`One of the smartest things I have ever heard when we talk about trading and business in general goes "Fail to plan and you plan to fail". Of course having a plan doesn't automatically translates into success and profit. But even if you lose money, you can be at peace with yourself because you developed a plan and followed it. Of course, modifications and fine tuning of your trading plan will also help.
So, what is our plan ? I have defined a scalping strategy which consists of three basic elements:
1) Trend - The price has to be in a clear downtrend. Usually, the price breaks the support, clears stops and then reverses and tests the resistance i.e. previous support.
2) Hammer candlestick pattern - A bullish reversal pattern which consists of a long lower wick which is at least two times smaller than the body of the candle. The close should be at top of the candle.
3) Volume - The volume has to be higher than for the previous candle, which usually is a red candle. The bigger difference between volume in these two candles, the greater reversal will be.
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