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The Forex one-minute trading strategy was initially designed by Kgopotso Mmutlane in 2016 and since then it has gained huge popularity among a certain category of traders.
This strategy does not work with every financial instrument and is effective only in particular events in the Forex market, thus it should not be taken as a general most effective trading strategy for stocks or FX pairs.
The main reason for using Forex’s one-minute scalping strategy is to focus on minimizing the losses and maximizing profits within the span of a minute. Because everything happens at a very fast pace while using this strategy, many traders prefer to use pending orders to make sure the positions are opened and closed at their preferred price point.
The scalpers regularly use the Central Bank Calendar and Economic Calendar in order to anticipate what events will be occurring within that week in the Forex market. We can classify the significance of events in the following way:
The 1-minute scalpers need to pay the most attention to high-impact events as they initiate the biggest changes and fluctuations in the market. Usually, these events are decisions made by the reserve banks of a country, such as regarding the interest rates, the reports on gross domestic products, inflation rates, or official statements made by the industry authorities in regard to specific economies or currencies. These reports come with the designated release time and date, thus traders can only make orders at the right time.
The strategy statistics suggest that one-minute scalping comes with an 80% efficiency rate and only 20% of the trades will be losing due to certain disadvantages that we will cover later in the article. The main reason for the losses is the expired pending orders, which means that trades do not open, at all.
Let’s see how the 1-minute strategy actually works. There are a few important steps for making this strategy actually work. Let’s discuss those steps one by one.
So, let’s say, according to the Central Bank Calendar you know that there is a certain report about to be released by the US Federal Reserve Bank. You should start preparing an hour ahead and be ready 45 minutes prior to the event.
After this, you will select a 15-minute timeframe on your MetaTrader 4 or cTrader platform. Start analyzing the patterns with at least the past 4 candlesticks to identify the price lows and highs. You have to calculate the market average and also keep note of where the market is headed, up or down, and understand the general market trend.
Since the vast majority of reserve bank events cause high volatility in the market, you have to be extremely precise in determining the valid entry level when employing a 1-minute strategy. When you have determined the average market movement for a certain currency pair, you have to decide whether you will be setting an order to buy stop or sell stop.
For the pending orders on a buy stop you have to add 200 pips on top of the average market movement and for the sell stop you have to subtract 200 pips. Whatever the result, these will be your entry levels on your sell and buy stop pending orders.
There are several approaches for setting your target pips in minute trading. However, we recommend sticking to the basic rule. This rule states that you should never target a level higher than 200 pips. This is done for one simple reason, if the target is set too high, the market may never reach your take-profit, which will undoubtedly result in unnecessary losses.
Similarly, your stop loss should not fall below 100 pips. The good thing is that the graph rarely touches this low point, which means that 100 pips is the optimal stop-loss target level.
You should set your buy-stop and sell-stop pending orders according to your targets and average market movements that you have calculated in advance. For the 1-minute Forex strategy, as we have mentioned in the paragraphs above, you have to add 200 pips on top of average market movement, which will be your buy stop, take-profit level, and subtract 100 pips to get the stop-loss level for your buy stop. The same applies to sell-stop orders and take-profit and stop-loss, but you subtract 200 pips and add 100 pips to calculate them respectively.
Lot sizes are rather individual and depend on the size of your equity. For your 1-minute strategy, the standard lot size will always be the same. This standard lot is 100,000 units of a currency you are trading, but you can also use smaller types of lots including micro lots, for example. Depending on the leverage that you use, you might also be able to open larger positions, as well.
The expiry time on your buy-stop and sell-stop pending orders should be set 1 minute after the end of the event. The logic behind this is that in case the market moves up during the event, your buy-stop order should open. After 1 minute, unopened sell-stop orders have to expire, otherwise, you will get losses. The same goes for sell-stop trades.
This strategy does not only depend on calculating the pips, entry points, stop-losses, and take-profits or correct lot sizes. The most important aspect of any trading strategy is analysis. However, there are certain Forex trading strategies where technical analysis works better than fundamental analysis.
For scalping, the best approach is to conduct a thorough fundamental analysis which includes press releases, bank representative speeches, changes in interest rates, and other economy-related announcements. It means that basically anything that goes on within market news and main economic calendar events will have a drastic effect on your Forex one-minute strategy.
One of the greatest advantages of fundamental analysis is that high-impact events from the economic calendar can charge the market movement by up to 1000 pips per minute. Fundamental traders are not required to have a deep understanding of charts and technical indicators. However, they have to have at least some understanding of the basics.
On the other hand, technical traders may still be required to pay a great deal of attention to fundamental analysis, and they still have to know what kind of information to use from market news and what to ignore. In scalping, fundamental analysis is the key player. Hence, economic calendars and market news should be your best friends while implementing a 1 minute scalping system.
This strategy is not universal and does not apply to all markets, all instruments, or all scenarios. There are several drawbacks that traders should necessarily take into account before getting started with scalping.
We will briefly summarize all the disadvantages and common issues related to the strategy and will also provide insights on how to overcome and fight them.
There are several mistakes that beginner traders make. But the issue is that with the scalping strategy your mistakes are highly sensitive, which means that it would lead to much greater losses than in the case of day trading, for example.
What the vast majority of beginner traders miss when using the one-minute strategy is the early opening of the trades. If your position opens before the event starts, you are risking your position, because you do not know the outcome of the event.
Because of this, trading can be turned into a kind of gambling if you simply start guessing the outcome of a certain event. Hence, we strongly recommend that you actively watch the market and make sure that you follow all the tips that we have discussed above.
The gap is a famous notion in trading that refers to an empty space in the market. Within this gap, the market does not follow any logic but simply jumps very high or drops very low. It happens during significant events mostly, such as Federal Reserve official announcements or huge liquidity news.
Even though people trading 1-minute charts are extremely scared of gaps, it is not always bad news. It only becomes an issue when the trader has both stop-loss and take-profits set during the gap.
When you set your take-profit to 200 US dollars and stop-loss at -50 US dollars, the gap can eventually bring you down to a stop-loss of -200 US dollars and take profit only at 2 US dollars. When there is no Gap, the graph will touch only either stop-loss or take-profit, while with the GAP the graph touches both. The only way to deal with the Gap is to close your trades immediately.
Your biggest enemies as a 1-minute candlestick trader are the commercial banks. Contrary to popular belief, which paints the brokers as the worst players in the market, the banks are pretty much capable of bending the markets to their will, and they actually do so. The worst thing is that you do not have any power to fight them. This means that you have to trade with them rather than against them, as they can crush any trading account in a matter of seconds.
What can happen is that you analyze the report and try to follow its outcome, but the graph behaves in an absolutely opposite way. This can be deadly even for the best 1-minute trading strategy and is known to be a false signal by the banks which intends to confuse the traders and trigger the buy signal.
Scalping requires complete devotion to trading. It is very different from value investing, which means that you find a decent financial instrument, purchase it and sit and wait for a few days, weeks or months until it reaches your desired price level to sell. If you are a scalper, you have to commit to sitting in front of a screen 1 hour prior to the main event, be extremely focused during the event, and decide your action after the event has ended. Since scalpers are required to make lightning-fast decisions, they have to be focused and concentrated on graphs for hours. Hence, it may not work well for full-time workers or students with less flexible schedules.
So far we have discussed trading with pending orders, which is the safest and the best strategy for 1-minute trading. However, there is another approach to scalping which is market execution.
Market execution trading implies that you open your trades immediately after the main event hits. However, contrary to the pending order, you will have to leave your position open for 15 to 45 minutes.
The outcome of the report in this case is the difference between a forecast and actual data. It does not matter whether you are using pending order or market execution in either case, you have to commit to the news. It does not only involve reading the report but also watching the news reports, reading articles, and so on.
The best 1-minute trading strategy is strictly based on interest rate decisions, NFPs, certain inflation reports, GDP reports of major countries, and governors’ and presidents’ speeches (live streams). The Forex event reports include:
The previous data means the event outcome of the previous period. The most important previous data is the decision on interest rates. The previous reports are active for a certain amount of time until the next event hits. In most cases, you can analyze the effect of previous data and see the market price reaction to anticipate the scope of effect of the upcoming event.
Forecasts are always an integral part of the best 1-minute trading strategy planning. The vast majority of economists will regularly meet and discuss the forecasts, expectations, and predictions of the possible outcomes of every major event in the Forex market.
However, traders should understand that these forecasts are only estimates and not the final outcome. You cannot take the forecasts as facts and base your profit-taking and stop-loss or entry levels based on them. Always trust the current market condition and make your own decisions rather than rely on predictions only.
Actual data is the final outcome of the report. The actual report is the major part of the best 1-minute scalping strategy. It is an indicator of what the reaction within a particular country should look like as soon as it’s released.
If you see higher than expected reading on the report then you should consider the market to be expected to move more bullish. The opposite is true for lower-than-expected readings which means that the country’s economy will shift towards the bearish side of things.
To translate this in terms of your trading decisions, when you see that it's actually higher than forecast prepare to buy, and if the opposite is true then decide to sell. But keep in mind that the difference between the actual news and forecast should be significant as otherwise, the market may not react in a way that you anticipate.
There is a common approach to using pending orders and market execution according to the event categories. We strongly recommend using pending orders on every interest rate decision event and using market execution on other types of events.
The main logic is that you have to wait for the reports' outcome before you start trading. But, in some cases, there are other monthly events that are so important that you still need to make pending orders instead of market execution. For example, nearly every inflation report lately has caused massive movements in the market and would require pending orders. However, it is not a unique formula on how to trade a 1-minute chart and every trader can make his or her own decisions.
When trading with pending orders, you should not forget about the expiry time (set after a minute from the event’s exact time). If you miss it, then you will have to manually delete it, which might cause you certain problems. However, with expiry time you can relax and wait until the system automatically removes your trade.
Some of the most important events that you have to pay attention to concerning interest rate decisions will be issued by the following authorities:
For the 1-minute scalping system, there are some monthly events that hold the same significance in terms of market price movement as the interest rate decisions, but these are mostly inflation reports. Here is the list of the most important event topics that might drive market price significantly, and you have to monitor them closely for the major currencies:
Hopefully, this article helped you to understand what kind of approach you need to take when trading on a 1-minute timeframe in the Forex market. You should know when to use pending orders (with interest rate decisions and high-importance inflation reports) and market execution (with other market news). It is also quite important to understand that it is crucial to have a 200 pips difference between the market price and your entry level.
Do not forget to set an expiry time for your trades otherwise you would have to delete your trade orders manually, which might lead to certain issues. Furthermore, you should emphasize the significance of fundamental analysis, and we have provided all the important releases and reports that you must pay attention to above.
Our partner, XM, lets you access to a free demo account to apply your knowledge.
No hidden costs, no tricks.
It is important to prepare your pending orders on both buy and sell orders a few minutes before the event. You have to measure the market movement average at least 15-45 minutes before the event starts and add 200 pips for a sell order to get your take profit and subtract 100 pips to get your stop-loss. Similarly, for the sell order, you have to subtract 200 pips from the market average to get your take profit and add 100 pips for stop-loss.
The best strategy is to use pending orders for the interest rate decision events and market execution for any other monthly news. When using pending orders you have to maintain the 200 pips difference between the average market price and your entry level. Also, it is crucial to set both take profit and stop loss along with the expiry time set at 1-minute after the end of the event.
Forex's one-minute trading strategy is targeting short-term profits with trades lasting for less than a minute. It targets high-impact market news, such as decisions on interest rates from the major banks worldwide, and requires a fundamental analysis of the potential effects of the news on the market. One-minute traders, or scalpers, put pending orders on both buy and sell-stop orders with an expiry time set to within 1-minute of the release.