What is Forex | what isforex trading, learn forex, trade forex, forex books, forex videos, forex strategys, forex expert advisors, forex indecators, mt4 download, how to trade forex What is forex, What is forex trading, What is forex, What is forex trading, What is forex, What is forex trading, | What is Forex | What is Forex |What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex
read forex books online
Forex Scalping
FOREX SCALPING —Tiny Trades For Terrific Profits“ eBook By Robert Bo rowski © 2005 Evergreen Forex Inc. Read Legal Info & Disclaimers at end of Document Use of this material is subject to the legal terms, conditions, and understanding of the statements at the end of this document. Unauthorized redistribution of this material is illegal, strictly forbidden, and will be punished to the fullest extent of the law. Read the legal text provided at the end of this document.
1
___Forex Scalping
This eBook has been formatted for easier on-screen reading I dedicate this eBook to Brian. Little did I expect when small coincidences introduced us that you would become such a huge part of my life. You are far more than my business partner and best friend œ you are a kindred spirit. Yo u have enriched my life and exponentially added to my own b oundless enthusiasm. I cannot express my immense gratitude for getting to kno w yo u, and can‘t fathom the marvelous journey yet ahead of us.
2
___Forex Scalping
TABLE OF CONTENTS Prerequisite Reading Introduction Welcome What is —Scalping“? The Joy of Scalping Great Expectations Use with —Forex Freedom“? Warning Basic Consid erations Practice Makes Wisdom Tools of the Trade Your Computer Serious Trading Computer Broker Charts Practice Account Broker Spreads & Tradable Currencies Pip Padding Overview of the Techniques Stop Frequency Equity Management Kamikaze Scalpers Currency Pair Choice The Techniques Trading Mechanics Premises of Scalping Picking Tops & Bottoms (Part A) Petit Trends Stagnations Sharp Reversals Caffeinated Market Secure Your Entry Bi-Directional In-Wave Entry Safer Stops Fibonacci Guidance Specialized Fibonacci Observances Adding S.E.X. Lines
3
___Forex Scalping
Exit / Enter Reverse Thinking Picking Tops & Bottoms (Part B) Co mpounding Gains Watching Mu ltiple Charts Bigger Perspectives The Opportunities The Four Main Opp ortunities Micro Trends & Trends Pattern Breakouts After FA Within Ranges Additional Tips Modified Slanted Channel Surf Zones Day Running Scalp Creative Combinations Scale Shifting Sunday Trading Quick Trends FA Considerations Wine & Cheese Extra Examples The Beginning PREREQUISITE READING This eBook assumes that you have already read the following eBooks: • Forex Surfing • Explosive Profits (revised edition) The above are prerequisites as this eBook assumes that you already understand a lot of the concepts originally taught there and those concepts will be referen ced but not repeated here.
4
___Forex Scalping
INTRODUCTION WELCOME Is it possible to score hundreds or even thousands of dollars (euro, pounds, yen, whatever) of profits in just a few minutes in the Forex markets? Yes it is! In this eBook we explore the fun & wildly pro fitable technique of —scalping“ in the Forex markets. It is amazingly simple to learn and you‘ll probably be able to proficiently start using these ideas today! Here we shall look at a few variations of how to accomplish —scalps“. We‘ll discuss the pros and cons of this style of trading, and how to be well on your way to success with these techniques. WHAT IS —SCALPING“? —Scalping“ can have various descriptions depending on whom you ask. Some folks would say that some —Forex Surfing“ techniques are considered —scalps“ due to the small size and duration of the trades. Different traders have differen t techniques for scalping, but one thing that can be universally agreed upon is that scalping involves tiny trades (both in amplitude and duration). Typically, —scalping“ is a specialized technique that involves making a tiny trade to cap ture a very small movement in the market. Whereas a —position trader“ may engage in trades th at are intended to last for multiple days to months (aiming for targets of hundreds to thousands o f pips), and a —day trader“ typically engages in trades that are intended to last for less than a day (aiming for targets ranging from 20 to 100 pips), a —scalper“ engages in trades that might only last a few minutes aiming for targets of 5+ pips. A scalper typically trades multiple Forex lots (mini or regular lots dep ending on the size of the account and risk to lerance), often more lots than one would normally trade if trading as either a —day trader“ or a —p osition trader“ (simply due to the fact that those styles typically require larger stops thus shrinking the amount of lots one can safely trade according to equity management principles). By trading more lots a scalper can achieve significant gains comparable to the gains expected by day & position traders in the same time span even though the scalper engages in much smaller individual trades. For example, a scalper that succeeds in capturing just 5 pips could have made $500 in under a minute if he traded 10 regular lots. In some circumstances 
5
___Forex Scalping
(that you‘ll learn later in this eBook) the scalper could successfully capture 10, 20, 30 or even more pips that (assuming he traded 10 regular lots) would result in profits of $1,000, $2,000, or even $3 ,000 in a very short amount of time. Some scalp attempts can occasionally yield over 100 pips (ov er $10,000 trading 10 lots) œ and YES, set ups like that happen several times each month! Scalping is often considered to be an advanced trading style. Though scalping is quite simple in concept many consider it to be advanced because it requires very quick decision making, very quick reflexes to react when set ups are spotted, and the scalper must be skilled at quickly executing a trade. The keyword for the scalper is —speed“. What makes —scalping“ an advanced skill isn‘t that it‘s complicated; it is just that one must be both skillful and fast. Drinking coffee or energy drinks while scalping is a good idea. This style of trading certainly isn‘t for slow minded or slow moving people (please don‘t interpret this comment as being insulting for certain groups of people). Scalpers often engage in multiple trades a day. Some scalp ers execute dozens and dozens of trades each day, but don‘t worry; I‘ll teach you to do fewer. Scalps are executed in the direction of the current trend, usually taking little bites of the market movement, but can also be an entry technique into long er day trades to capture even larger profits. Skillfully scalping one can literally buy very close to the actual low and sell very close to the actual top of market movements; much closer than day traders, and certainly position traders, would normally accomplish. Scalping is suited for some people & p ersonalities better than others. Some traders love it, making it their primary trading style, wh ereas some traders hate it for their own personal reasons. Scalping is best reserved for traders after they are already familiar with other trad ing styles, but if this is your first exposure to trading Forex don‘t worry about it œ you can easily learn everything you need to know to make some HUGE profits by scalping just by reading this eBook (however I strongly suggest you first read my other eBook —Forex Surfing“ as there you‘ll learn many basics that I won‘t be covering here in this eBook). —Scalping“ seems to me to have a slightly negative perception in the minds of traders in general. I believe it is simply due to the name of the technique, as —ticket scalpers“, peo ple selling over priced tickets for concerts or spo rting events, are commonly thought of as being sleazy. It seams to me that some —advanced / experienced“ traders look down upon —scalping“ techniques as being beneath them, or even unethical (perhaps this is from the days when floor traders at stock exchanges would sometimes scalp stocks). It‘s funny
6
___Forex Scalping
that even FXCM clearly doesn‘t like scalping for whatever reason (at the time of this writing FXCM has been hostin g a mini trading contest called —King of the Mini“. If you read th e contest rules it is stated as rule #8, —NO SCALPING œ At FXCM‘s discretion, entrants may be removed from the contest for employing trading techniques resembling ”scalping‘ or ”picking‘“. This doesn‘t make logical sense to me since they profit for the pip spreads of each executed trade, so while writing this eBook I decided to ask FXCM why this is a rule. They responded saying that scalping is generally —frowned upon“, and though they permit traders to employ such techniques (since they profit from each trade entered) they simply disallow it for the contest b ecause they feel it is an unacceptable practice for their trading contest. ). I don‘t really know why there appears to be some kind of negative stigma to scalping, and I don‘t think it is justified. As far as I am concerned a profit is a profit regardless of what trading technique used, and as a trader all that matters is the profits. Here is a link to an article on the web titled —Scalping: Small Quick Profits Can Add Up“. I have included it here for your reference to be able to read a third party‘s definition of scalping. (Note: This is an external link. You need to be connected to the Internet to view this page. As I have no control over the content of their website this link may become inactive at some point in the future.) THE JOY OF SCALPING Why be a Forex Scalper? Simply put, it is both fun AND profitable! Th e concepts are easy to learn, easy to do (once you‘re skilled at it), provides you with an adrenaline rush, and can fatten your bank account. Personally, I think that of all Forex trading methods that scalping is simply the most fun. The trading style is mentally stimulating, and it‘s exciting to watch your profits grow. If you are a chronic trader, someon e who enjoys doing frequent trades, you‘ll find that here you‘ll have the chance to b e —trigger-happy“. Day traders often have to wait for hours before a g ood trading opportunity comes along (sometimes they don‘t even trade that day if nothing seems to happen), position traders often have to wait for days or even weeks before a suitable trading opportunity presents itself, but a scalper can be joyfully raking in fantastic profits while the other traders are bored out of their minds! For these reasons experienced Forex traders can also add scalping to their trading
7
___Forex Scalping
toolbox; so that they have another tool to work with. I‘ll elaborate up on when traders employing other styles o f trading might switch to scalping. Generally speaking when a cu rrency pair goes into a tight range or consolidation in the time frame view one is normally looking at, if you were to zoom in even closer it would be apparent that there is plenty of market move on a tiny scale. A trader could then scalp the tiny movements when otherwise they couldn‘t trade at all. Often times it is generally best for most Forex traders to restrict trading activity to only the times when two markets overlap (typically 2am to 6am and 8am to 12noon EST (New York time)), however even outside of those times a trad er can engage in scalping, thus a scalper can trade virtually at any time 2 4 hours a day. Because many people are simply part-time traders, trading as a hobby, due to having to go to work at some job, scalping is a method that may allow those people to trade who might not be able to otherwise participate in trading during the optimum times mentioned above. Scalping professionally sure beats going to work at some J.O.B. (Just Over Broke œ ever notice that you‘re still broke soon after getting paid?) that you hate everyday. As a scalper you can hang around your computer for a few hours, make say 5+ trades, and profit as much or more than you might earn all week going to a job working for a grueling 40 hours. If you have a job then don‘t despair… after some time your —hobby“ of Forex Scalping can p ossibly save y ou from a lifetime of being a slave working to make some company rich. All hype aside, I think that scalping is a useful skill for all traders to have for various reasons. As mentioned above, it allows a trader to trade during times when other styles of tradin g would make you sit on the sidelines (not trading), so you can engage in profit making activities when you otherwise couldn‘t. Scalping is best used in conjunction with, as a supplement, to other styles of trading œ so keep trading your primary methods and add scalping to your trading toolbox. The down side of scalpin g is that it is the most labor-intensive style of trading. Whereas longer-term styles of trading might only require minimal —work“ each day (as some of the techniques presented in the eBook —Forex Sailing“), and some kinds of day trading (as taught in the eBook —Forex Surfing“) may only requ ire period ic checking of charts during a trading session, scalping however requires that you spend more time paying attention to charts throughout a trading session, and active concentration while en gaged in a
8
___Forex Scalping
trade (you can‘t leave your computer to grab a coffee as easily). Despite the fact th at it is the style of trading that most resembles —work“ you shou ld still take the time to learn this style regardless of whether you intend to trade it often or sparingly as it is a useful skill that can help improve your other trading methods in a variety of ways. Remember also that you don‘t have to scalp everyday, but you can treat it as an occasional sport or game (best —played“ in a demo account) for the shear joy, thrill, and instant gratification that this style of trading offers. GREAT EXPECTATIONS Whenever I start teaching someo ne how to trade the Forex the most common question they ask is —how much $ can I make each day doing this?“. I always smile and shake my head once they inevitably ask this question. Everyone always asks this question (I remember ask ing this question too when I first started), and when you start teaching your friends (if you haven‘t already) then you too will get asked this question. Pay attention to how I answer it so that you too can give your protégés the correct answer. It is first of all incorrect and inappropriate to state wh at can be expected in terms of dollars earned. Dollars (or whatever currency you are accustomed to) is by no means a relevant measuring unit to make comparisons with. If I told y ou that ”John‘ scored $50 today whereas ”Simon‘ scored $500 it would be understandable that at first glance you would more impressed with Simon‘s results. But hold one, what if I then told you that Simon just scored a single 5 pip scalp tradin g 10 regular lots, but John made three trades scoring 10 + 17 + 23 pips trading just one mini lot for each. With whom would you now be more impressed with? Your answer should now be John. He score 10 times more pips than simple Simon. Pips, as you should now understand, are absolutely relative (meaning that you can make comparisons) but dollars are not because dollars are contingent upon how many lots you can afford to trade. So now here is the answer you are looking for. A conservative scalper should be able to consistently (and by now from reading my o ther eBooks you should understand the significance of the word —consistently“) average 2 0 to 60 pips a day (depending on how skillful you are, and how aggressively you trade). For the following examples we‘ll use a realistic 40 p ips. (Actually you could do much better than what I just suggested, but I‘d rather you start off with a low expectation and then let you find what your average is œ which could be much
9
___Forex Scalping
higher.) Ok, so how many dollars can this mean to you? Well here is where you write your own paycheck. It all depends on your account size. If using proper equity management principles all you can afford to trade is one mini lot then if you were to hypothetically capture 40 pips on average on EUR/USD then you would have made an impressive forty bucks. Ok, it‘s nothing to get excited over but assuming you kept up that average for a full month (20 trading days) then you might hav e captured 800 p ips for an $800 profit (surely it sounds better now œ and an 800 pip month is impressive by anyo ne‘s standards). Con tinuing the above hypothetical scenario, if you were to trade 5 mini lots then you‘d be averaging $200 daily or $4,000 monthly - - 1 regular lot (equal to 10 mini lots) would be $400 daily or $8,000 monthly - - 5 regular lots would be $2,000 daily or $40,00 0 monthly - - 1 0 regular lots would be $4,000 daily or $80,000 monthly. You get the idea. I could seriously answer you that you that you could expect to earn $40 a day and you‘d immediately lose interest (too bad for you because you‘d miss a great opportunity) or I could casually state that you could expect $4,000 a day which might blow your mind (depending on what your current income level is œ if you are Donald Trump then this chump change would bore you) and you‘d probably start suspecting that I smoke crack (I don‘t, it‘s just a derogatory slang expression implying absurdity). So now do you understand why it is completely pointless to ask how much $ you can be making each day (on average)? As a beginner assume that you‘ll only average 20 pips daily (yes, it‘s realistic) and then calculate your own —paycheck“ based on the account size you expect that you‘ll be trading with (applying proper equity management principles). —Why do you talk about the money you can make earlier in the eBook and on your website rather than talk about pips?“ Simply put, most people wouldn‘t understand the significance of potential pip gains, but they sure can recognize the meaning of dollar figure examples. Any dollar amounts ever quoted on my website or in any of my writing is simply a realistic —carrot“ to g et people to realize that trading Forex can be a very profitable activity. So stated dollar amounts (always hypothetical of course) is just so that people who wouldn‘t otherwise understand the opportunity can start realizing that this could
10
___Forex Scalping
possibly be for them. Let‘s face it, everyone, surely including you (and me too), first gets attracted to Forex for the income possibilities. So when people initially ask you how much money one can earn trading Forex you can simply give them some dollar examples to spark their interest, then when you start teaching them y ou then explain that the d ollars are irrelevant and that only pips really matter. USE WITH —FOREX FREEDOM“? Can you combine scalping techniques with the exponential growth plan presented in the eBook —Forex Freedom“? Absolutely! Most scalping techniques initially rely upon a 10 pip stop (elaborated upon later in this eBook) however the plan as laid out in —Forex Freedom“ assumes you are using 20 pip stops. As scalping is somewhat —riskier“ don‘t double your lots, but just follow along with the suggested amount of lots as described in that eBook. If you do intend to scalp your way through the —Forex Freedom“ plan I wou ld strongly recommend that you have plenty of practice in a demo account (and have demonstrated profit) before scalping in your real money mini account. WARNING Before we proceed any further I want you to b e aware that these methods can be —High-Risk / High-Reward“. I don‘t want to be a wet rag on your learning enthusiasm but I‘ve placed a —Warning“ for you to read . Please consider the —warning“ which I am stating for your protection, but don‘t let it scare you off from reading the rest of this eBook… and from attempting these techniques. Yes, there are some risks (as with any trading system), but for the most part you‘ll find that the risks are easy to swallow and the profits gained by these methods are quite lucrative. BASIC CONSIDERATIONS PRACTICE MAKES WISDOM Have you ever watched a game of some professional sport such as footb all,
11
___Forex Scalping
hockey, baseball, soccer or basketball? Surely you wo uld agree that the athletes have spent man y hours (actually years) practicing and honing their athletic skills before they ran out onto the field for the big game (the real game). Before you trade with real mo ney you too should practice practice practice with fake money in a —demo trading account“. By the time you finish reading this eBook you‘ll likely feel confident that you can su ccessfully scalp trade. Chances are that you‘ll probably be able to, but just becau se you can do something doesn‘t mean you should do something. You really do need to practice to gain proficiency as a scalp trader. You can read this entire eBook, study all the tradin g rules and trading set ups presented, however there is simply something that I can‘t teach you that you can only learn by your own practicing. Being able to read the charts in real time and being able to decipher & to make the decision whether to trade or exit a trade requires what can seem like intuition. Once you are skilled at scalping you almost appear to be psychic to someone sittin g next to you. The only way to develop this —intuition“ is by extensive practicing. Once you‘ve watched your real-time charts long enough and have witnessed many micro trends as they happen you‘ll begin to get a —feel“ for what th e market is doing based on the behavior of the real-time price action. Again, this isn‘t something I (or anyone) can possibly teach you within a book such as this; you can only cultivate this —intuitive“ skill by observing the live market. This eBook will teach you the knowledge you n eed to know to be able to able to scalp trade the Forex market, but, as any athlete can tell you, you need to practice to develop proficiency. Many people have —knowledge“, but few people have —wisdom“ œ wisdom is the result of the marriage o f —knowledge“ and —experience“. Reading this eBook will provide you with easy knowledge, but to develop the wisdom is completely up to you (clue: practice practice practice). TOOLS OF THE TRADE (pun in tended) The next few sections will discuss some of the tools you will need to scalp trade. YOUR COMPUTER
12
___Forex Scalping
Obviously you‘ll need the standard tools such as a trading account and charts (we‘ll get to those shortly), but here is a topic I haven‘t previously discussed in my other eBooks œ your compu ter. With most Forex trading techniques you can make do with a lame computer and slow Internet (dial up), however with the fast paced world of Forex scalping you really do need a reliably quick computer. As a Forex scalper you need your charts to display the most up to date price possible, and you need your brokerage software to execute a trade promptly. Even with the best computer and a screaming fast Internet connection you‘ll still have some lag time (not to mention ho w long it takes for you to physically move your mouse and click to enter a trade). Often as a scalper you‘ll experience missing out on a few pips (of lost profit) because of slight inefficiencies (somewhat frustrating at times), but if you have to deal with a painfully slow computer and a molasses Internet connectio n speed then you‘ll soon be tempted to introduce your computer to a sledge hammer. For a scalper lost seconds means lost pips which means lost profits. Even in a single day of trading this can add up to HUNDREDS of dollars, even thousands, of missed profits. The first thing to do to ensure that your computer is running your trading tools smoothly is to NOT have other programs running on your computer while trading. Having many programs open eats up your computer‘s resources, which can mean that your charts aren‘t refreshing as fast, and it may take longer to execute a trade. If you must listen to music then please turn on the radio, don‘t listen to MP3s on your computer, or God forbid, DON‘T be streaming music off of the Internet unless you have a very fast computer with High-Speed Internet (even then it‘s still better not to). Chances are your computer itself is good enough to scalp trade with (unless you are using something that is 10 years old), however you may find that it starts running slower over time. If you ever find that your computer is running like molasses, or much slower than you remember from the past then it may be time to reformat your compu ter. It is generally a good idea to reformat your computer every 6 months (kind of like going to the dentist) to keep it running smoothly. If you don‘t know how to do this then invite a tech-savvy friend over for a few beers to help you out with this. If you think that your compu ter sucks then perhaps you should consider buying a new one. You don‘t have to spend a fortune buying the best computer available, as generally the cheapest computer y ou can buy at your
13
___Forex Scalping
favorite high-tech toy store is more than adequate for the purpose of scalping with. You can alway s justify the expense by the profits it‘ll make for you . Your Internet connection is also important. Folks, I can‘t understand why anyone would still use dial-up for Internet access (unless it is all that is available in your area) when High-Speed is not that much more expensive (typically around 2 to 3 times the p rice of dial-up). Just the thought of surfing the web on dial-up stresses me out let alone trading with it. If it is all you have available then it‘ll work for you, but seriously , if yo u can have high speed Internet available then just pay the extra $20 or $30 per month. After a few days of surfing the web you‘ll wonder how you‘ve ever d one without it, and surely each month you‘ll catch at least an extra couple of pips that‘ll more than pay for it. SERIOUS TRADING COMPUTER I wasn‘t going to add this topic (as it isn‘t specific to scalping techniques) but decided to include these thoughts here fo r you as it can give you a solution to the problems that I‘ve faced for a while before figuring it out myself. These ideas are useful for you regardless of what style of Forex trading you do, however for a scalper these ideas can be of immense value due to the fact that you want to keep a more constant pulse on the market. I have an —office“ in my home where theoretically I am supposed to do most of my work, however I actually spend about 99% of my time —working“ (trading & doing all the other things I do) in my living room (actually on my sofa œ yo u should see the —butt print“ there œ my chiropractor considers me a —valued client“). I have a nice setup in my home office, including multiple screens, but I‘ve fo und that I don‘t hang around in that room most of the time, thus I can‘t be watching what is happening in the markets throughout the day. The solution that I‘m about to present isn‘t for everyone, as it does cost some money, but if you are a serious trader making nice $$$ by trading, especially with scalping, then you should consider this idea for yourself. Buy a laptop computer th at is exclusively dedicated to trading. Don‘t use it for anything other than for trading. If you need to use a computer then use another one, but this laptop comp uter is your dedicated trading machine. The reason for having this laptop is that it is portable, so you can be lugging it around your home (or elsewhere). What you want to do is to have it turned on
14
___Forex Scalping
and situated wherever yo u are so y ou can frequently glance at the charts to see what the market is doing, scanning regularly for potential scalp trading opportunities. If you are in the living room watching television then have it sitting on your coffee table, or on a pedestal next to the sofa, where you can just look at it from time to time. If you are hanging out elsewhere like the kitchen, family room, bedroom (provided that your spouse allows this distraction), backyard, or elsewhere then y ou can take it with you and place it somewhere you can glance at it periodically. If you are a doctor, lawyer, business owner, or some other professional (if you are an employee your boss might not approve, but if you are the —big kahuna“ then you can do whatever you want) then you can also take this laptop computer to your office to scan the markets throughout the day (heck, you might score more profits than what you do at work all week). You don‘t need to buy an expensive laptop computer; the cheapest one available from a large —high-tech toy store“ will be far more than adequate. Get a laptop with a —wide screen“ (the screen is the dimensions of a wide screen DVD movie). I‘d suggest that you talk to the sales agent about which laptop has a q uiet fan (as I find the hum of the fan annoying), and you might want to splurge on having a smaller lighter laptop (but these usually cost more, which is not necessary œ my personal preference is for tiny computers). I‘m a laptop computer addict (my wife rolls her eyes at me because I buy a new one every several months) so I usually don‘t buy the extended warrantees that they try to sell (I think that they‘re a big rip off), but because of how you‘ll be using this computer you might want to consider getting it (it‘ll be on for extended periods and so it is possible that it may breakdown from —wear & tear“). The reason you want a wide screen is because you can have multiple windows open and arranged so that different areas o f your screen shows different charts (for visual scanning purposes), and then when you‘ll be trading you can have your trading software on one side with the chart on the other side. Here are some useful accessories that you might want to consider getting. You might want to get an optical wireless mouse. A wireless mouse is great because you can man ipulate your computer with out having to move the computer from the convenient place where it is resting, and if the mouse is optical (not a track ball inside) then you can use it o n just about any surface, such as a coffee table, sofa, magazine, or anything (no mou se pad required). Your laptop computer should come with a WiFi wireless device inside that
15
___Forex Scalping
allows you to connect to the Internet wirelessly (obviously you‘ll need a wireless router on your Internet connection). I have found that for most purposes the wireless wo rks great, but o ccasionally I lose the wireless connection. What I did is I bough t a —Powerline Ethernet Bridge“ (—HomePlug“ from IOGear). I simply plug one of the devices (you get two) into the electrical outlet near my Internet router (and plug in the network cable connecting it to the Internet router), and the other device I plug into the electrical outlet near where I intend to work (next to my sofa in my living room). I then connect that device to my computer with a network cable. This ingenious pair of devices uses your home‘s electrical wiring to make a direct physical connection from your computer (anywhere in your house) to the Internet. The advantage of using this is that you have a constant connectio n to the Internet, whereas using wireless is prone to loosing your connection (which can be bad for your trading). A few more thoughts for you. If your laptop is plugged into your power outlet then remove the battery (as the battery will get weaker over time of constant use). Keep your battery fully charged and use it when you need to move the computer (without turning it off) to another location. Over hours and hours of being turned on your laptop will tend to get quite hot. Don‘t place it on surfaces that might get damaged from the heat. Wh en you are not paying attention to the markets then simply turn your computer off (giving it a rest and a chance to cool off). Turn your —screen saver“ off. A screen saver is there to prevent damage to your screen due to images burning into the screen, but you need to have your charts display ed at all times, so you‘ll want to disable this feature (another reason to buy the extended warrantee). Right-click o n your desktop (assuming you have a Windows computer œ I hope you didn‘t buy a Mac computer (sorry to any die-hard Mac users for this offense, but u nless you‘re a graphic designer why the heck would you buy a Mac in a predominantly Microsoft world) then ch oose —Properties“ then click on the —Screen Saver“ tab on the top, then set your screen sav er to —None“. To save power and to reduce wear on your computer do the following: In the same place wh ere you made the change to your screensaver y ou should see an option to change your power settings. Click on the button to get there and another window should pop up. Change the following settings for —Wh en computer is PLUGGED IN“ (not when running on batteries). —Turn off
16
___Forex Scalping
monitor“ = Never (or —After 2 hours“ incase you‘ve abandoned your computer œ if it shu ts off then just touch the mou se to reactivate the screen). —Turn off hard disks“ = After 5 mins. —System standby“ = Never. —System hibernates“ = Never. If you do n‘t know how to do the above simple steps then ask a teenag er to help you out. If yo u broke your computer following the above steps (highly unlikely, but hey, I need to protect myself legally) then too bad for you; I accept no responsibility for your actions. You are fully responsible for what you do, and don‘t come crying to me. If you are serious as a trader, especially as a scalper, then you‘ll find that having a secondary laptop computer exclusively dedicated to trading will be quite useful, convenient, an d will allow you to catch more trades than you might otherwise. This computer should pay for itself. BROKER For Forex Scalping it is important that you carefully select a suitable Forex broker based on these criteria. Your Forex broker must provide a live data feed for charts (further explained below), must have very competitive spreads for the currency pairs you will be trading on , and the trad ing software must be easy to use & quick to execute trad es with. I have had numerous trading accounts with various brokers (some real money and some just demo) and at the time of this writing would recommen d to my friends to use FXCM or RefcoFX. This isn‘t to claim that they are the best of all brokers, but overall they are the ones I personally most recommend for several reasons. FXCM (and RefcoFX that is pretty much similar) has a very simple user interface (the trading station software), so simple that even a child can be taught to use. However other brokers, such as Forex.com and ACM h ave nice web based trading interfaces that is simply too complicated for a newbie to use with ease, and takes far too long to execute a trade when precious seconds count. In this eBook I show how to place trades on the FXCM system because it is so easy to explain, and easy for you to do. Thus all examples in this eBook are based on FXCM. I have cho sen against explaining the methodologies applicable to such brokers as Forex.com, ACM, and others simply because it
17
___Forex Scalping
would take far more time to explain how to place OCO, IF THEN, etc… trades, and the nuances o f stop / limit orders. When you become more advanced as a trader you can figure these out on your own (it took me a while to wrap my brain around those concepts). Different brokers also offer different pip spreads on the various currency pairs. For example, FXCM unfortunately offers 5 pips for GBP/USD (too bad as it is one of my favorite pairs to trade and scalp), so once you become more advanced then you might want to have two or more accounts with various brokers to take advantage of the best that they have to offer. Some brokers have lower pip spreads than others (i.e. you can get 2 pip spreads on some of the majors œ if your account is large enough), but some of those brokers don‘t have their spreads —fixed“, meaning that they can widen during volatility (but is generally not a problem for most of the time). FXCM is fixed (good for you). Some brokers have streaming executable prices, meaning that the price you click on is the price you get (even if the market has already moved), whereas some brokers —request for quote“ meaning that if you are experiencing a shooting market (rapid price changes) then y our trade might fail to be entered (can be frustrating at times). Unfortunately FXCM seems to me to be one of those. There are many brokers to ch oose from. Just to name a few more here are some others: GFTforex, XpressTrade, CMSforex, FXsolutions, etc… (like I said, there are others. Google —forex b roker“, or look through trading magazines if you want to find more.) There are more issues to be aware of in choosing a Forex broker, but what I‘ve covered here present some of the most important considerations. Generally speaking, stick with the bigger, more popular brokers. Befo re dedicating your funds to any in particular it is wise to get demo accounts with several that you might use to give them a test drive. Initially it is best to use one broker (FXCM or RefcoFX is a good choice for your first account), but later (once you‘ve gained some experience) get some more real accounts with other brokers so that you can take advantage of the stuff that is better with them. FXCM isn‘t the absolute b est broker in the world œ nor is an y broker in my opinion (they aren‘t my primary broker, but I wouldn‘t recommend my primary broker to novice traders as they are one of the more —complicated“ ones). Th ey all have their strengths & weaknesses. I have selected FXCM to
18
___Forex Scalping
be the broker that all the examples of this eBook use simply because it would be difficult and confusing to write this eBook trying to explain the examples with multiple broker variables. I had to pick one, and FXCM is the one I went with. It is (in my personal opinion) the easiest and best choice for a novice trader to start trading with, an d so that is also wh y I am using FXCM as the broker for all the examples of this eBook. They are, fo r scalp trading techniques, one of the better, and easiest to work with brokers. If you are one of those people that insist on find ing what you prefer then feel free to test out the demo versions of a bunch of brokers, but if you are willing to just take my reco mmen dation then go with FXCM (or RefcoFX) to start with. At the time of this writing it is the broker I would most recommend to the average & beginner trader, however if I later change my mind I‘ll be sure to provide my latest recommendation within the online resources section. Additional Tip: Most brokers don‘t always honor your stop orders during extreme volatility such as around Fundamental Announcements. At the time of this writing there is a broker that is currently honoring stops even in those volatile times, and in the eBook —Forex Sailing“ I‘ll tell yo u who they are. CHARTS For Forex Scalping you‘ll need charts providing a live data feed from the same Forex broker you are trading with (very important!). If you are trading with FXCM then use charts provided by FXCM, if you are trading with RefcoFX then use charts provided by RefcoFX (use this logic for whatever broker you are trading with). It is important that you use charts using a live data feed from the same broker you trade with because there can be slight discrepancies between brokers than can negatively affect your trading. For the purpose of scalping it is fine to use the free charts provided by your broker as the free charts should have everything you need to scalp with. It is however a good idea to subscribe to a paid version of your favorite charts as you‘ll have so me more flexibility (i.e. having multiple charts open simultaneously). The chart view you‘ll be using most fo r scalping is the one-minute candle view over 24 hours. Simply zo om in until y ou can clearly see the individual candles. You will be using other views such as hourly and five-minute candles for other purposes.
19
___Forex Scalping
PRACTICE ACCOUNT I would strongly recommend that before you start scalp trading with real money (even if you are already an experienced Forex trader) that you first get a demo account with the broker you intend to trade real money with to practice. I STRONGLY URGE YOU to practice scalping in your demo account for at least a month (accomplishing a minimum of 20 trades, but more is better) before trading with real money. Remember, if you can‘t make money in a demo account you won‘t magically become successful just by transitioning to real money. After you have succeeded in a demo account next trade a small amount of real money in a mini account to continue practicing (as your psychology will change as a result of trading real vs. fake money) before gradually moving up to trading with the full account size you intend to be trading. BROKER SPREADS & TRADABLE CURRENCIES Because of the nature o f scalping (going for the smallest possible trade typically using an initial stop of just 10 pips) you need to trade only on the currency pairs with the smallest pip spread. Here is a screen shot taken of FXCM‘s spreads at the time of this writing (applicable to both mini and regular trading accounts).
20
___Forex Scalping
As you can see their fixed spreads range from 3 pips (on EUR/USD & EUR/GBP) all the way up to 15 pips (on EUR/AUD & GBP/CHF). It is best to stick with the currency pairs that are just 3 or 4 pip s (I‘ll explain why shortly). Too bad that GBP/USD has a 5 pip spread as it is generally my favorite currency pair to trade, but generally speaking it is best to stay away from the pairs with 5 pip spreads, and absolutely don‘t trade the higher spread currency pairs. Thus for the above mentioned reasons (at the time of this writing as brokers may change spreads in the future) currently for FXCM the currency pairs that are tradable with these scalping techniques are: Scalpable Currency Pairs EUR/USD EUR/GBP USD/JPY EUR/JPY AUD/USD NZD/USD Why only trade these currency pairs? Allow me to explain. Later in this eBook I will elaborate upon stops used in these trading methods, but I‘ll simply state here that generally you will initially b e using 10 pip stops. What this really means is that the market only has to move 10 pips less your spread against you to get you stopped out. EUR/USD & EUR/GBP has a 3 pip spread thus the market needs to only move 7 pips against your direction from point of entry for you to lo se your full 10 pips. Thus the odds of you scoring a 10 pip gain are actu ally 30% against you from the start. The other currency pairs listed above have a 4 pip spread, thus the market needs only go 6 pips against you on a 10 pip stop for you to lose out (40% against you from the start). The currency pairs with a 5 pip spread can still be traded in special circumstances, but in general it is best to shy away from these for what sh ould now be obvious reasons. All the other currency pairs with higher spreads are absolutely not traded. PIP PADDING In my previous eBook —Forex Surfing“ I extensively discussed the importance of adding pips to entry orders (in the section titled —Broker‘s Pip Spread“). In some resp ects you won‘t need to worry about this for most scalping purposes,
21
___Forex Scalping
but it is still important to be aware of especially if you‘ll be using entry orders. In this eBook I won‘t be discussing this topic at all, but I strongly urge you to reread that section from within —Forex Surfing“. OVERVIEW OF THE TECHNIQUES Here is a general overview of what scalping is like. I‘ll talk in generalities here but will certain ly go into specifics later in this eBook. This section is just to giv e you a taste for how a ty pical trade goes. You watch your charts for specific market conditions to occur. Once you see a potential opportunity you begin to watch your charts very closely for the right moment to act. Once the desired circumstance occurs you pounce to enter a trade. Your trade is entered with a stop set at 10 pips below your entry price. If all go es poorly (it happens often when scalping) you‘ll lose your 10 pips. If things go well (as you hope) then ultimately the market will move in your direction (it might h ave first dipped back a bit before proceeding ). Once it moves sufficiently far you promptly replace your stop to your en try price to prevent a loss. Now you are in a —free trade“ so hopefu lly you can make a profit without any further risk. Hopefully the market doesn‘t pull back to stop you out, and once it moves sufficiently far enough you again replace your stop so that you are now secured with a 5 pip p rofit. What comes next will depend on current market factors, and you‘ll have to make a judgment call about how you will proceed with the trade. If by you r assessment of what you see on your charts you think that the market is about to pull back you could simply exit the trade at the current market price to get the most profits out of the small market movement. Alternately, if you believe that the market may retrace a little but is likely to resume in a micro trend then you migh t choose to remain in the trade, trailin g your stops as taught in —Forex Surfing“ and either exiting by getting stopped out for a nice profit o r by scalping your exit (explained later in this eBook) at the appropriate time for an even greater profit. The advantage of letting your trade run (when appropriate) is that you can potentially score some very significant pips in a single session.
22
___Forex Scalping
STOP FREQUENCY You‘ve probably guessed by now that getting stopped out is common when scalping. It can get aggravating at times so you need to be mentally prepared for experiencing frequent stops. Sometimes I swear it‘s like I‘m psychic or something for setting my stops to the exact pip to get stopped out just before the market dramatically turns around and soars into the profit zone. When you first start scalping you ‘ll likely find that these stops may drain you emotionally but after a experiencing them quite a few times you‘ll learn to not get upset by getting stopped out for loss. You need to develop the skill of ascertaining when to enter a trade that will likely go in your favor. Then the o bjective is to qu ickly move up your stops to reduce loss and then to secure a profit ASAP. Often you‘ll be stopped out or will volu ntarily exit for small 5 pip profits. What you strive to do is to be cunning and when appropriate leave th e trade enough breathing room (not suffocating it by trailing your stops too closely) to potentially catch some larger pips (for scalping I consid er anything over 20 pips to be a large trade œ scoring 100 pips on a single trade is spectacular). When looking at risk/reward ratios it soon beco mes apparent that on trades that exit with a 5 pip profit your risk/reward is 2:1. Obviously this isn‘t desirable. If all y ou feel you can capture is 5 pips (or you simply get stopped out for 5 pips) then let that be good enough, but what y ou need to strive for are sufficient amounts of larger trades (20+ pips) to account for the bulk of your profits. Needless to say that some days will be better than others (and some days you‘ll even end up a net loser). EQUITY MANAGEMENT I won‘t stress the impo rtance of eq uity management principles here as I have written sufficiently about this subject in my other eBooks. I strongly encourage you to reread those sections in the other eBooks and be sure to adhere to the guidelines presented. In scalping it is best to maintain a maximum risk of 2% on any single trade, however when starting off it would be even better to reduce it to just 1% at least initially while you are still learning. If you are following the —Forex Freedom“ plan your risk levels will be higher, and the justification for this is explained in my eBook —Forex Sailing“.
23
___Forex Scalping
To help you quantify this here is a chart of how many lots you could trade depending on h ow much you have in yo ur trading account. If you have already figured out how many lots you can trade doing —Forex Surfing“ techniques (2% at 20 pip stops) then simply use the same amount of lots as it‘ll automatically maintain the proper proportion for your 1% since you are trading with typically half the stop size. This chart shows approp riate lots amounts (based on the 10 pip stop) against various margin account sizes. Keep in mind that once your account surpasses $100k you should scale your maximum down to 1% to even 0.25% (not shown) when you reach a million to preserve your equity from substantial drawdowns. This chart shows the maximum —Amount(K)“ you can trade based on the 10 pip stop. Remember, 10K = 1 mini lot, and 100K = 1 regular lot (or 10 min i lots). Account Size 1% 2% $300 <10k stop =" open" 2="160" surfing =" Easier" scalping =" Bigger" pip =" $1," 3 =" 6.9,"> books learning photos
===========================================================
What is Forex | what isforex trading, learn forex, trade forex, forex books, forex videos, forex strategys, forex expert advisors, forex indecators, mt4 download, how to trade forex What is forex, What is forex trading, What is forex, What is forex trading, What is forex, What is forex trading, | What is Forex | What is Forex |What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex | What is Forex
