1 FOREX STRATEGY: RAPID-FIRE (FOR EUR/USD - M1)

Forex trading stategies: Rapid-Fire strategy

The  strategy 1 was designed with two criteria in mind:

1. The most liquid currency pair in the world
2. The lowest time frame available

This criterion led to the development of the strategy on the minute chart (M1) for the EUR/USD currency pair.

The M1 time frame is fast-paced and exhilarating. If you are not careful, the adrenaline rush you experience can cloud your trading decisions. This problem is compounded by the high frequency of trading opportunities that the strategy presents. On average, there are about 30 to 40 trading opportunities for the rapid-fire strategy every day.

This is the reason why the rapid-fire strategy employs two indicators to assist you in spotting objective trades throughout the day. You can then fire off the trade rapidly once you decide to take it.

Time Frame

The strategy 1 works with the 1-minute (M1) time frame. Each candlestick on the chart represents 1 minute of price movement.

Indicators

We use these indicators for the rapid-fire strategy:

1. Parabolic SAR with default setting:
2. Step 0.02
3. Maximum 0.2
4. Simple moving average (SMA), period 60, and apply to close.

Currency Pairs

The strategy is designed specifically for the EUR/USD, the most traded currency pair in the world.

Strategy Concept

The strategy concept  is a  trend-scalping strategy, which means  it works best in a trend. The strategy combines two trend indicators, SMA 60 and Parabolic  SAR with  default  setting  (step  0.02). The SMA  60  is  used  to identify the direction of the momentum. This means that we look to long EUR/USD  when  the  price  is  above  the  SMA  60.  Similarly,  we  look  to short EUR/USD when the price is below the SMA 60.

The Parabolic SAR is used to give the exact entry signal for both long and short positions. When the price for EUR/USD goes above the Parabolic SAR, we fire off a long trade. When the price for EUR/USD goes below the Parabolic SAR, we fire off a short trade.

Long Trade Setup

Here are the steps to execute a  long trade using the rapid-fire strategy:

1. Look for the market price to go above the SMA 60.
2. Wait for the Parabolic SAR to move above the market price.
3. Once  the market price  goes  above  the Parabolic SAR,  the ParabolicSAR will appear below the market price. This is the signal to enter for long. (See Figure 6.1.)

   

   Rapid-Fire strategy

4. The stop loss is set at 15 pips below the entry price.

5. The  profit  target  is  set  at  10  pips  above  the  entry  price (See Figure 6.2.)
6. 

   

   Rapid-Fire strategy

From the long example in Figure 6.3: 

Entry  price  =  1.2934

Stop  loss =  1.2919

Profit target = 1.2944

The risk for this trade is 15 pips, and the reward is 10 pips. The risk to reward ratio is 1.5:1, which yields a 2% return  if we take a 3% risk.

Rapid-Fire strategy

Short Trade Setup

Here are the steps to execute a short trade using the rapid-fire strategy:

1. Look for the market price to go below the SMA 60.
2. Wait for the Parabolic SAR to move below the market price.
3. Once  the market price goes below  the Parabolic SAR,  the ParabolicSAR will appear above the market price. This is the signal to enter for short. (See Figure 6.4.)
4. Set the stop loss at 15 pips above the entry price.

4. Set the profit target at 10 pips below the entry price.  (See Figure 6.5.)

   

   Rapid-Fire strategy

Rapid-Fire strategy

From the short example in Figure 6.6:    

Entry  price  =  1.2937

Stop  loss =  1.2952

Profit target = 1.2927

The risk for this trade is 15 pips, and the reward is 10 pips. The risk to reward ratio is 1.5:1, which yields a 2% return  if we take a 3% risk.

Strategy Roundup

The Strategy 1 could give you another trade signal even before the current trade exits. It is not uncommon to encounter consecutive trading signals one after the other, simply because of the low time frame used.