What is the NZ Scalping Strategy?
One of the more common strategies you will see around The Forex Army has to do with the NZ Scalping Strategy. NZ basically means No Zone (or rather the grey zones you see in the middle). To trade in this zone, you ideally need a very strong level and because it is usually in areas of low volatility, the stop loss and targets are usually very small. There are plenty of NZ Scalping opportunities throughout the day, and if you can really master this strategy, you can really unlock immense profit potential.
Are there any particular pairs these work best with?
Because of the tight stop loss and profit targets we play, we ideally prefer pairs that have lower spreads. The lower the spreads, the less they eat into our potential profits. Why spreads matter so much is because if you’re playing for a profit target of 5 pips, assuming a 1:1 risk to reward ratio, a single spread of 1 pip would mean you are put at 1 20% disadvantage. This definitely adds up over the long term. So the currency pairs are usually majors such as AUDUSD, NZDUSD, EURUSD, USDCHF, GBPUSD, USDCAD, USDJPY, EURJPY.
What is the hit rate of this strategy?
This strategy has a hit rate of about 70% with a risk to reward ratio of about 1 : 1.5 which is good enough to help us generate steady streams of profits throughout the day. In many cases, we can run to reward from 1.5 to even 3 depending on how we assess the market and how well we trail it when price is moving in our favour.
Alright, what are the conditions for entry?
The most ideal conditions revolve around 3 things :
- Fibonacci pivot points (support and resistance)
This is important as fibonacci pivot points prove to be one of the most observed areas throughout the day. Having this to your advantage in your trades is greatly beneficial.
- Daily high resistance and daily low support
We only trade levels that have never been broken. This means that even if we see a perfect NZ entry (Fibonacci pivot point + Fibonacci clusters), we don’t take the entry if it has been broken previously.
- Fibonacci clusters
These are the standard Fibonacci boxes you see. When their combined strength meets a certain criteria (eg. Minimum Fib Points For Entry) it will show a cluster for you to take the trade off. I usually prefer it when there is a Fibonacci box at one of the higher time frames (eg. H4 or D1).
- Directional Diamonds
This is more of a bonus instead of a standard requirement. If you notice there are a lot of darker red diamonds at your sell entry, that is good. If there are a lot of darker green diamonds at your point of buy entry, that is good too.
- Market Structure
It’s important to know how the market looks like. There are certain times when the support and resistance are super clear. There are also other times when it is all one jumbled up mess. Think about it this way : Imagine you want to kill this expert gunman. If everyone ambushes him at once, you have a high chance of winning. But if each person goes in individually by himself one-by-one, you have a low chance of defeating him. So, it is absolutely crucial that everyone knows when is the best time to jump in together to attack the market. If the market looks too messy, then it is best to avoid such decision.
We usually have a “Minimum Fib Point For Entry’ of 4 (if you are aggressive) and 5 (if you are more conservative) – this setting can be adjusted in the TFA Sniper. What this would do is to show you the clusters where you can take these trades off.