Forex Scalping.

Forex scalping is one of the most profitable techniques in forex trading. To perform forex scalping, you will only have to open and close your trading positions for a very short period of time. If done right, you will be able to generate profits easily. Although you may only earn a small amount, the times you will work here are shorter. So, imagine getting a few dollars for one minute of work. One of the reasons why there are people who try forex scalping is because it is quick in nature. The profits that are gained can build up really fast. In addition, you do not have to risk your money because since it will not cause a huge differential in the prices for buying and selling transactions. Therefore, most people view this as a safe technique.

If you want to do forex scalping, you should know the rules here. You should be able to exit your position speedily especially if the movement of the market does not appear to be in your favor. You will have to make quite a number of forex scalping trading transactions for one day alone. Usually, you can perform ten up to a hundred or even more if you want. You should not pray that the direction of the market will turn around and do not hold on to a position that is clearly losing.

Now that you are well aware of the rules, you will have to focus on your objective, which is to buy or sell a currency pair at the ask or bid price. To profit, you will have to sell them for a little higher pips. Here, you will have to make sure that you have a well devised exit strategy in forex scalping so that you will not accumulate large losses.

Most of those who make use of the forex scalping strategy utilize one minute, five minutes or hourly charts. Also, they have to select a good brokerage company that will provide the best platform so that they can execute their orders effectively. If you want to be a part of forex scalping, you can follow the step by step process here. The first procedure in forex scalping is to visit a reliable website that lets you check the release time for the important data. Next is to take note of the previous day’s open, close, low and high positions. Then, you should be able to make out the candlestick studies, which can be found on the daily charts.

After you have identified the candlestick readings for your forex scalping, you will have to classify the major trend lines including the support and resistance in the charts. From here, you will be able to discover the sentiments of the market for the day, whether it is bullish or bearish. Proceed by going to the hourly charts where you will once again have to find out the support and resistance. On the hourly chart, you will have to watch out for the candlestick formation. Now the last step for forex scalping requires you to regulate your risk to an entry level. This should be done as soon as you are 10 pips in the cash.

Actually, forex scalping is not hard to implement given that you have correctly invested your time in making researches about this particular strategy. You should not venture into this market if you are not prepared. In reality, this is much safer than the other forex methods and this is one of the main causes why this technique is attractive for the traders.

Average True Range.

You may have read that many traders use the average true range for setting their stop losses. The reason is that the average true range is a fantastic measure of volatility and market noise.

Very simply, the average true range (ATR) determines a security’s volatility over a given period. That is, the tendency of a security to move, in either direction.

More specifically, the average true range is the (moving) average of the true range for a given period. The true range is the greatest of the following:

# The difference between the current high and the current low
# The difference between the current high and the previous close
# The difference between the current low and the previous close

If the current high-low range is large, chances are it will be used as the True Range. If the current high-low range is small, it is likely that one of the other two methods would be used to calculate the True Range. The last two possibilities usually arise when the previous close is greater than the current high (signaling a potential gap down or limit move) or the previous close is lower than the current low (signaling a potential gap up or limit move). To ensure positive numbers, absolute values were applied to differences.













Calculation:

True Range is the greatest of the following three values:

* difference between the current maximum and minimum (high and low);


* difference between the previous closing price and the current maximum;


* difference between the previous closing price and the current minimum.

The indicator of Average True Range is a moving average of values of the true range.

Alligator Indicator.

Introduction:

Alligator indicator consists of 3 lines. They are Moving Averages with various parameters. Here they are:

The First line, or the chap of alligator, is a line of balance to the considerable period of time. It's used for the chart constructing - 13 period smoothed shifting average, moved on 8 bars to the future. The Green line, or the lips of alligator, is the line of balance for the considerable period of time, which is one more step less - 5 period smoothed shifting average, moved on 3 bars to the future. The Red line, or the teeth of alligator, is the line of balance for the considerable period of time, which is one step less - 8 period smoothed shifting average, moved on 5 bars to the future.

Interpretation :

How to interpret the lines? When all of them are jolloped, it means that the "Alligator" is sleeping, and the more it sleeps the more hungry it gets. Of course, when it wakes up after long sleep, it's very hungry and starts "hunting for food", which is price, till it is glutted. As soon as it happens, it looses interest to the food, which is price, and then the balance lines meet at the same point. It's when you should fix your profit. It's time to close all positions and wait till Alligator awakes up next time.

Awesome Oscillator.

Awesome Oscillator Technical Indicator (AO) is a 34-period simple moving average, plotted through the middle points of the bars (H+L)/2, which is subtracted from the 5-period simple moving average, built across the central points of the bars (H+L)/2. It shows us quite clearly what’s happening to the market driving force at the present moment.

AO signals to buy:

* "Saucer" is the signal to buy which appears when the direction changes from the downward to upward with the second column is lower than the first one and is colored red and the third column is higher than the second and is colored green. It is generated when the bar chart is higher than the nought line.

* "Nought line crossing" is a signal to buy which appears when the bar chart passes from the negative values to that of positive. Two columns are necessary for it: one of them has to be below the nought line while another has to cross it.

* "Two tops" signal is generated when the bar chart values are below the nought line and when a top pointing down is followed by another one which is higher thus closer to the nought line. If the bar chart crosses the nought line in the area between the tops, the signal to buy is not generated. If an additional higher top is formed and the bar chart has not crossed the nought line, an additional signal to buy will appear.

Calculation:

Awesome Oscillator bar graph is a difference between 5-periods simple moving average, built on central points of the bar (H+L)/2 and 34-periods simple moving average built on central points of the bar (H+L)/2.
MEDIAN PRICE = (HIGH + LOW) / 2 AO = SMA (MEDIAN PRICE, 5) - SMA (MEDIAN PRICE, 34)

Where:

MEDIAN PRICE - median price;
HIGH - maximum bar price;
LOW - minimum bar price;
SMA - simple moving average.

Accumulation Distribution (AD).

After AC lets talk about Accumlation/Distribution(AD). The more expanded the volume of trade is the more noticeable the price changes will be. Accumulation/Distribution Technical Indicator is determined by the changes in price and volume. This indicator is a less commonly used variant of the indicator On Balance Volume. When the Accumulation/Distribution indicator grows, it means accumulation of a currency, as the overwhelming share of the sales volume is related to an upward price movement. When the indicator drops, it means distribution (or selling) of the currency, as most of sales take place during the downward price trend.

Divergences between the A/D indicator and the currency price indicate the upcoming change of prices. As a rule, in this case, the price tendency moves in the direction in which the indicator moves. For instance, if the indicator is growing, and the price of the security is falling, a soon turnaround of price is expected.














Calculation:

* Description: Accumulation Distribution (AD) is a comparison of the price movement and the current range, with the result being used to weight the current volume.
* Calculation:
AD = ((Close - Open) / (High - Low)) * Volume

Trading Use:

Accumulation Distribution is usually used as a divergence indicator, with long entries signaled by bullish divergence, and short entries signaled by bearish divergence. Accumulation Distribution can also be used as an exit indicator, by showing the end (or the weakening) of the current trend.

Accelerator/Decelerator (AC).

Accelerator/Decelerator (AC) is an oscillator that measures activation or deactivation of the driving force on the market. It changes its direction before any changes in the direction of the price take place. This oscillator has much in common with Awesome Oscillator, but unlike AO, the crossing of the zero line is not a buy/sell signal.

Accelerator/Decelerator is mostly used to predict the change of the driving force on the market. When AC is at the zero line it means that the driving force is at balance with the acceleration. When AC crosses the zero line and goes up or down the only thing that should be traced is the change of the color of the bars.

Interpretation:

The nought line is basically the spot where the driving force is at balance with the acceleration. If Acceleration/Deceleration is higher than nought, then it is usually easier for the acceleration to continue the upward movement (and vice versa in cases when it is below nought). Unlike in case with Awesome Oscillator, it is not regarded as a signal when the nought line is crossed. The only thing that needs to be done to control the market and make decisions is to watch for changes in color. To save yourself serious reflections, you must remember: you can not buy with the help of the Accelerator Decelerator Oscillator, when the current column is colored red, and you can not sell, when the current column is colored green.

Methods of use:

1. When the chart is above the zero line and there are two green bars, it is a signal to buy.
2. When the chart is below the zero line and there are two red bars, it is a signal to sell.

How To Use Moving Average For Your Profit.

Now we going to discuss that how we can use moving average to out advantage. As we already aware moving average is a lagging forex indicator which means that it is slow and it can only tell you what had just happened instead of telling you where the price is likely to move. However, by utilizing this lagging forex indicator together with repetitive price patterns, you can then form a reliable forex trading system to use.

If you have been seen a forex chart, you will notice that the price is constantly fluctuating up and down making it tough for you to visualize price action. What moving average does for you is to give you a visualizing line that can allow you to see the price movement.

Other than using the gradient of the moving average as a trend indicating tool, you can also make use of this forex indicator to place your trade. One of my favourite method of using moving average is the crossover.

This is what you need to do with this forex indicator:

Step 1: Set up a long term EMA (50 EMA)

Step 2: Set up a short term EMA (20 EMA)

Step 3: Observe the crossover of these two lines

If the short term moving average is above the long term moving average, this is known as the golden cross and it usually indicates that the trend is moving up. If the short term moving average is below the long term moving average, this is know as the death cross and it usually indicates that the trend is moving down.

This does not means that you should trade every crossover as it can be very devastating to your account. What you need to do is to make use of trend line or trend wall to help you place your trade. Remember this, you should only trade when there is a trend line break. If you are looking for forex indicator to use for your trading, you must add moving average to your toolbox.

Different Types Of Moving Average.

Now we are going to discuss different types of moving average(MA):

Simple Moving Average (SMA)

Simple, in other words, arithmetical moving average is calculated by summing up the prices of instrument closure over a certain number of single periods (for instance, 12 hours). This value is then divided by the number of such periods.

The volatility of the forex market is much more smoothed at the long periods of time due to the equal weight given for the daily price by SMA. Only the long-term trends bay me seen out of the long-term averages as far as any insignificant fluctuations get smoothed. For finding put short-term trends the short-term averages are taken, however they still give the long term expense.

The prices are mostly located close to the moving average but still aside from it. The moving average changes following the trend changes giving the additional data of the trend strength taking the slope steepness as its basis.

Exponential Moving Average (EMA):

Exponentially smoothed moving average is calculated by adding the moving average of a certain share of the current closing price to the previous value. With exponentially smoothed moving averages, the latest prices are of more value. P-percent exponential moving average will look like:

As moving averages are sometimes applied for the trend defining, they can also be used to see whether data is opposing the trend. Entry and exit systems usually compare data to a moving average to determine if it is supporting a trend or starting a new one. That's why the exponential moving average is just one of the types of a moving average.

In an ordinary moving average, all price data has the same weight in the calculation of the average with the oldest eliminated value as each new value is added. And in the exponential moving average equation as the average is being measured the most recent market action gets greater importance. Still the oldest pricing data in the exponential moving average is never eliminated.

A sell signal occurs if the short and intermediate term averages cross from the top to the bottom the longer term average. On the contrary, a purchase signal happens if the short and intermediate term averages cross from bottom over the longer term average. If you trade only 2 exponential moving averages in a crossover system it's better to use longer term averages.

It's rather important to know that a 5-day exponential moving average usually consists of over 5 days worth of data and can comprise data from all the life of a futures contract. So such moving averages can be more successfully searched by their actual "smoothing constants," as the number of days of data in the computation remains equal for the 5-day average as for the 10-day average. Exponential calculations are held at various moving average values depending on the point you start with.

Weighted moving average:

A weighted average is any average that has multiplying factors to give different weights to different data points. Mathematically, the moving average is the convolution of the data points with a moving average function; in technical analysis, a weighted moving average (WMA) has the specific meaning of weights which decrease arithmetically. In an n-day WMA the latest day has weight n, the second latest n − 1, etc, down to zero.
By looking at the moving average of the price, a more general picture of the basic trends can be seen MA are useful for smoothing raw, noisy data, such as daily prices. Price data can change greatly every day without demonstrating if the price is increasing or decreasing.

Moving averages can be used to see trends, that's why they can also be used to predict if data is bucking the trend. A weighted moving average is measured by multiplying each of the previous day's data by a weight. The weight in its turn is based on the number of days in the moving average. In this example, the first day's weight is 1.0 while the value on the most recent day is 5.0. This gives 5 times more weight to today's price than the price 5 days before.

Soothed Moving Average:

A Smoothed Moving Average is sort of a cross between a Simple Moving Average and an Exponential Moving Average, only with a longer period applied. The Smoothed Moving Average gives the recent prices an equal weighting to the historic ones. The calculation does not refer to a fixed period, but rather takes all available data series into account. This is achieved by subtracting yesterday’s Smoothed Moving Average from today’s price. Adding this result to yesterday’s Smoothed Moving Average, results in today’s Moving Average.

In a Simple Moving Average, the price data have an equal weight in the computation of the average. Also, in a Simple Moving Average, the oldest price data are removed from the Moving Average as a new price is added to the computation. The Smoothed Moving Average uses a longer period to determine the average, assigning a weight to the price data as the average is calculated. Thus, the oldest price data points in the Smoothed Moving Average are never removed, but they have only a minimal impact on the Moving Average, which is similar to how an Exponential Moving Average places more weight on the more recent data.

Meaning Of Forex Trend Indicators And Introduction Of Moving Average Indicator.

Trend indicators in Forex reflect three tendencies in price movements:

Up moves, Down moves and Sideways price moves.

Trend indicators help defining the prevailing direction - trend - of the price moves by smoothening price data over certain period of time. In simple words, Trend indicators allow to visualize Trends in the market.

MOVING AVERAGE INDICATOR:

Moving averages are one of the most popular and easy to use tools available to the technical analyst. Moving average Forex indicator is the average price for a given time interval in relation to other prices during the similar time periods. For instance the closing prices over a 5-day period would have a moving average of the total of the five closing prices divided by five.

A moving average is an average of a shifting body of data, as seen from its name. For example, a 10-day moving average is got by adding closing prices for the last 10 periods being measured and dividing by 10. The term "moving" is used as only the last 10 days are used in the measurement. That's why the data body is averaged shifted forward with every next trading day.

The moving average line will be placed directly in the price shifting chart. The moving average is measured with a definite predefined period. The sensibility of the moving average is weaker if the period is longer. The probability of false signals is higher if the period is shorter.

Warning Signs.

Here are few warning signs for forex trading to save yourself from any fraud dealing:

1. Stay Away From Opportunities That Sound Too Good to Be True.

2. Avoid Any Company that Predicts or Guarantees Large Profits.

3. Stay Away From Companies That Promise Little or No Financial Risk.

4. Don't Trade on Margin Unless You Understand What It Means.

5. Question Firms That Claim To Trade in the "Interbank Market"

6. Be Wary of Sending or Transferring Cash on the Internet, By Mail or Otherwise. Be especially alert to the dangers of trading on-line.

7. Currency Scams Often Target Members of Ethnic Minorities.

8. Be Sure You Get the Company's Performance Track Record.

9. Don't Deal With Anyone Who Won't Give You Their Background.

How To Start With Forex Trading.

Well, after discussing some basic terms and other information lets talk about how to start with forex trading? This question is common among new investors that how to enter in forex trading so lets deal with it. To get started, once you've located a brokerage you would like to work with, you should open up a demo account, so you can start making practice trades. When you are ready to open a real account, its a good idea to also keep your demo account open. You will be able to test alternative trades with your demo account, which gives you the ability to keep learning and testing strategies. You will also be able to see if you are being too liberal or conservative in your real account, by testing out different trade amounts in your demo account and comparing the outcomes.

To become more successful with Forex, research is the name of the game. If you tend to jump in first and ask questions later, you may want to be a little more deliberate, and start by understanding the basics of how the market works, such as the trading terms and terminology that are used in Forex. There are many tutorials available on the Internet, and much of the basic information can be accessed at no cost. So, all the best.

Disadvantages Of Automated Trading.

After discussing advantages of Automated Trading now lets talk about few disadvantages:


1. Success Is Not Guaranteed:

Although you may use the automated Forex trading software, there are no guaranteed successes by just depending on the software itself to make you earn high profits of money. Since the trading market depends and directed by some factors such as the economy, the political state of a country or the future strategies of big companies, a trader is still required to have some knowledge and an amount of study before setting up their trading commands. As stated earlier, the system can be programmed by you to follow your individual needs. It means that the automated Forex trading system is not exactly mechanical that you don’t need to know anything at all.

2. You Will Miss The Learning Opportunity:

If you like the use of an automated trading software system, the thing is you will miss all the knowledge other non-automated traders know when they don’t use an automated system in Forex trading. The automated Forex trading system also does not tell you how it is running. But you can still understand it if you go look up the results.

Automated Forex Trading And Its Advantages.

Okay, these days Automated Forex Trading is getting popular so lets learn about it. Automated Forex Trading operates precisely the way the name suggests. An extremely sophisticated piece of software utilizes complex formulas to choose the best time to trade currency. Then, depending on the type of software you have, it will either indicate the action you need to take or make the trade automatically for you. You surely understand how exhausted to monitor the price movement in forex market for the whole day just to wait for the right moment to do the transaction. Few other advantages of Automated Forex Trading are as following:

1. Not Exhausted

The best thing about the system is that it earns money for you without requiring you to watch over them as they run. As the name implies, an Automated Trading Software of Forex simply means a software system that does foreign currency trading automatically without having the trader to supervise his trading all the time. The software is already programmed in a format of automated trading bots. Everything that is required by a trader is just an internet connection and a computer to get the system run! And an account to start trading of course.

2.Accuracy

Trading Software forces you to trade based on concrete rules. This eliminates the emotional and psychological aspects of trading, which I have always thought is a good thing. The mind is very complicated and it is very easy to see things that aren't really there or to find reasons why you think you should enter a trade or take profit or cut your losses. Many times you will get caught up in the moment, especially when volatility is high. You see the price move quickly and want to jump in and chase without any clear entry signals. Or you think price is way to high, it can't go any higher, but then it does. Trading software eliminates all of these problems.

3. Uptodate Information:

The Forex Automatic Trading Software allows the traders to setup the strategy of their trading systems and the software will automatically generate trades according to the setup. The Forex trading system is able to run on a number of factors at once such as the multiple technical indicators and the market conditions. You can generate signals according to the custom trading systems that you set up. You can also set the system to create orders automatically and later perform trades when a signal of buy or sell is generated. The automated Forex trading software is also programmed to allow you to visually back test your trading systems. You can see them on a historical chart data where you can verify if your trading strategies are running effectively.

Different Statistics To Be Remember(Part 2).

Payroll Employment:

Payroll employment is a measure of the number of people being paid as employees by non-farm business establishments and units of government. Monthly changes in payroll employment reflect the net number of new jobs created or lost during the month and changes are widely followed as an important indicator of economic activity.

Payroll employment is one of the primary monthly indicators of aggregate economic activity because it encompasses every major sector of the economy. It is also useful to examine trends in job creation in several industry categories because the aggregate data can mask significant deviations in underlying industry trends.

Large increases in payroll employment are seen as signs of strong economic activity that could eventually lead to higher interest rates that are supportive of the currency at least in the short term. If, however, inflationary pressures are seen as building, this may undermine the longer term confidence in the currency.

Durable Goods Orders:

Durable Goods Orders are a measure of the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. Monthly percent changes reflect the rate of change of such orders.

Levels of, and changes in, durable goods order are widely followed as an indicator of factory sector momentum.

Durable Goods Orders are a major indicator of manufacturing sector trends because most industrial production is done to order. Often, the indicator is followed but excludes Defence and Transportation orders because these are generally much more volatile than the rest of the orders and can obscure the more important underlying trend.

Durable Goods Orders are measured in nominal terms and therefore include the effects of inflation. Therefore the Durable Goods Orders should be compared to the trend growth rate in PPI to arrive at the real, inflation-adjusted Durable Goods Orders.

Rising Durable Goods Orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates that are often supportive to a currency at least in the short term.

Retail Sales:

Retail Sales are a measure of the total receipts of retail stores. Monthly percentage changes reflect the rate of change of such sales and are widely followed as an indicator of consumer spending.

Retails Sales are a major indicator of consumer spending because they account for nearly one-half of total consumer spending and approximately one-third of aggregate economic activity.

Often, Retail Sales are followed less auto sales because these are generally much more volatile than the rest of the Retail Sales and can therefore obscure the more important underlying trend.

Retail Sales are measured in nominal terms and therefore include the effects of inflation. Rising Retail Sales are often associated with a strong economy and therefore an expectation of higher short-term interest rates that are often supportive to a currency at least in the short term.

Housing Starts:

Housing Starts are a measure of the number of residential units on which construction is begun each month and the level of housing starts is widely followed as an indicator of residential construction activity.

The indicator is followed to assess the commitment of builders to new construction activity. High construction activity is usually associated with increased economic activity and confidence, and is therefore considered a harbinger of higher short-term interest rates that can be supportive of the involved currency at least in the short term.

Different Statistics To Be Remember(Part 1).

Trade Balance:

The trade balance is a measure of the difference between imports and exports of tangible goods and services. The level of the trade balance and changes in exports and imports are widely followed by foreign exchange markets.

The trade balance is a major indicator of foreign exchange trends. Seen in isolation, measures of imports and exports are important indicators of overall economic activity in the economy.

It is often of interest to examine the trend growth rates for exports and imports separately. Trends in export activities reflect the competitive position of the country in question, but also the strength of economic activity abroad. Trends in import activity reflect the strength of domestic economic activity.

Typically, a nation that runs a substantial trade balance deficit has a weak currency due to the continued commercial selling of the currency. This can, however, be offset by financial investment flows for extended periods of time.

Gross Domestic Product:

The Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity available. Reported quarterly, GDP growth is widely followed as the primary indicator of the strength of economic activity.

GDP represents the total value of a country's production during the period and consists of the purchases of domestically produced goods and services by individuals, businesses, foreigners and the government.

As GDP reports are often subject to substantial quarter-to-quarter volatility and revisions, it is preferable to follow the indicator on a year-to-year basis. It can be valuable to follow the trend rate of growth in each of the major categories of GDP to determine the strengths and weaknesses in the economy.

A high GDP figure is often associated with the expectations of higher interest rates, which is frequently positive, at least in the short term, for the currency involved, unless expectations of increased inflation pressure is concurrently undermining confidence in the currency.

Consumer Price Index:

The Consumer Price Index (CPI) is a measure of the average level of prices of a fixed basket of goods and services purchased by consumers. The monthly reported changes in CPI are widely followed as an inflation indicator.

The CPI is a primary inflation indicator because consumer spending accounts for nearly two-thirds of economic activity. Often, the CPI is followed but excludes the price of food and energy as these items are generally much more volatile than the rest of the CPI and can obscure the more important underlying trend.

Rising consumer price inflation is normally associated with the expectation of higher short term interest rates and may therefore be supportive for a currency in the short term. Nevertheless, a longer term inflation problem will eventually undermine confidence in the currency and weakness will follow.

Producer Price Index:

The Producer Price Index (PPI) is a measure of the average level of prices of a fixed basket of goods received in primary markets by producers. The monthly PPI reports are widely followed as an indication of commodity inflation.

The PPI is considered important because it accounts for price changes throughout the manufacturing sector.

The PPI is often followed but excludes the food and energy components as these items are normally much more volatile than the rest of the PPI and can therefore obscure the more important underlying trend.

Studying the PPI allows consideration of inflationary pressures that may be accumulating or receding, but have not yet filtered through to the finished goods prices.

A rising PPI is normally expected to lead to higher consumer price inflation and thereby to potentially higher short-term interest rates. Higher rates will often have a short term positive impact on a currency, although significant inflationary pressure will often lead to an undermining of the confidence in the currency involved.