set it at key levels such as recent highs/lows or nearby support/resistance lines.
• Take Profit: Use the next support or resistance level as the target profit level.

Conclusion

In scalping and day trading based on price action, use M1 or M5 as the primary time frame and complement it with M15 or H1 for overall trend analysis. During active market hours, be alert to short and rapid price movements and use price action techniques to identify the best entry points.