PIP PADDING

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 respects you won’t need to worry about this for most scalping purposes,
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 certainly go into specifics later in this eBook. This section is just
to give you a taste for how a typical 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 goes 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 have first dipped back a bit before proceeding). Once it
moves sufficiently far you promptly replace your stop to your entry price to
prevent a loss. Now you are in a “free trade” so hopefully 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 profit.
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 your 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 might choose to remain in the trade, trailing
your stops as taught in “Forex Surfing” and either exiting by getting stopped
out for a nice profit or 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.