Tell Me About Forex Scalping
Trading on the Foreign Exchange market, or Forex, has become increasingly popular due in no small part to its sheer size and volume of trading. There was a time when only the large investment banks and other institutional vehicles of finance could play in the currencies market but now it is possible for just about anyone to invest in the Forex. Just as with equities or commodities traders, investors in the Forex need some type of strategy when deciding on currency pairs and when to enter and exit a position.
Scalping is one of many Forex investment strategies and at its simplest involves anticipating short-term movements in the exchange rates. Forex scalpers are like the polar opposites of those who use the buy-and-hold approach because they are only looking to enter and exit a position quicklymake their profit and run. Scalpers may only hold a position for a few hoursand in the extreme casesor mere minutes. These hit and run investors look for market indicators specifically known to affect rates on the Forex.
National and international news events have been shown to affect currency exchange rates. In truth, the Forex trades 24 hours a day with investors all having access to real time pricing changes. Thus, a Forex scalper may only have a few minutes to enter and exit a position before the market corrects itself and factors the news into the pricing. Scalpers use key indicators to help them anticipate the price fluctuation, such as:
GDP Gross Domestic Product
Interest rate announcements
Consumer/business confidence surveys
Government statistics tend to be more valuable to Forex scalpers for a couple of reasons. First, the U.S. dollar backs nearly 90% of all transactions on the Forex so any economic data released about this key nation will likely have some affect upon the exchange ratesat least temporarily.
Secondly, U.S. government statistics are considered to be some of the most reliable and accurate data that investors can get their hands on. Plus, the real benefit to scalpers is that government data are supposed to be well-guarded secrets meaning that all investorsbig or smallare made aware of the same information at the same time. Because small retail Forex traders are able to raise and move capital faster than larger institutional investors, they should have the advantage when it comes to taking advantage of short-term movements in exchange rates caused by the release of new information.
However, it is important to understand that a Forex scalper only profits if they can actually anticipate how the market will react to the information. For instance, if an investor had a position in the USD/EUR currency pair, they might be tempted to believe that the dollar should rise relative to the Euro if the U.S. had a higher rate of GDP growth in the 4th quarter. However, the dollar might actually fall based on this information if the U.S. economy grew at a slower rate than predictedeven if this rate was still higher than the Euro growth (and if the Euro zone grew faster than predicted). Plus, even if the investor does realize which way the market should move based on the information, they still need to enter and exit the position before the information can be assimilated into the pricing.
Forex scalping is a very dangerous investment strategy because the market is so very volatile and positions are leveraged to the hilt. In short order, scalping can cost an investor all of their capitaland perhaps even leave their account in the red. Although a viable option, traders new to the Forex are encouraged to find another, safer strategy to use.
Best Price Action Trading Strategies
There was a team of the very minimalist traders, who decided to invent a very simple trading approach without any oscillators, lagging indicators, Fibonacci retracement and looked only at the actions of the price. So, they just removed all these needless things from their trading screens and predicted future price movement with a high degree of accuracy without them. We would like to present you some of their “keep it simple” strategies.
1. Pin Bar Trading Strategy
A pin bar is a price action strategy that activates at important support and resistance levels. Pin bars can be taken counter trend as well. They could be easily identified, as they protrude significantly from the surrounding price bars. When they occur, it means that the strong rejection has occurred and that a potential reversal is imminent.
A candlestick of this pattern consists of one price bar with small body and long shadow. The shadow shows the area of price that was rejected, and the implication is that price will continue to move in an opposite direction to the shadow of the candlestick. A bearish pin bar signal is the one which has a long upper tail, which shows that there was a rejection of higher prices and that quotes are going to move in the opposite direction in the near-term. A bullish pin bar signal has a long low tail, it shows the rejection of lower prices and tell us that there will be a price hike.
There are a few entry options for traders who decided to trade with this strategy. The first one, is when you enter the trade at the current market price. You should keep in mind that the pin bar that gives a reversal signal must be closed before you enter the market or this candle won’t be considered a pin bar. Another entry option for a pin trading signal is entering on a 50% retrace of the pin bar using a limit order. The last option is to place a buy stop above the bullish pin bar’s high and sell stop below the bearish pin bar’s low.
An inside bar pattern is a two-bar price action strategy in which one of the two bars is placed within the low and high ranges of the previous bar. Inside bars indicate a brief consolidation and then a break out in the dominant trend direction. The inside bar strategy combined with a very strongly trending market is one of the best price action setups that shield you from risks and offer very large rewards. If you look at the chart below you will that a nice inside bar setup formed just after the market broke down below a key support level, the setup has since come off significantly lower and it still continues to fall towards the next support.
The fakey trading strategy indicates rejection of an important level within the market. Let me explain it with an example. In the chart below we can see the market was moving up until the fakey was formed. The fakey was formed on the false breakout of the inside bar setup which occurred because some of the amateur traders having been deceived by the price movement tried to pick the market top. Then, there was a restoration of a trend – a false break has been created and closed back within the range of the mother bar (the larger one).
There are many other strategies that you could use in your intraday trading. The main advantage of these price action strategies is that they could be used by every trader no matter how long he/she trades in forex markets. And in the fact that they are so simple makes them so credible.
Ichimoku Kinko Hyo indicator is a very useful and informative technical indicator. It shows the direction of the dominant trend; its lines may serve you as solid supports and resistances, and its clouds will allow you to visualize momentum and trend strength. At first glance, Ichimoku Kinko Hyo might look very intimidating and mind-boggling, but once you understand how to read it, you will see that the information and the signals it provides are very helpful. In the following tutorial, we will tell you about the Ichimoku lines generating different trading signals, the so-called Kumo-clouds and lags. Then, we will explain how to analyze the market with this wonderful technical tool. So, let us cast a “glance at a chart in equilibrium” (literal translation of the phrase Ichimoku Kinko Hyo).
Kijun Sen (blue line, base line): it is a major indicator component of the Ichimoku Kinko Hyo indicator, it is used to measure medium-term momentum. It is calculated by averaging the highest high and the lowest low for the previous 26 periods. In lay terms, it marks the middle of the range of the past 26 candles.
Tenkan Sen (red line, conversion line): It is another turning line which is derived by averaging the highest high and the lowest low for the past nine periods. It shows the middle of the range of the previous 9 candles.
Chikou Span (green line): It is a lagging, delayed line. Its closing price can be found by shifting to the left for 26 periods. Think of it as of a reflection back to what’s already happen, as of a repaint.
Senkou Span (orange lines): The first Senkou line is the average of Tenkan Sen and the Kijun Sen shifted 26 periods ahead. The second Senkou line is the average of the highest high and the lowest low for the previous 52 periods and it is plotted 26 periods ahead.
Kumo (cloud): it is the shaded area between the two Senkou Span lines. The cloud is perceived as a price attractor. The price tends to retrace to its borders which are the price’s formal levels. In other words, the price very often revisit the levels it tested earlier.
How to trade with Ichimoku components
Now, let us see what these components might tell us
Equilibrium lines (Kijun-Sen and Tenkan-Sen)
The equilibrium lines can show us the direction of the trend at the present moment. The cloud is a predictor of the future direction of a trend. Its crossovers are the signals for the identification of market reversals.
Kijun-Sen trading signals
A bearish trading signal occurs when the price crosses the Kijun-Sen line from up to down.
A bullish trading signal occurs when the price crosses the Kijun-Sen from the bottom upwards
A weak bullish signal occurs when the cross is below the cloud
A neutral bullish signal is in place when the cross is inside the Kumo
A strong bullish signal occurs when the cross is above the cloud.
Tenkan Sen trading signals
A bearish signal is present when the Tenkan Sen crosses from up to down the Kijum Sen line.
A weak bearish signal occurs when the cross is above the cloud
A neutral signal occurs when the cross is inside the cloud
A strong signal occurs when the cross is below the cloud
The borders of the cloud (Senkou spans) are good resistance and support lines.
The cloud’s bandwidth is a proven measure of market volatility. The wider the cloud the more volatility and less certainty on the future price direction is present. Narrow, flat clouds are the signs that the marker is stable.
You may also use Kumos to identify the direction of the dominant trend. If the price is above the cloud, it means that un uptrend is in place and that there are lots of buying opportunities. If the price is below the cloud, it is better to look for shorts instead of longs. For more detail look at the table below
A weak bullish signal is present when the price is below the Kumo
A strong bullish signal is present when the price is above the Kumo
A bullish signal occurs when the price moves up and breaks the upper border of the Kumo
A bearish signal occurs when the price falls and breaks the lower border of Kumo
The twists (crossovers) of Senkou spans (the lines that form the Kumo) are generally used for identification of the reversal points. A bullish trading signal occurs when the Senkou Span A cross from the bottom upwards the Senkou Span B. A bearish signal occurs when the Senkou Span A crosses from up to down the Senkou Span B.
For those who can’t imagine their lives without drinking sake, eating Japanese meals and trading in the Asian sessions, smart people invented a “cherry-blossom” strategy that is considered to be a very profitable and risk-averse. Let me show you how it works.
To use it you should plot the Fibonacci retracement levels to the chart. The “cherry-blossom” is based on the assumption of the continuation of a trend. The trends are usually formed in the course of American and European sessions, whereas in the Asian session the prices are moving sideways trying to consolidate, or the quotes move in the opposite direction of the main trends.
According to the “cherry-blossom” strategy, we should enter the market as soon as the daily candlestick closes (at the very beginning of the Asian session) and buy/sell in the direction of the trend established during the previous trading sessions (American and European ones).
First of all, you should look at the size of the candle (it should be at least 30 points long). Then, you should plot the Fibonacci levels from the low to the high (in case of the bullish trend) and place orders at 23.6, 38.2, and 50% levels. Stop-loss should be set below the low of the candle, and take-profit – below the high of the candle.
If at the end of the day you still have some open positions, you should wait for the next day so that your orders are closed. If after two days, your positions are still open, you should remove your orders from the chart manually. All pending orders that were not activated should be removed at the end of the current session. On Friday we stop trading.
On the chart below, you can see the bearish candlestick with a long body in 70 points (on our chart this candle is divided into several bars, because we use H1 timeframe for clarity). It means that we should trade short. The order should be place above the high of the daily candle, and take-plot should be plotted a bit higher than the low of the candle. From the picture we can see that all three orders had been activated. And the position closed at “take-profit” level.
For example, you’ve noticed a bullish candlestick with a size in 35 points. What you should do is to place three orders (Buy limit) at the 23.6%, 38.2% and 50% levels. We can see that only the upper order has been activated.
How to find a really strong bearish engulfing pattern
In our previous articles, we discussed reversal candlestick patterns. You might remember a bearish engulfing pattern, in which the second candle engulfs the whole body of the first candlestick. This patterns form on the bullish market and signal the upcoming price reversal to the downside.
In this article, we will learn how to recognize strong bearish engulfing patterns (which indicate real short trade setups) and single them out from the weaker ones. There are some features of the strong engulfing patterns:
• The second candlestick is the most important part of the pattern. It should be long enough to engulf the first candle completely. If the first candlestick is not very big, you should pay attention to the range of the previous candlesticks (at least 2 previous ones); their bodies and wicks should be engulfed completely by the candlestick you are focusing on (the second one). If this requirement is satisfied, the bearish engulfing pattern is rather strong. But to make sure that you chose a real engulfing pattern, you should meet two other requirements.
• The first and second candlesticks should go beyond the upper boundary of the Bollinger band indicator.
• The bearish engulfing pattern shouldn’t be formed at the very peak of the long-term uptrend because the formation of strong engulfing pattern could signify the bulls’ exhaustion, not a trend reversal.
Once your pattern satisfies all these requirements, you may be sure that you found a really strong reversal pattern that can be used as a short trade setup.
Online trading is great way for serious investors to make money, but inexperienced traders often wind up with big losses. A good set of instructions can minimize the risks and save months of expensive trial-and-error learning.
Day Trading had its heyday during the bull market of the 1990’s. All the amateurs have since dropped out, but day trading is still being practiced by professionals. There are fewer opportunities in the current market, but skilled investors can still find them if they know what to look for.
The Foreign Exchange Market (FOREX), the world’s largest financial exchange market, originated in 1973. It has a daily turnover of currency worth more than $1.2 trillion dollars.
Unlike many other securities, FOREX does not trade on a fixed exchange rate; instead, currencies are traded primarily between central banks, commercial banks, various non-banking international corporations, hedge funds, personal investors and not to forget, speculators. Previously, smaller investors were excluded from FOREX due to the huge amount of deposit involved. This was changed in 1995, and now smaller investors can trade alongside the multi-nationals. As a result, the number of traders within the FOREX market has grown rapidly, and many FOREX courses are appearing to help individual traders increase their skills.
As a matter of fact, it’s advisable to take FOREX training even before opening a trading account.
It is vital to know the market mechanics of FOREX, leveraging in FOREX, rollovers and the analysis of the FOREX market. Due to this fact, potential FOREX traders would do well to either enroll in a FOREX training courses or even purchase some books regarding FOREX trading.
There are pros and cons to enrolling into a FOREX course. For beginners a FOREX course is a rapid method of learning the basics of FOREX trading. Not much time is spent on history of the market or arcane economic theories. Often, on-line or phone support from a skilled FOREX trader is available to answer any questions. Also, the information is condensed and practical, often with graphs and charts.
The disadvantage is the price, as courses are more expensive than a paperback from the bookstore. Also, the course may just teach the approach of the trader who wrote it, and individuals have different trading strategies. The student may grow accustomed to the logic and focus of the teacher without coming to realise that nothing is predictable in the FOREX market, and many different strategies will bring profits in varying market circumstances. Also, knowledge of practical applications may not be enough, as the FOREX is highly unpredictable and there are many external factors, such as political issues, affecting the flow of finances in the market.
The best advice would be to do some background research on the FOREX market first, and then enroll in a course.
Day trading strategies
Day traders are those who enter into and exit positions several times per day. Their biggest pet peeve Is holding trading positions overnight. They are more concerned with finishing the day without an open position than the actual result of the trade itself. Day traders use a combination of both technical and fundamental analysis. So, if you refer yourself to these traders, you might be interested in the following strategies.
GAWK THE TALK
Timeframe: 15-minutes and 30-minutes (news is usually released within the 15-min intervals).
Strategy is suitable for all currencies
We compare the forecasted figures with the actual figures. For this strategy, traders go long on the chosen currency when actual figures of the release are much greater than forecasted ones. For example, the Reserve Bank of Australia raises its benchmark. In this case, we should go long on the AUD/USD.
Long trade setup
You should take following steps to execute the gawk the talk strategy for long.
Choose an affected currency to trade the news.
Enter long on NZD/USD once the actual figure released is ahead of expectations (if it is higher than the forecasted figure by 20% or more).
Set a stop loss of 20 pips from the entry price.
A profit target should be placed 40 pips higher from the entry price.
The risk for this trade is 20 pips, the reward is 40 pips. The risk to reward ratio is 1:2 (you can expect 6% return from a 3% risk).
BALK THE TALK
In forex life, everything is topsy-turvy. Even if the news is very bad, you can still earn whaling sums of money. For this strategy, we go short on the certain currency (hit by the news) when actual figures are lower than forecasted ones by a minimum factor of 20%. The “key ingredients” for this strategy are the same we had for gawk the talk strategy.
For example, we get a negative GDP for the US. What we should do is to initiate a short trade on the USD/CAD. We set a stop loss of 20 pips from the entry price and a profit target of 40 pips from the entry price.
The risk for this trade is 20 pips, and the reward is 40 pips. The risk to reward ratio is 1:2 (you may gain a tidy 6% return haven taken a 3% risk).
30 Pips A Day Forex Trading Strategy
Today I am going to tell you a story of a guy named Fred who managed to earn $1,000,000 with just 40 trades. Very impressive, I agree. Here is one of the strategies he suggests. It’s called a 30 pips a day forex trading strategy. You know that GBP/JPY is rather volatile currency pair that can make big swings (from 100-200 pips). So, our aim is not to capture all this price margin in the course of a trading session, but just 30 pips. Once we are done with embellishment of a story, we can proceed to real things – the description of the strategy.
Choose GBP/JPY currency pair
Switch to the 5 minutes’ screen
Add some indicators to your chart: 10 and 26 exponential moving averages (EMA)
How to trade:
If 10 EMA intersects 26 EMA and goes up, we are facing with an uptrend. If 10 EMA intersects 26 EMA and goes down, there is a downtrend. After we found the EMA’s crosses, we should identify traders’ action zone (a reversal zone, a zone of buying or selling depending or what the market main trend is). It occurs at the end of the minor rally in the dominant bullish trend
Imagine that the market main trend is down, there could be some minor rally in a downtrend market. That price rally (short-term upward price move) usually ends in a traders’ action zone when the price starts falling in the direction of the main trend again. A similar in logic, but opposite situation also happens if the market is bullish.
Your actions in the case of a downtrend:
You notice that 10 EMA crosses 26 EMA and goes down.
You don’t sell immediately after the formation of the cross; you should wait for a retrace.
Then, you sell immediately when a candlestick gets into the traders’ action zone halfway between the 10 EMA and 26 EMA.
You place stop loss at 15-20 pips
Your take profit target is 30 pips
Your actions in the case of an uptrend:
You notice that 10 EMA crosses 26 EMA and goes up.
You don’t buy immediately after the formation of the cross; you should wait for a retrace.
Then, you buy immediately when a candlestick gets into the traders’ action zone halfway between the 10 EMA and 26 EMA.
You should place stop loss at 15-20 pips
Your take profit target is 30-40 pips
Source By Fxbazooka
Gambit trading strategy is a bold attempt to gain maximum profit while not losing sight of risk. But I should warn you, that to use it you should school yourself to patience, because for all conditions to meet you might need lots of time. The good thing is that this strategy worth it; you can get big profits from waiting for the right moment to come without taking additional risks.
The strategy was designed by Walter T. Downs, a dedicated chess-player and mathematician, for calm and lucrative trading on D1 time interval. But it turned out that it works on h4 timeframe as well. With this strategy you need only one indicator to receive signals to enter the market – Bollinger bands.
If there is a bullish trend – you should BUY on rollbacks from the upper Bollinger line. If there is a bearish trend – SELL on the rebounds from the lower line.
The minimum and maximum of the “signal” candles (2) should be located above the minimum and the maximum of the previous candles (1).
Closing price of the signal candle should be in the lower part of the candle’s range.
Central Bollinger line should be moving downward for at least 10 consecutive days.
If all these conditions are met, at the opening of the third candle followed by the “signal” candle (3) we can open shorts. Stop Loss should be set slightly above the maximum of the “signal” candle (2). On the fourth day after we opened our position, we should place Stop Loss at the breakeven point (the opening point). The deal should be closed when the price crosses the lower green Bollinger line.
Minimum and maximum of the “signal” candle should be located below the minimum and maximum of the previous candle.
The “signal” candle should be closed above the middle level of the entire range of the candle and above the center Bollinger line.
Central Bollinger line should rise in the course of 10 consecutive days.
If all these conditions are met, we enter the market long at the opening of the next candle followed by the “signal” candle. Stop Loss should be placed below the minimum of the “signal” candle. On the fourth day after we opened our position, Stop Loss should be placed at the breakeven point (the opening point). We should close the deal when the price crosses the upper green Bollinger line.