My Simple One Candle Scalping Strategy (Backtested Results)

Summary

In this video, the creator shares a simple yet effective scalping strategy used for trading the first 90 minutes of the market open. This strategy involves marking the first 5-minute or 15-minute candle, identifying a breakout, and then entering a low-risk pullback. The video also compares the performance of the 5-minute and 15-minute strategies through a one-week backtest, highlighting their strengths and weaknesses. The presenter emphasizes that the strategy is simple, repeatable, and can be applied across various trading instruments, offering traders a clear, low-complexity path to success.

Takeaways

• 😀 The trader has been trading for seven years and has tested hundreds of scalping strategies, but found success with one simple strategy that uses just one candle.
• 😀 The strategy focuses on trading during the first 90 minutes of the market open, with a simple and repeatable process.
• 😀 The key component of the strategy is the 'first candle,' which is either the first 5-minute or 15-minute candle of the market open.
• 😀 The strategy works across multiple markets including stocks, futures, options, crypto, and forex, and can be applied to both 5-minute and 15-minute timeframes.
• 😀 The process involves three steps: drawing the high and low of the first candle, waiting for the stock to break out of the range, and entering on the pullback.
• 😀 The first candle’s high and low determine the breakout range. A break above indicates buying strength, while a break below indicates selling pressure.
• 😀 The strategy focuses on high-probability trades, entering the market only when there's a clear breakout from the first candle range.
• 😀 The pullback entry is the lowest-risk point, where the price returns to the first candle’s high or low, providing a solid support or resistance level for trade entries.
• 😀 A backtest of the strategy over one week compares the 5-minute and 15-minute candle strategies, showing which is more effective for different market conditions.
• 😀 The trader emphasizes the importance of sticking to one proven strategy, avoiding complicated setups, and maintaining consistency over time for better results.

Q & A

What is the main strategy discussed in the video?

The main strategy discussed in the video is a simple scalping strategy that focuses on trading within the first 90 minutes of the market open using the first candle of the trading day, either the 5-minute or 15-minute candle, as the key to identify trade opportunities.

Why is the first candle important in this scalping strategy?

The first candle is important because it sets the initial high and low for the day, which serves as the basis for identifying breakout points and determining whether buyers or sellers are in control of the stock.

What time frames does the strategy use?

The strategy uses the first 5-minute or 15-minute candle after the market opens at 9:30 a.m. Eastern, depending on which time frame aligns with market conditions.

How do you identify entry points in this strategy?

Entry points are identified by marking out the high and low of the first candle. A breakout above the high signals a buying opportunity, while a breakout below the low signals a shorting opportunity. After the breakout, a pullback to the initial high or low is used as the entry point.

What should you do if the stock doesn’t break above or below the first candle range?

If the stock doesn’t break above or below the first candle range, it’s considered a low-probability trade and should be avoided.

What is the key factor that determines whether the 5-minute or 15-minute candle is more effective?

The effectiveness of the 5-minute versus the 15-minute candle depends on the strength of the stock’s movement. If the stock is moving rapidly, the 5-minute candle may be more useful; if the stock is moving more slowly, the combination of the 5-minute and 15-minute candles is often more powerful.

What were the results of the backtesting for the week?

The backtesting results showed 4 trades for the week, with 3 wins and 1 loss, yielding a 75% win rate. The profit factor for the week was 4.339, with a total profit of $1,870.

What is the best approach when entering a trade according to the strategy?

The best approach is to wait for a breakout above or below the first candle’s high or low, followed by a retest of that level. The trade is then entered when the price confirms a continuation in the direction of the breakout.

How does the strategy handle market volatility and choppy days?

On choppy days, the strategy helps avoid low-quality trades by waiting for a clear breakout and retest. If the market remains within the initial range and shows weak price action, no trade is taken.

What are the potential risks when using this strategy?

The potential risks include missing opportunities when the breakout doesn't occur, entering too early during choppy conditions, or taking immediate retests that might not provide the best risk-to-reward ratios, as demonstrated in the loss on the final day of the backtest.