Wednesday, December 14, 2016

Will You be Great At Forex Scalping?





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Most traders have heard of scalping. Forex Scalping is practised by many traders and there are many variations of methods.

A brief explanation of scalping from Investopedia.

Scalping, at least in trading, is a term used to denote the "skimming" of small profits on a regular basis, by going in and out of positions several times per day. Scalping is not unlike day trading in which a trader will open a position and then close it again during the current trading session; in other words never carrying a position into another trading period or holding a position overnight. Whereas a day trader may look to take a position once or twice, or even a few times a day, scalpers are much more frenetic and try to skim really small profits multiple times in a session. And whereas a day trader may trade off the five-minute and the 30-minute charts, scalpers will often trade off of tick charts and one-minute charts. In particular, some scalpers like to try and catch the high-velocity moves that occur around the time of the release of economic data and other important news events, such as the release of the employment statistics or GDP releases if that is what is high on the economic agenda.


Day Traders and swing traders like to use the longer time frame charts such as 30 minute up to daily charts, whereas a scalper is much more at home on a tick chart or 1-minute chart. The scalper wants to catch small moves and get out with a quick profit of 5 or 10 pips. The Swing  Trader would probably want to profit by 300 or 800 pips. Quite a difference between how these types of traders operate.

Who Can Be A Forex Scalper

The answer to that question can be simple or complex. Anyone can be a scalper but their personality may or may not suit this type of trading.

Scalping suits the person who is prepared to sit watching the trading screen for a few hours each day and pay strict attention to the charts and execute trades with precision.

It does not suit a person who wants to be able to go out for coffee or visit the trading forums or read the news. Without strict focus, a trader will lose out on opportunities or, even worse, experience serious losses because of inattention.

There are certain times each day when scalping can be profitable and other times when there is little chance of profits. To be successful at scalping a person has to be watching his charts at the right time, even if that is the middle of the night in his timezone.

A scalper has to be disciplined, well practised with entries as there is often little time for deliberating when opportunities arise. He has to know what entry criteria he will use and be able to recognise instantly when the situation arises and then quickly enter the trade.

As opposed to the scalper, a swing trader may have as long as a day to enter a trade, lots of time to research and do studies to evaluate the entry.

What Can Go Wrong With Scalping?

It is best to be aware of pitfalls of this type of trading as there are some that can be very costly.

  • Power outages can leave the trader extended if he has open orders.
  • Internet failures can prevent trade monitoring.
  • Latency can cause missed entries and exits.
  • Rapid moves in the market can cause stop loss orders to be ignored.
  • Brokers may be offering re-quotes which are disadvantageous to the trader.
  • The broker may be actually trading against the trader and holding back orders to improve their position.

A forex scalper has to be aware of this type of problem and he has to do his due diligence well ahead of starting to trade. It is well known that it is very difficult and time-consuming to recover funds lost in a trade.

What Does the Forex Scalper Need to Start?

  • A detailed written Trading Plan
  • Low spread broker
  • Precise Method for entering trades
  • Fast Internet connection
  • Strict discipline and focus
  • Reliable trading platform
  • Broker support telephone number
  • Detailed trade journal for recording entries
  • Exceptional capacity for handling stress


With these factors considered and prepared for a person can start to develop the strategy that he will use for trading and incorporate that into his written trading plan. The reason for the written plan is to ensure that there is something to refer to before trading and after the trades for the day are closed out.

It will take practise to make sure that the trades are being executed according to the plan and a demo account is recommended for this purpose. It may take a period of six months to a year of practice and develop the trading plan before things are ready for real account trading.


Which Currency Pair is Best for Forex Scalping?



There are many views as to which may be best currency pairs to trade, perhaps as many as there are traders.

The criteria have to be based on what is necessary for a profitable entry, not on whether the pair is a “Major’ or ‘Carry’ or ‘Exotic’. The reality is we can be scalping Indexes or CFD’s or stocks or bonds or futures……. The name does not matter and I have seen so many articles attempting to segregate the instruments.

Some scalpers feel that they want a pair with a low spread, good liquidity and volume. In many cases, the EURUSD pair offers those.

It would be wise to investigate a few different brokers for spreads and execution speed and latency as there is a wide variation.

Some brokers do not like rapid trading and they make that known in their documentation.

The reason that I mention these is that each broker will have a different method for different pairs and that is well worth investigating.

Further, you may find that the brokers are inflating the spread in the times that are best for scalping thereby removing your profits.

Some brokers with fixed spreads, merely requote your orders to reduce your profitability, and some of them have software which is geared to work against your order. Metaquotes brokers are often using such software, it is best to investigate carefully all aspects.

All of that being said, there is no ‘best’ currency pair to scalp with, a trader has to investigate many aspects and make his own determination.


I can not stress enough that to do forex scalping a trader has to exercise his own due diligence in many areas.



Thursday, December 8, 2016

US Dollar Update as at December 8, 2016




The US Dollar has been moving higher this morning, having drifted lower earlier in the day.

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Part of the reason for the rise in the Dollar is the announcement by the European Central Bank that it will extend its Quantitative Easing Program for 6 months.

As ECB President started his speech, the Euro started to fall.


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Tuesday, December 6, 2016

Gold Analysis as at December 6, 2016

Gold is causing the bulls some grief this week as it is just not quite ready to move higher. A brief flurry after the results of the election in Italy quickly eased off and the metal is sitting in a range.

Expectations of an interest rate rise in the United States is providing a damper on any price rise.

Recent economic numbers from the United States indicate that the US economy is doing well, Gold had risen on the expectation that a Trump Presidency would bring volatility to the market and that has not happened. Instead, the markets have risen sharply since the US Election and the price of Gold has drifted lower.

At present the price of GOLD is hovering at close to a ten month low while markets and bond yields are moving higher.

Monetary restrictions in India have contributed to a decline in demand for Gold from the jewellery industry.

There are some signs of a future price rise on the technical charts.


First, a Bullish Fibonacci Pattern on the Weekly chart

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On this chart , Daily, there is some bullish Divergence showing;

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However, the Gold price at this time is stagnant and until investors start to move money into Gold it will not be moving far.

I have located an excellent article that I am copying into here in its entirety. This is a very detailed research into the management of Gold and well worth reading a few times.


Wednesday, November 30, 2016

3 Excellent Forex News Sites










There are many sites  that provide excellent news and news summaries. I have selected these three for today as they each offer something unique and also very valuable to a trader.

A trader has only so many hours in a day and needs access to news quickly for decision making purposes. These sites are  quite different from each other and present very useful aspects.



These news sites I peruse often when looking for updates as to what might be happening with different currencies.

Some of these sites offer perspectives based on the economies of the countries involved and some of them are focused on news announcements.

They are listed in no particular order as each has its own merits and would be hard to be rating them as best or second best . These are all excellent.

ForexFactory


ForexFactory has a comprehensive news site featuring very current articles from many sources around the web.

Excellent about ForexFactory news is that you can select different views so as to be able to focus on certain areas.


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Each news item can be assigned an ‘Impact’ rating to easily indicate which news has potential to affect the market and there is the facility to drill down with each item to see the forecast expectations.








The ForexFactory site is simply huge. The forum has thousands of threads and there are many, many posts per minute. This is a favorite for many traders.




MyFxBook


This site has some unique features for news. The Economic Calendar shows the upcoming news announcements with their impact and what is great about this page is that it gives the time remaining and then a notification as the time approaches.








 As well as news from the web they offer some great charting news as shown in the diagram. You can drill down to see what candlesticks are showing on different  time frames currently.








The Heat Map is also current and updated frequently, a valuable tool when checking for trends.






In addition they offer ‘Social Trading’ which allows an investor to follow the trades of successful accounts and copy those into their own accounts.The My FxBook site is a very busy site based on the services which are offered, particularly the strategy analysis and news features.




Finance Magnates


This site is a huge news site devoted to many aspects of news for business as well as traders. It was originated in 2009 by Michael Greenberg, initially to cover the Forex industry and has since involved into a gigantic news source.
There are many different categories of news on the site, and also a huge selection of resources for business, developers and traders.
One very interesting section is the Interviews, videos of interviews with industry leaders.
Because there is so much to look at on the site and the news is being updated constantly, there is a sidebar showing the last article posted, this feature is very handy for someone looking through the site.
One aspect of the sitye that is a deterrent is that a lot of the pages take a while to load and that may prove to be annoying to some site visitors.





Sunday, November 27, 2016

Hidden Divergence AUDUSD

Hidden Divergence is great for pointing out what may be a trade that continues in the direction of the trend.



60 minute chart of AUDUSD


This chart shows a super specimen of Hidden Divergence doing what it is supposed to do.

While price had been making higher lows the oscillators had been making lower lows....... and sure enough price continued the upward trend.

For more about Hidden Divergence click here.

Gold Analysis as at November 27, 2016



Gold price has recently slipped to about a 9 month low, although today there is some sign of a recovery.


The decline in Gold is caused partially by the rise in the US Dollar and the prospect of rising interest rates in the next month or so.

There may be a further decline in months to come, however, currently it appears to be oversold and will probably rise.

Three charts below this paragraph indicate Fibonacci Patterns that are bullish. (Fibonacci Patterns do not have 100 percent reliability)

Weekly




Daily




4 Hour

Despite the good news about a rise in the price of Gold, there is reason for caution, as follows:

By Jordan Roy-Byrne, CMT, MFTA from Gold Seek  http://news.goldseek.com/GoldSeek/1480266000.php
Last week we wrote that the 2016 bull market in Gold and gold stocks had gone off course. It had moved too far out of the historical boundaries to remain a bull market. There was also other evidence of such including but not limited to rising real yields. Gold’s last hope was to hold $1200-$1210 and rebound back to the highs. It has broken bull market support ($1200-$1210 and $1230) and could be on its way to $1050 in the next few months.