BEST 5 Minute SCALPING FAKEOUT Profitable Trading Strategy

Traders employ a variety of strategies in order to be able to consistently beat the markets and profit – however, there are few methods of trading as effective as scalping. Scalping refers to a form of trading that relies on making a series of small profitable trades, focussing on quantity rather than quality in order to boost profits. Usually, traders tend to use support and resistance levels in order to trade, and most of the trades are either based on the price conforming to the existing levels of support and resistance or breaking out. However, sometimes there is a breakout for a while and then the price comes back within the normal parameters, called a fakeout. This scalping strategy focuses on trading fakeouts. Read on to find out more. 

Basic Idea for the Strategy

As mentioned earlier, the idea for this strategy is to trade on the fakeouts that might occur from time to time on different instruments. Therefore, the first step is to create well-defined support and resistance levels. This can be done by simply drawing two lines at levels where the price has reversed more than once. This will give you the baseline for where the trend normally reverses, and you can then begin to look at the price action when there are fakeouts. 

The idea for the strategy is that once the support and resistance levels have been identified, we expect them to hold for a while, and therefore, our trades are going to be in favour of the support and resistance lines holding even when there is a temporary breakout. If the levels hold and the price comes back between the support and resistance, then we would profit. On the contrary, if it is a real breakout, then we would hit our stop-loss levels.

In the future, the strategy can even be expanded to try and identify real breakouts as a way to profit from those as well. 

Results and Adjustments 

Initial Results 

After a 5-minute scalping session over past data, the overall results were: 

Profitability: 12.95% net profit 

Number of Trades: 85

% of trades profitable: 61.18%

Profit factor: 1.306

Drawdown: 3.94%

Adjustments 

Some additional indicators and settings that could be added in order to increase the win rate and reduce the risk employed are: 

  1. The risk-reward ratio could be adjusted to tweak the profitability and the win rate. 
  2. The stop-loss and take-profit levels and methods could be adjusted. 

Conclusion

Scalping has been proven to be one of the most profitable trading strategies out there, however, even when you’re scalping, you need to ensure that you have a high win rate so that the strategy is fruitful and profitable. Using the strategy discussed above, you will be able to profit in both bull and bear markets consistently. You can even tweak the settings to suit your level of risk and trading style, finding the right balance between the win rate and the net profit. 

Resources: 

  1. BEST 5 Minute SCALPING FAKEOUT Profitable Trading Strategy – YouTube
  2. TradingView Indicator
  3. Settings Used in the Video

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