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.

US Dollar Index Update as at November 27, 2016



Bearish AB = CD




 US Dollar dropped back a little on Friday having reached a 13 year high on Thursday, it still ended up for the week.

There is great speculation that the US Federal Reserve may hike interest rates in December and there is anticipation of better economic reports on the horizon.

United States housing starts are at the highest rate since August of 2007.

Jobless claims are at their lowest since 1973.

All of these are contributing to a strong US Dollar.


Wednesday, November 23, 2016

Hidden Divergence Trading Strategy AUDUSD

The Aussie is about ready for a short entry.

AUDUSD 4 hour chart
AUDUSD 4 hour Chart
 The pair has already turned south and the divergences are very clear.

Note that the Kijun Sen and Tenkan Sen have crossed indicating an entry, however, I am a bit cautious at this point.

I would wait wait until the PPO (lowest chart) crosses to get confirmation.

The price of iron ore has increased substantially in the past couple days which boosted the currency, however the rise and strength of the US Dollar has offset that, hence my caution.


Video about Hidden Divergence


Ichimoku Kumo Renko Trading System Update as at November 23, 2016

A few pairs have broken out of the Kumo lately and led to some nice entries.

Here is a selection, note that the bars are ten pip Renko bars.


USDJPY is doing nicely after falling back to the Kumo a couple times.
USDJPY




NZDUSD climbed through the Kumo only to fall bac with the resistance being strong and now looks to go lower.
NZDUSD





AUDUSD has failed at the Kumo and dropped back
AUDUSD




EURUSD has fallen again with the sharp rise in the US Dollar recently
EURUSD


Canadian Dollar Update as at November 23, 2016

The Loonie is going lower this morning having climbed for a few days.

USDCAD
USDCAD
The strength of the US Dollar and  the weakness in the price of oil has caused the Canadian Dollar to fall.

Retail Sales in September have risen 0.6 percent while oil is falling away from recent highs.

Sweet Light Crude is just above $47.50 at this time and appears to be prepared to go further south.

The US markets have been quite strong lately based on expectations of the Trump government.



The remainder of this week will have little in the way of announcements in Canada.

News in the United States has been generally positive this week, stengthening the markets there.

Tuesday, November 22, 2016

Hidden Divergence Trading Strategy




Hidden Divergence as a trading strategy is a phenomenon that is occurring on every time frame almost every day and it offers a trader an easy way of spotting entries without spending a lot of time every day, especially if trading from a four hour chart.

There are some excellent books on Technical Analysis that cover Divergence,  First I would recommend Momentum, Direction, and Divergence By William Blau and Technical Analysis for the Trading Professional by Constance Brown.


We can regard Divergence as a leading indicator most of the time, it is a measurement of price action related by indicators such as OSMA and Stochastic Oscillator. Some people use Macd or RSI or CCI, I prefer the combination of OSMA and Stochastic.

I have an excellent discussion about divergences from the Ensign Software site as appeared in their newsletter in July 2002, written by Vaughan Kirkpatrick


Divergence Cheat Sheetby Vaughan Kilpatrick
It's about higher highs and lower lows.  If you find them in price, but not in the oscillator, you have regular divergence.  If you find them in the oscillator, but not in price, then it's hidden divergence.
Higher Highs => Short
Lower Lows => Long
At first this seemed to me like the opposite of common sense, so I had to think about it for a while.  I finally got it that it means when higher highs or lower lows in either price or an oscillator aren't confirmed by the other, then the direction indicated by the extremes, meaning the higher highs or lower lows, is weak and is likely to change.
If the higher highs or lower lows are in price but not the oscillator, then the direction of price is likely to reverse.  This is regular, or classic divergence and can be used as a confirming indicator for a reversal entry.

Regular divergence describes a price trend change that will probably happen in the future, albeit shortly.  On the other hand, hidden divergence is a confirming indicator of past price direction.
We have hidden divergence when we have higher highs or lower lows in the oscillator but not in price.  In this case the direction indicated by higher highs or lower lows in the oscillator is contradicted by the price trend.  Unlike regular divergence, where the weakness in price trend is about to lead to a reversal; here the weakness has already led to a little reversal against the trend.  The hidden divergence implies that this recent little reversal in price direction will be short-lived and that price will resume moving in the direction of the trend.  This is exciting because it can confirm a continuation entry, which is generally much less risky than a reversal entry.  What you have here is the opportunity to enter on a pullback of the current trend, which you expect to continue based on this and whatever other indicators you choose.  This is trading with the trend, nice and friendly; however, please heed the following warning.

Warning:  I consider divergence to be an indicator, not a signal to enter a trade.  It would be unwise to enter a trade basely solely on this indicator as too many false signals are given; however, on the other hand, I consider it even more unwise to trade against this indicator.
Thanks to NQoos for sharing his knowledge in the NQ/ES Paltalk room and providing so many wonderful examples of divergence in his great charts posted at www.dacharts.com.  Also thanks to Dave Shedd and Buffy for bringing us all together and for freely and generously sharing their time and knowledge.












SUMMARY OF FOUR TYPES OF DIVERGENCE

Regular Divergence:
  • Higher highs in price and lower highs in the oscillator which indicate a trend reversal from up to down.
  • Lower lows in price and higher lows in the oscillator which indicate a trend reversal from down to up.
Hidden Divergence:
  • Lower highs in price and higher highs in the oscillator which indicate a confirmation of the price trend which is down.
  • Higher lows in price and lower lows in the oscillator which indicate a confirmation of the price trend which is up.
On the diagram, the diagonal lines represent the trend lines drawn on a chart showing how each of the four patterns look with price above and the oscillator below.  On the two price lines, going either from right to left or left to right, the reversal of the diagonal lines shows the direction to be expected by each instance of divergence.  In each of the four instances of divergence, when price is headed up, green, chances are good it will turn down, red, and vice versa.

Copyright © 2003 - Ensign Software

Hopefully Hidden Divergence can become a part of your trading strategy toolbox.



In the next post I will present some current Hidden Divergences

Compare Forex Brokers

From time to time a trader will want to know if he is using the right broker for his style and needs. There is a huge number of Forex brokers to choose from. They are located in many countries and jurisdictions and have differing requirements.

I have located a couple sites that do some comparisons, in fact there are several sites that offer comparisons, lets have a look at a couple.

BabyPips.


Here is a partial look at their comparison screen



As you can see, there is a lot of detail available, you can compare up to three brokers at a time, great for decision making. You can access the BabyPips broker comparison here.


Compare Forex Brokers


This company does a comparison for a few Australian Forex brokers. They compare only a few criteria such as Low fees, High Leverage..... not really as good as what BabyPips seems to offer. The site is located here.


forex-brokers.credio


This company provides a comparison for more than 200 Forex Brokers using criteria such as Account size, Leverage and Spread. And they have a rating system.
Here is a look at their screen:



You can access their comparison here


Of course it is important whether you are an experienced or new trader to be absolutely comfortable with your choice of broker. It is a great idea to look at many firms and make your selection. Using these broker comparison screens may enhance your decision making.

There are many more places offering comparisons for Forex Brokers, these are merely an introduction as to what is available.

Monday, November 21, 2016

Gold Analysis as at November 21, 2016

Is There a Bottom Yet?



Gold has had a bit of a move upwards in the past couple days, perhaps the recent slide is finished.


Gold Chart
Daily Gold Chart

Recent announcements  regarding interest rate rises and government expenditures in the US are causing some degree of uncertainty leading to a demand for Gold.

“Bets on a steeper Fed rate hike path after the U.S. presidential election have undermined demand for anti-fiat and non-interest-bearing assets,” including gold, said Ilya Spivak, currency analyst with Daily FX. “A lull in top-tier news flow may allow for a corrective retracement in the week ahead, but prices will probably remain highly sensitive to headline risk as the [President-elect Donald] Trump cabinet takes shape.”





Here is a chart of the US Dollar Index showing  some retrace as a result of the recent policies in the US. At this point traders are uncertain as to when interest rates may rise and there is some concern as to the budget proposals of the new President of the US.



Daily Chart of US Dollar Index
US Dollar Index daily chart

Ichimoku Kumo Renko Trading System Update as at November 21, 2016



AUDUSD

AUDUSD
AUDUSD




The Aussie has fallen close to 6 percent since the US Election, partially due to the fall in the preice of Iron Ore and the prospect of a rate increase in the US.
Although there is a bit of a retrace occurring presently, some people expect the decline to continue to approximately .6500.
The Renko bars on this chart are ten pip bars, you can see that they contain the price action nicely.


EURNZD

EURNZD
EURNZD


This pair has reached what appears to be a double bottom and may be starting to reverse its fall. However, many expect the Euro to reach parity or close to it with economic and political uncertainty in Europe. Meanwhile the New Zealand Dollar seems to have discounted the recent earthquake although the damage is estimated at close to NZ$2.5 billion.


EURUSD

EURUSD
EURUSD


The US Dollar has been benefiting from expectations of an interest rate rise recently and some of the enthusiasm has started to wane a bit in recent trading. The run up has lasted for about ten days and traders have eased off on their  buying. You can see that price is entering the Kumo at this time, we will have to wait for a while to see if there is a long transaction.

You can see that the Renko bars combined with the Ichimoku Kumo make an excellent combination for scalping.

Thursday, November 17, 2016

Ichimoku Kumo Renko Trading System For Scalpers

Ichimoku Kumo Renko Trading System For Scalpers Can Be Easily Set Up.

 

Forex Chart with Renko and Ichimoku Kumo


This trading strategy using the Ichimoku Kumo (Cloud) Tenkan sen is a very profitable and simple scalping system. The first caution is that a stop loss must be used.

Chart Setup.

We need a 1 minute chart for each pair to be traded. I suggest only two or three charts as you will be busy when the markets are moving and there will be a lot of profits and opportunities for trade entries.
On each of those charts place the expert adviser for making offline charts and set the Renko brick size to three.
Here is an illustration of the Renko Expert Adviser settings

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Once those are set up, open the offline charts and add the Ichimoku Kinko Hyo indicator as shown on the chart.
Here is a pic of the settings for the Ichimoku Kinko Hyo indicator for this system.


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You can see that I have blanked out two of the components by changing their color to ‘none’.

The Trade Entries.

We enter when the price and Tenkan sen have crossed the Kumo…. sounds simple enough.
A proviso…….. if there is no trend…….. you will get stopped out. You will have to ensure a trend.
You can observe the Kumo and decide if the trend is satisfactory. With experience you will be able to spot the trend with ease.

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