The 1 Minute Forex Trading Strategy is one of the most common trading strategies in both Forex and Fixed Time Trading.
It involves opening trades that last 60 seconds only, after which the trader closes them in Forex or after which they expire in Fixed Time Trading.
That then means that the 1-minute strategy falls under the scalping strategy which is fast-paced in the analysis and execution of trades.
When we talk about a trading strategy whose analysis and trade execution has got only 1 minute to be done, then this poses both benefits and pitfalls.
These we shall discuss in this post – Advantages and Disadvantages of the 1Minute Trading Strategy.
Advantages of the 1-minute trading strategy.
- Fast results– in as much as patience is a key virtue in forex and FTT trading, not all traders are the same.
Some are patient enough to wait for long trades to expire while others may not be so patient to enter so long trades. That makes the 1-minute strategy the best option for the latter.
Remember, on the 1-minute strategy, results are seen after 1 minute only, and so after such a short duration, you can know whether you won to proceed or you lost to strategize for recovery of your loss.
2. High probability of wins– you do not need huge supply and demand shifts to cause the small market moves that 1-minute strategy traders anticipate.
Only minimal shifts and the price has moved, and out of the small move, the trader stands a chance to profit as opposed to swinging trading which needs huge price shifts to give significant profits.
Another reason which increases the win probability is the fact that small moves required for the 1-minute trading strategy are by far, more frequent than larger price moves.
3. A high number of trades– trading the 1-minute strategy allows you to place so many trades on a given day.
Among these many trades, you will have wins and losses.
Because of the privilege of numbers, it becomes easier to strategize on recovering lost trades within that particular trading day.
4. No overnight risks – scalping using the 1-minute strategy confers the benefit of avoiding overnight risks like overnight gaps to the trader.
This is because no trades are held overnight because after all, all trades are just held for 1 minute.
Disadvantages of the 1-minute trading strategy.
As earlier hinted, the 1-minute trading strategy is a two-faceted affair, with pros and cons in equal measure.
We have seen some of the top advantages and here are some of the significant cons to beware of as concerns the 1-minute trading strategy:
- Adverse psychological effects – we already mentioned that the 1-minute trading strategy produces fast results.
These do not come without a catch because the psychology of the trader is tested.
Investing $100 and winning the trade to earn $182 or more within a duration of 1 minute is not only a good thing but also a detriment.
This is because the excitement that comes with it is destructive.
On the contrary, investing that $100 and losing the whole amount in 1 minute is not only a lesson but also a catch, because the spirit of revenge and the anger that comes with it might destroy you all together.
2. High market noise – 1-minute trading strategy
The lower time frames which include the 1-minute time frame or lower, come with a lot of market noise.
This means that prices rise and fall in a matter of seconds and that poses a challenge in analyzing such data.
Imagine a fast-paced action of the price, is it that easy to predict where the price is likely to move next?
Not at all, and most of the predictions, even if supported by almost all indicators used, are likely to be marred by opposing changes seconds into the trade.
3. High costs of trading – one thing with the 1-minute scalping strategy is that it involves the execution of so many trades during a given trading day.
Each trade attracts commissions and spreads to be paid on the Forex platform. That is to say that placing fewer trades incurs fewer commissions and spread payment which is not the case here.
Therefore, if so many trades are involved, as in the 1-minute trading strategy, that means that a lot of your capital will go to the payment of commissions and spreads for trades, some of which may not be successful anyway.
4. Trade automation – 1 minute trading strategy
Did you know that the major market movers, central banks, and commercial banks have bots that use advanced algorithms to execute trades very fast in a matter of seconds?
Yes, they do! And why is this bad for you?
As a retail trader, that places you, at a position of a disadvantage because those entities possess more market information and technology than you.
You can only compete with them by considering higher time frames of analysis and placing trades that take long enough.
Those, among others, are the most marked cons which you need to beware of as you consider trading the 1-minute trading strategy.