Support And Resistance On Chart.

Support

A support level is the price at which buyers are expected to enter the market in sufficient numbers to take control from sellers.

The market has a memory. When price falls to a new Low and then rallies, buyers who missed out on the first trough will be inclined to buy if price returns to that level. Afraid of missing out for a second time, they may enter the market in sufficient numbers to take control from sellers. The result is a rally, reinforcing perceptions that price is unlikely to fall further and creating a support level.

Resistance

A resistance level is the price level at which sellers are expected to enter the market in sufficient numbers to take control from buyers.

When price makes a new High and then retreats, sellers who missed the previous peak will be inclined to sell when price returns to that level. Afraid of missing out a second time, they may enter the market in numbers sufficient to overwhelm buyers. The resulting correction will reinforce market perceptions that price is unlikely to move higher and establish a resistance level.












Role Reversal

Support levels, once penetrated, frequently become resistance levels and vice versa.

The market logic is fairly simple: buyers who purchase near a support level, only to see price fall, are likely to sell in order to recover their losses, when price rallies to near their break-even point. The support level then becomes a resistance level.















Likewise, stockholders who sell when price approaches a resistance level will be disappointed if price penetrates the level and continues to rise. They will be inclined to buy if price returns to near the support level, fearing that they may miss out a second time. The resistance level thus becomes entrenched as a support level.

Support And Resistance Trading.

The concepts of support and resistance are undoubtedly two of the most highly discussed attributes of technical analysis and they are often regarded as a subject that is complex by those who are just learning to trade. This article will attempt to clarify the complexity surrounding these concepts by focusing on the basics of what traders need to know. You'll learn that these terms are used by traders to refer to price levels on charts that tend to act as barriers from preventing the price of an asset from getting pushed in a certain direction.

Support And Support Levels:

Support level is defined as the price level at which point the demand level is strong enough to stop the trading price from declining further. When prices reach this support level it is more likely to bounce off this level, than to break through this level.

The support level indicates the point at which the trading price becomes cheaper and traders become more interested in buying, giving way to a support level where sellers become less interested in selling.

When prices reach the support level it is proved that the increase in demand will outweigh the supply and prices will be stopped from falling below the level of support. When prices decline below the level of support, there is an indication of new willingness to sell. This may also be the case if there is a new unwillingness to buy.

Once the level of support breaks, the cycle will repeat from the start – A decrease in price will awake new interest in buying and a new level of unwillingness to sell -giving way to a new level of support This will form the new lower-level support level.

Support trading can usually be found below the current price, but it is not impossible to trade at or very near support. Support levels are not always easy to identify due to various factors. Price movement is by nature volatile and prices may briefly dip through the support level, before returning upwards. Predicting the point, at which a price is considered to be breaking through the support line, comes with experience and research. Some will only consider this breakpoint if the price closes 1/8 below the current established support level.

Resistance and Resistance Level:

Resistance level is defined as the level at which selling is considered strong enough to hamper the price from increasing any further. The level of resistance theory defines that as a price moves towards resistance, sellers become more willing to sell, and buyers in turn become more unwilling to buy. When the price reaches the level of resistance, supply will outweigh demand and the price will be prevented rising through the resistance level. A break above the resistance level predicts a new willingness to buy and a new lack of interest in selling.

Resistance will not always be strong enough to hold and a breakout might not always be able to break. The bulls must win the bears over before a breakout can be formed. Once the current resistance level has been broken through, the process will repeat and a new higher level of resistance is establishes.

Fibonacci Retracement:Golden Ratio.

This function calculates the Fibonacci retracement 61.8% level, also referred to as 'the golden ratio'. It uses simple vector-based functions to do this. The function accepts one parameter which is the lookback period to use to define the highest and lowest close prices.
Fibonacci retracement is a very popular tool used by many traders. It is based on the key numbers identified by mathematician Leonardo Fibonacci to calculate the Fibonacci ratios. These ratios levels are then used to identify critical points that could cause an asset's price to reverse.

First of all we need to determine the difference between the highest and lowest close prices for the defined lookback period. We store this data into a variable whose name is (dif). The second step is to try to determine which of the highest or lowest close price occurred first; this is done using the (BarsSince) formula. Depending on the last result, we calculate the 61.8% level. In case the highest close price happened before the lowest close price, the variable 'dif' (calculated previously) is multiplied by 0.618. In the other case, the same variable 'dif' is multiplied by (1 - 0.618). We finally add the lowest close price value to the 61.8% level value and plot the resulting time-series.

We can create a bar chart that displays the difference between the current price and the 61.8% Fibonacci level by subtracting this level to the close price.

In order to create a time-series that plots other Fibonacci ratio levels like the 23.6% ratio or the 38.2% ratio, you just need to change the "level" variable. For the 23.6% level, just replace the value (0.618) by (0.236). You can also easily tweak the code and offer the possibility to define the Fibonacci ratio level by adding another parameter to this function.

Fibnacci Extension Levels.

In this article we are going to throw ligh ot the Fibnacci Extension Levels. Three most used Fibonacci extension levels are 0.618, 1.000 and 1.618. Also 1.382 extension can be applied as well.

















In the above picture we are in the uptrend. Lowest swing — point A — is 120.75;
highest swing — point B — 121.44.

To calculate retracement levels and enter Long at some point C we do next:

Calculations for Uptrend and Buy order:

B — A = ?
121.44 — 120.75 = 0.69

0.382 (38.2%) retracement = 121.44 — 0.69 x 0.382 = 121.18
0.500 (50.0%) retracement = 121.44 — 0.69 x 0.500 = 121.09
0.618 (61.8%) retracement = 121.44 — 0.69 x 0.618 = 121.01

Fibonacci retracement levels formula for an uptrend:

C = B — (B — A) x N%

Now we need to calculate extension levels:

0.618 (61.8% ) extension = 121.44 + 0.69 x 0.618 = 121.87
1.000 (100.0%) extension = 121.44 + 0.69 x 1.000 = 122.13
1.382 (138.2%) extension = 121.44 + 0.69 x 1.382 = 122.39
1.618 (161.8%) extension = 121.44 + 0.69 x 1.618 = 122.56

Fibonacci extension levels formula for an uptrend:

D = B + (B — A) x N%


Our next example is downtrend:
















Highest swing — point A — is 158.20; lowest swing — point B — is 156.44.

Calculations for downtrend and Sell order:

A — B = ?
158.20 — 156.44 = 1.76

Because of the downtrend we need to add to the lowest point B to find retracement.

0.382 (38.2%) retracement = 156.44 + 1.76 x 0.382 = 157.53
0.500 (50.0%) retracement = 156.44 + 1.76 x 0.500 = 157.32
0.618 (61.8%) retracement = 156.44 + 1.76 x 0.618 = 157.11

Fibonacci retracement levels formula for downtrend:

C = B + (A — B) x N%

Now let's find Fibonacci extension levels (downtrend):

0.618 (61.8%) extension = 156.44 — 1.76 x 0.618 = 155.35
1.000 (100%) extension = 156.44 — 1.76 x 1.000 = 154.68
1.382 (138.2%) extension = 156.44 — 1.76 x 1.382 = 154.01
1.618 (161.8%) extension = 156.44 — 1.76 x 1.618 = 153.59

Fibonacci extension levels formula for downtrend:

D = B — (A — B) x N%

Understanding The Term Fibonacci Retracement.

Fibonacci retracements are percentage values which can be used to predict the length of corrections in a trending market. Most popular retracement levels used for the forex trading are 38.2%, 50%, and 61.8%. In a strong trend you can expect the currency prices to retrace a minimum of 38.2 percent; in a weaker trend corrections may go as far as 61.8 percent. The 50 % is the most widely monitored retracement level and is a common area to buy in the up trends or sell in the down trends. If a correction exceeds one of the retracement levels - look for it to go to the next (e.g. to 50% after the 38.2% level or to 61.8% after the 50% level). Whenever the prices retrace more than 61.8% of the previous move (on a closing basis) you can expect them to return all the way back to the beginning of the trend.

Fibonacci Trading Introduction.

Fibonacci theory as we know it today originated from a 13th century Italian mathematician by the name of Leonardo of Pisa, otherwise known as Leonardo Fibonacci. His work that eventually led to such mainstream technical analysis standards as Fibonacci retracements originated from a sequence of numbers that led to the discovery of the Golden Ratio, approximately 1.618. This ratio can be found in many areas of nature, science, music, and, very importantly, the financial markets. This includes the forex market.

The so called Fibonacci number sequence first appeared as the solution to a problem in the Liber Abaci, which was a book written by the mathematician in 1202 and introduced the Arabic numerals presently used to Europe when it was limited to Roman numerals.

The actual problem that was solved with this famous numerical series dealt with the propagation of rabbits, of all things.

The question to be solved was essentially, starting with only one pair of rabbits, how many pair could be generated if each mature pair "delivers" a new pair each month, which itself becomes productive in the second month.

The solution starts with a 0 and 1, and each new number is the sum of the previous two numbers
(0 + 1 = 1; 1 + 0 = 1; 1 + 1 = 2; 1 + 2 = 3;
3 + 2 = 5; etc). Or as a more acceptable expression
in the world of mathematics:

Fn+1 = Fn + Fn-1.

This leads to the following infinite series: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.

Fibonacci found that this series of numbers and their ratios to each other surprisingly are prevalent throughout nature and can be found even in human nature.

The ratio of any number to the next larger number in this series (e.g., 55 to 89), approaches 0.618, or 61.8 %, and this as well as its inverse (0.382 or 38.2 %) become important Fibonacci retracement numbers which will be further discussed in the next article.

Likewise, the ratio of the next larger number to any number in the series (e.g., 89 to 55) approaches 1.618, and this very significant number is known as the "golden ratio", "golden mean", and "divine proportion", among other names.

This number was highly significant to both Greek and Egyptian cultures and had important implications in areas of art and science. It was also utilised in the construction of many buildings in those cultures, including the pyramids and the parthenon.

This ratio can even be found in the Holy Bible. Two such examples are the ratios in the proportions of the Ark of the Covenant (Exodus 25:10) and the construction of Noah's Ark (Genesis 6:15).

This ratio (1.618), also known as "phi", is found all around the world today.

For instance, in the human body, the proportion of the distance from the head to the finger tips vs the total body height has this ratio. Likewise, the distance from the navel to the elbows vs. the distance from the head to the finger tips.

Even the program for all life on this planet, the DNA molecule, is based on this same ratio. It measures
34 Angstroms (a very small unit of measurement) long by 21 Angstroms wide for each full cycle in the double helix spiral. As can be seen in the series shown above, 34 and 21 are successive Fibonacci numbers with their ratio approaching phi.

One final, galactic example is in recent (2003)studies based on data taken from NASA's Wilkinson Microwave Anisotropy Probe (WMAP) on cosmic radiation background that suggest that the universe is finite and shaped like a dodecahedron. This geometric shape is based on pentagons, which are based on phi.

Many more examples could be given which demonstrate how the world and our lives are impacted by the applications of Fibonacci numbers but I think you get the point in the few examples that were given here.

Understanding The Forex Lingo(2).

Measuring the Transaction Cost:

The important aspect of the bid-ask spread is that this is used to measure the transaction cost of a round turn trade. A round turn is defined as both a buy trade and an offset sell trade having the same size of similar currency pair. In the example using the EUR/USD exchange rate of 1.2812/15, the transaction cost will be equal to three pips.

Here is the formula for calculating the transaction cost:

Transaction cost = Ask Price – Bid Price

Knowing the Cross Currency:

When you refer to cross currency, it means any pair where the U.S. Dollar is absent. If you trade in cross currency, you might experience erratic behavior or movement of price. That’s because you triggered an action which actually involves two USD trades.

Here is an example: a long Buy EUR/GBP is equals to buying EUR/USD while selling GBP/USD. The transaction cost for cross currency trades are normally higher.
Recognizing the Margin

If you open a new margin account with any Forex broker, you will be required to deposit a minimum amount in your account. The minimum deposit varies from broker to broker. This could be as low as $100 or can be higher up to $100,000.

When you execute a trade a percentage of the balance in you account will be allocated by the broker. This is called initial margin requirement. The basis of this margin requirement are underlying currency pair, existing price, and lots traded. The size of the lots is based always on the base currency.

If you have a mini account with a leverage of 200:1 or 5 percent margin, you will trade in mini lots. 1 mini lot will be equivalent $10,000. You will only need $50 for this mini lot ($10,000 x .5% = $50).

Recognizing the Leverage:

Leverage in Forex allows increasing trading accounts values by literally allowing traders operate with virtual money. For each real dollar trades fund their account with, Forex brokers ad more funds, increasing traders buying/selling capabilties on the currency market. A leverage of 200:1, for example means that for each dollar invested a broker adds 200 dollers on top, making the trading account 200 times larger. Thus, funding your account with $1000 at 200:1 leverage would enable you to oprate a $200 000 account.

Only traders with really large accounts may afford trading Forex without leverage. For all other traders leveraging their investments is often the only way to participate in Forex currency trading and be able to operate large trading lots while make reasonalbe profits from trading forex.

Understanding the Margin Call:

You have to be ware of margin call because all traders fear this. A margin call occurs when the broker tells you that you do not have sufficient balance in your account. This could be a result of losing an open position.

Margin trading is profitable. However you need to understand its risks. Be very sure that you thoroughly understand your margin account. You also have to read the margin agreement of the broker. You should ask your broker about this before you agree to anything.

If your account falls below the required security margin, some or all of your open positions will be closed and liquidated. There are cases when a margin call will not be received before the open positions are liquidated.

You can avoid margin calls by monitoring your existing balance. You also have to employ stop loss orders on all positions. This will minimize your risk.

Understanding Forex Lingo.

As a novice or newbie trader, you have to learn the lingo of Forex before you ever think first ever trade. Some of the lingo or Forex terms you have learned already. Still, have a look to understand these terms:

Learning the Major and Minor Currencies:

There are eight commonly traded currencies at the Forex Market. USD, EUR, JPY, GBP, CHF, CAD, NZD, and AUD. These currencies are called the Majors or major currencies.

The rest of the currencies are commonly called as minor currencies. You do not have to worry about these minor currencies. They are there for professional use only.

Base Currency:

In foreign exchange markets, the base currency is the first currency in a currency pair. The second currency is named the quote currency (counter currency, terms currency). Exchange rates are quoted in per unit of the base currency. Note that FX market convention is the reverse of mathematical convention.

Currently the euro has first precedence for base currency; as a result, all currency pairs involving it should have the euro as the first currency. For example, between the US dollar and the euro the exchange rate will be identified as EUR/USD; the number is the amount of US dollars that can be traded for one euro.

The currency hierarchy for the majors is as follows:

* Euro
* Pound sterling
* Australian dollar
* New Zealand Dollar
* United States dollar
* Canadian Dollar
* Swiss franc
* Japanese Yen

Quote Currency:

In foreign exchange markets, the quote currency is the second currency in a currency pair.

The quote currency is also known as the counter currency.

If looking at the EUR/USD currency pair, the U.S. Dollar is the quote currency, and the Euro is the base currency.

Understanding The Pip

A pip is the smallest price increment in forex trading - pip stands for percentage in point.

Prices are quoted to the fourth decimal point in the forex market - for example EUR/USD might be bid at 1.1914 and offered at 1.1917. In this example we can see that the spread is 3 pips wide. The Japanese Yen (JPY) is an exception - it is quoted only to the second decimal point.

There is an exception for quotations for Japanese Yen against other currencies. For currencies in relation to Japanese Yen a pip is 0.01 or 1 cent. Then if you are trading USD/JPY in $100 000 lots, one pip will be equivalent to $1000.

Knowing the Bid Price

Bid simply means the price that the market is willing to buy for a particular currency pair. At this price, you will be able to sell the base currency. It is shown on the left of the quotation.

To illustrate, the quote for GBP/USD is 1.8812/15. Bid price is set at 1.8812. This simply means that you can sell 1 British Pound for 1.8812 U.S. Dollars.
Identifying the Ask Price

On the other hand, the ask is the selling price that market is willing to take for a particular currency pair. In this case, you will be able to buy the base currency. It is shown on the right of the quotation.

Here we will quote EUR/USD at 1.2812/15. The ask price set is 1.2815. Basically, you will be able to buy 1 Euro for 1.2815 U.S. Dollars. This is also commonly known as the offer price.

Knowing the Bid/Ask Spread

The difference between the bid and ask prices is called the spread. A dealer expression called “the big figure quote” refers to the first few digits of a specific exchange rate. These digits are not included in the dealer quote.

To give you an example, the USD/JPY exchange rate could be at 118.30/118.34. Dealers however will verbally quote this in terms of 30/34.


Continued....

Mini Forex Account.

As we discussed in the last article there is two types of account that a trader can open, but for a new trader it is advisable that he should open Mini Forex account first and gain some knowledge before opening a regular account. Mini forex account trading is a great method for investors with small amount of capitals to understand and join in the forex market. With a deposit of only $ 100, you can control a currency position of $ 10,000 as the majority of the forex brokers offer a 100 : 1 leverage.

Mini forex account can also give the beginner forex traders some ideas of trading, find out the tricks, and discover the strategies in order to be successful in the forex trading with no need to risk too much money. As what the most of today’s experienced and successful forex traders had implemented, you also should begin your forex trading with mini forex account.

The mini forex account obviously suitable for the beginner forex traders as it is beneficial to assist the traders to train and develop their trading, with less worry of achieving the targeted gain or loss.

In this type of forex account, the traders still will be able to access to all the features in the regular and full size of forex account. When you trade in the mini forex account, you can get the same tools, information, alerts, charts, graphics, indicators, and others. By having exactly the same features, it can contribute towards implementing successful strategies without the fear of missing out any big chance to make profit in the forex market.

There are other advantages when you trade in forex mini account. The forex mini account is available in small size of 10,000 units. You can start trading with a small amount of money of around $ 100 - $ 300. This will be useful before you start trading in regular or full size of forex account. You can try to trade in a forex mini account by dealing with one mini size lot only, and soon after that you can opt to place more mini lots.

The forex mini account traders are not restricted to trade only one lot at a time. Therefore, it is a perfect for you to enhance your experience in forex trading as well as build up your confidence. If you want to make a regular lot trade, you can just simply make ten mini lots trade.

Every forex trader interprets the forex market in their own ways, therefore they ask for numerous prices in accordance to their various chances and benefits. The broker will then shows the highest bid and the lowest ask price.

As you know the forex mini account entails a high leverage, which is 100 to 1 obviously because this is a normal application in the forex mini account trading and it is a normal degree of leverage. In addition to that, the risk for the forex mini account traders is counterbalance by the small loss risk that they may be made in forex mini account trades.

Normally, the average loss in forex mini account is only one tenth of the similar amount that traders could be losing in the forex regular account. For this reason, it is easier to apply a better self discipline in your forex trading strategy, as it is not so hard to allow a small amount of loss to go, in comparison to a larger amount of loss which could influence the traders to keep much longer and that is not so good forex trading strategy.

Another advantage of the forex mini account is that, due to the high degree of leverage in the forex mini account trading, you can make a series of small lots trades. This way, you can have more choices available and apply different forex trading strategies which is crucial for your forex trading learning and practices towards success.

When your risk is obviously cut down, so does your chance of incurring loss due to the low capital employed in contrast to the forex regular account trades.

Once you are gaining profit in your forex mini account trades consistently and your winning trades are much more than the losing trades, thenit is time to apply this knowledge, and experience to get in into the challenging forex market by trading in the forex normal account with bigger capital and bigger lot sizes.

However, just like any other type of trading, the forex mini account also has some drawbacks. There were some forex mini account traders who have made big amount losses which have caused by the incorrect leverage selection, interpreted wrongly the news announcement, short technical failures of forex trading technical tools, graphs, and charts, placed gutless points as well as less protection and unreasonable thought of forex trading.

You should set up in the beginning and then keep to your principles of risk management in your forex trading strategies and hold onto your stop loss points in order to maintain the safety trades. It is recommended that you can only lose around $ 200 when you trade in the forex mini account.

How To Open A New Forex Trading Account.

There are three easy steps to complete in starting a new online trading account with a Forex broker, namely:

1. An account type selection

2. Sign up

3. Account activation

Consider opening a demo account prior to trading a cent from your well-deserved money. In fact you may practice with two or three demos since it is free. Test a number of various brokers to get a feel for the one that suits you.

Different Account Types

To open a Forex trading, if you are prepared to open a live account, has options of signing up an account under your personal name or a business name. Moreover, there is an option on opening a "standard" account or a "mini" account (or "micro" account if offered). It is suggested that inexperienced traders or traders with little capital to trade ought to open a mini account. A standard account is for the veteran traders who have plenty of capital to trade.

Read the fine print at all times

When you want the broker to do the trading of your account then there is a “managed account” option in the functions for some brokers. However, you are here to gain the knowledge of Forex trading then do not opt for that. A managed account also requires a very large minimum deposit of $25,000 or higher and take note that a portion of the revenues goes to the broker.

Ensure as well that the account opened is a Forex spot account and not a “forwards” or “futures” account.

Sign Up for an Account

Sequentially to open an account some paperwork, which varies for each broker, are required for submission. Most commonly, these are made available in PDF format and can be seen and printed using Adobe Acrobat Reader program.
Information on Your Account Activation

The directions on completing your account activation will be sent through email when the broker has obtained all the important paperwork. When these steps are done then a final email with your username, password, and directions on how to fund your account will be sent.

How To Chose Right Broker For You.

You need to have an account with a broker before you can trade at the Forex market. So, how can you spot a broker? Simply said, a broker can be an individual or a company. The broker buys and sells orders based on the decision of the trader. Brokers take profit through commissions or fees for their rendered services.

There are so many brokers who will offer their services to you. You might feel overwhelmed. You need to make a little research before taking the offer of any broker. The time you spend researching will provide you with valuable insights about different broker services and fees.
Check if the Forex broker is registered

You need to determine the regulating agencies that exercise authority over the broker. Essentially, the Forex market is an unregulated market. Reactive regulation is the typical practice. This means that you will only get action after you lose your entire savings.

Forex brokers in the United States should be registered as a Futures Commission Merchant. The Commodity Futures Trading Commission exercise regulatory powers over them. The brokers should also be a member of the NFA. These agencies were created to protect you from abusive trading practices, fraud, and manipulation.

You will be able to verify the status of the Forex brokers with the Commodity Futures Trading Commission and NFA. Registration of a broker as well as its membership can be checked by phoning the NFA at (800) 621-3570. You can also visit the NFA web site at www.nfa.futures.org/basicnet/. Here you can find basic information about the broker and its history of disciplinary actions. Stick with registered brokers and choose those with excellent financial and clean record. Always avoid unregulated brokers.

The NFA seeks to boost its campaign to educate investors like you about Forex trading. They have a brochure called “Trading in the Retail Off-Exchange Foreign Currency Market.” This brochure is worthy of a Pulitzer Prize. Before you dive into the Forex market, the NFA highly recommends that you read this book.

The NFA also has an interactive and self directed program called Forex Online Learning Program. This program explains the intricacies of trading and the shows to you the risks involved in the trading at Forex. You can get the brochure and take the online learning program at no cost to you.
Check the Customer Service

You need 24 hour customer service from a broker because Forex is open 24 hours a day. Check if you can contact the broker either through phone call, live chat, or email. When you speak with representatives, determine if they are knowledgeable. Different Forex brokers offer different qualities of customer services. So it would be best if you can check this out before you open an account.Choose several brokers and try to contact their support service. If they respond quickly then this could be a good indicator that they will respond faster to your needs.


On the other hand, do not trust a broker if your queries cannot be answered satisfactorily. If you also did not get fast replies, then you better look for other brokers. Of course, you should be aware that sometimes, pre sales services are better than post sales services.
Types of Online Trading Platform

When checking out a forex broker, do look for these details:

1. Margin provided (usually 1-4%)

2. Their spreads for the currencies you’ll be trading (the EURUSD will usually be 3-4 pips)

3. Amount of funds required to start an account

4. Any fees for small trade sizes (many don’t charge fees for smaller trade sizes, but some do)

5. Any other fees (there will be rollover fees for positions held overnight with any provider, which are usually small, though the details of this fee can vary)

6. Whether the broker automatically closes your position if the position goes against you by the entire value of your account not used as margin for that trade (not that you’re likely to face this situation if you follow system rules, but just in case it does!)

7. What their charting package and forex trading platform is like

8. Whether the trading platform provide a demo account for you to practice on

9. How established the company is, and any problems within the company.

Few Advantages Of Trading Divergence.

There are few rules fabricated for trading divergences that would prove to be very useful if you apply them. If you ignore them, then it would not be advantageous for you.

Advantages of Trading Divergences:

1. There are various price scenarios on which the order of divergence normally exists such as Double top, towering than the former high, inferior than the former low and double bottom. You must not consider any indicator until one of the price scenarios occurs. If these scenarios have not occurred then you must not bother much.

2. If there is some changes in the price that is in accordance with any of the above mentioned price scenarios then you will notice a plane high, a towering high, a plane low or an inferior low. However, you can now draw a line back from the low or high to the earlier low or high. The major top or bottom has to be consecutive. If there are rise and fall in the major highs or lows, you have to ignore it.

3. If you notice are formed, you can connect the tops. If you notice two lows then you can connect the bottoms. You must not make a mistake while drawing a line in the bottom if you notice two towering highs. Else, you will get bewildered.

4. You have to connect the two tops or both the bottoms with a line. Thenceforth, you have to look towards indicator that you have preferred, and then you can compare it with the action of your price. However, you must not forget to compare the tops and bottoms. There are various lines in various indicators like the Stochastic or MACD.

5. If you are drawing lines that connect two highs on a particular price, you should draw a line that links both the highs on an indicator. You have to follow the same procedure for both the lows.

6. The lows and highs that are identified on the indicator must be lined up vertically with the highs and lows in the price.

7. The divergence would exist only if the slope of the connected lines to the indicator is dissimilar form the slope of the lines that are connected with the price. The slope should be rising, descending or flat.

8. If you have spotted the divergence but the price has been reversed and diverted in a particular direction for some time period, then the divergence id played out. Then you have only one option left with you and that is to wait for the next swing low or high in order to form and initiate the divergence search.

9. Divergences that are on a longer time frame are more precise. Therefore, you will receive fewer signals that are false. Your trade will also reduce, but you will surely get an elephantine profit. The divergences that are on the succinct time frames are not much dependable. You can look for your divergences on the one hour charts. There are several traders that utilize the fifteen minutes charts.

Divergance An Indicator.

You need to remember one thing that divergence is an indicator and you cannot use it for entering the market of forex. If you are a smart trader then you would not be dependent on divergence only you would use different signal that would help you to make the profit that you want to make. If you combine the divergence with different tools of trading then you can lower down your risk and earn the fruits that you are in need of. You can also lower down your risk.

Sometimes divergence can become dangerous indicator for the trade. If you are not sure about the trade direction then you should not invest in that direction. Divergence appears very rarely if they appear then you would be able to notice them. Regular divergence can help you to get proper direction about the trade. They would provide you right information at right time. Hidden divergence and lead your trade in waiting period. To gain the desired results you will have to wait for long time. It would not give you proper guidelines about the market trend.

You should know the tricks to choose the divergence for your trade. You need to think twice about the direction that is showed by the divergence. You need to plan about your set up and then enter the direction that is showed by divergence. Thus divergence is the indicator that can be used for making huge profit and gaining information about the market.
Important Rules for Trading Divergences.

Understading MACD.

MACD is one of the strongest signals generated by technical indicators is MACD divergence on a daily chart. MACD stands for Moving Average Convergence/Divergence and can be quite useful for giving hints of a possible market reversal.

We calculate this indicator by generating a 12 period Exponential Moving Average and a 26 period Exponential Moving Average and plotting the difference on our chart. We then add a 9 period Exponential Moving Average of that figure and plot that as our Signal Line. We now look for two situations. Positive Divergence is when the MACD makes a higher low but the market makes a lower low. This situation gives us a hint of a possible reversal to the upside. The other situation is Negative Divergence and is noted when the MACD makes a lower high while the market makes a higher high. This situation gives us a hint of a possible reversal to the downside.













For example if i am a trend trader and only trade in the direction of the daily trend, I would not look to initiate is new buy position when noting Positive Divergence or a new sell position when noting Negative Divergence. However, if I were already in a trade and the MACD showed a possible reversal, I would tighten up my protective stop by moving it closer to the current market price to protect any profits that I may have in the trade at that time. As with any technical indicator, the best signals will come on the daily chart and as the time frame shortens, the reliability of the signal weakens.

Moving Average Convergence Divergence(MACD).

In a volatile and dynamic market like the forex everyone would require “a set of precise recommendations” or in other words accurate forex signals for successful trading.

Moving Average Convergence Divergence or MACD is a detailed method of technical analysis using moving averages for forex trading. Trading signals can be generated from price charts with the help of MACD

When the MACD crosses below this trigger it is a bearish signal and when it crosses above it, it's a bullish signal, with the corresponding implications for the currency's price in each particular situation.

Moving averages tell the average price in a given point of time over a defined period of time. These are known as ‘moving’ because they reflect the latest average, while adhering to the same time measure. To resolve the inconsistency between entry and exit, a forex trader can use the MACD histogram for both trade-entry and trade-exit signals.

MACD can also be used by combining two averages of distinct time-frames. Whether using 5 and 20-day MA, or 40 and 150-day MA, buy signals are usually detected when the shorter-term average crosses above the longer-term average and the price is likely to go up.

Conversely, if the shorter average falls below the longer one, sell signals are suggested as the price is likely to go down.

Types Of Divergence Trading.

As we know that there are two types of divergence in currency trading-regular and hidden divergence:

Regular Divergence happens in two trends. One is when the price creates higher highs when the oscillator says otherwise and the other is when the live quote creates lower lows when the oscillator is not. A regular divergence is generally used as a possible sign that a trend reversal could happen.Regular divergences can help a Forex trader make a large profit because they can step into the trade right when a trend changes.

Hidden Divergence occur when the oscillator makes higher highs while the price is not and when the oscillator makes lower lows while the live quote is not as well. In a way, regular divergence is the result of changes in the price trend that might happen in the near future while hidden divergence confirms past live quote trends.A hidden divergence is a possible sign for a trend continuation.Hidden divergences can help a Forex trader make more profit by staying in the trade longer and being on the right side of the trend.

It is very important to learn how to spot the divergences when they occur, and learn to figure out how to read the direction the trend will go. Divergence trading on the Forex market can greatly maximize the profits and return on investment while minimizing the risks of a loss on the market.

Divergence Trading.

What if there was a low risk way to sell near the top or buy near the bottom of a trend? What if you were already in a long position and you could know ahead of time the perfect place to exit instead of watching all your unrealized gains vanish before your eyes because your trade reverses direction?

What if you believe a currency pair will continue to fall but would like to go short at a better price or a less risky entry?

Well there is a way. It’s called divergence trading.

Technically speaking what is a divergence? When there is an imbalance between the price element and the oscillator element a divergence occurs. This is the point when the oscillator is providing a strong hint that price may be losing its momentum and a change in price direction may therefore be impending. Both the price action and the oscillator begin to go separate ways and start telling opposite stories.

Higher Highs and Lower Lows

Just think “higher highs” and “lower lows”.

If price is making highs, the oscillator should also be making higher highs. If price is making lower lows, the oscillator should also be making lower lows.

If they are NOT, that means price and the oscillator are diverging from each other. Hence the term, divergence.

Few Final Tips For Successful Scalping.

Here are some tips for scalpers that they should remember while scalping to gain maximum profit.

1. Discipline: Scalping is for disciplined traders. A methodical, even mechanical approach to trading will increase the potential profits of any scalper, and if automation is necessary, there is no logic in delaying it. Acquiring mental discipline may require time and effort, but its beneficial in every aspect of life, and nothing will be lost as you put your trading career in order. If a trade must be closed, it must be closed. If losses need to be taken, they must be. Scalping doesn’t allow the trader much time for vacillation or worry, and whining and complaining have no place in this style. Face the realities and act in accordance: success is just around the corner.

2. Patience: Impatient, or arrogant traders don’t have a stellar future in scalping. Many people have attained great profitability in trading, but only through persistence and determination. It is even more so in scalping, where minuscule profits are expected to combine into sizable gains.

3. Calm: Scalpers need to remain calm in the face of market turmoil, especially those who want to trade directional, trending markets. Without emotional restraint, trading choices will be confused and arbitrary, and that is the least of what can be afforded by a committed scalper. Get used to losses and mistakes. Accustom yourself to mending the errors. And all should be well.

4. Regular Trade Sizes: This is always a necessity in trading, but even more so in scalping. Don’t make the mistake of doubling your trade sizes in response to a chance streak of wins. Don’t blur your vision by entering orders arbitrarily. Be disciplined, and ensure that your trades can be analyzed easily by standardizing your order sizes.

5.Concentration: Scalping can be an intense activity, and a good scalper needs to have a mind which can concentrate effectively on the task at hand for profit. If you’re scalper, make sure that the place and time period during which you’re active in the market is as peaceful and calm as possible. Have the kids sleep or play, let your spouse tend to her own duties. Ensure that you’re not distracted while scalping the forex market.

HAPPY SCALPING!

How To Choose Right Currency For Scalping.

After discussing about the right time for forex scalping the next most important thing is to determine right currency for scalping, in this article we are going to discuss about this thing. In general, the best currency pairs for scalping are those that are not prone to very sharp movements, or if they are, such movements are less frequent. In that sense, the best group for scalping is the group of major pairs discussed below, and among them, the most liquid and least volatile one is the EURUSD pair.

A. Majors
This group includes pairs such as the EURUSD, the GBPUSD, the USDCHF, and others which are formed by currencies of the most powerful and dominant economic powers in the world. Although the JPY (Japanese Yen) pairs can also be examined in this group, they behave differently and we’ll examine them under the heading of carry pairs.

The main property of the majors pairs is liquidity. Their second characteristic is relatively subdued responsiveness to market shocks. An event which can cause a 100 pip movement in the AUDJPY pair will move the EURUSD by 30 points usually, sometimes less. The major pairs are traded all over the world, by almost all banks and important institutions (since they are often reserve currencies). They are the bulky giants of currency market in terms of trade volume, and move slowly.

Scalpers who prefer to trade ranges, or to exploit slow, and small movements in currency pairs for conservative profits can concentrate their activities in the major pairs.

B. Carry pairs
Carry pairs are liquid, but volatile. Pairs such as the EURJPY or USDJPY are traded all over the world, and trading is activity is hectic, but they are also very volatile, because many financial actors use the Japanese currency to borrow and invest in various risky assets. As a result, when there is a market shock these pairs react in an excessive fashion which is difficult to interpret for trading decisions, especially so in the short time frame favored by scalpers.

The carry pairs are traded mostly for interest income. Although it is possible to scalp them as well, it is not a great idea because at times spreads widen so rapidly that even a stop-loss order cannot protect our account from a significant loss. The sudden widening of spreads is not unique to carry pairs, but while in the EURUSD pair it is often seen after the non-farm payrolls release, or major interest rate decisions, in carry pairs it is more frequent, deeper and longer lasting. Its not advisable for beginners to scalp with carry pairs.

C. Exotic Currencies
Exotic is a term used in the options market, but we’ll use the term to discuss the comparatively rare, less liquid, and less well-known forex pairs which are mostly unsuitable to scalping. This group includes such volatile pairs like NOKUSD (NOK being the Norwegian Krone), the Russian ruble, the BRLUSD pair (with the Brazilian Real), and many other lesser known ones.

This group is not suitable to scalping because unpredictable price gaps are frequent, and it is difficult to use money management strategies in the short term. Especially beginners should avoid them to avoid getting scalped while trying to scalp the market.

Suitable Timings For Scalping.

In scalping time plays a crucial role, so we cant neglect its importance. Some scalpers prefer choppy, directionless markets when utilizing this style, while others prefer to trade strongly directional, highly liquid and volatile markets. This choice is mostly a matter of personal preference, but the two kinds of markets do offer different environments where different strategies will bear greater profit. In this post we will not discuss the methods, but will consider the time periods when a particular approach is likely to bear the best results.

7:00-8:00 am

This is the time period when European markets often experience choppy conditions as traders prepare for the opening of the New York market at 8 am. Since there are option expiries and news releases in this time period, and statistical releases of the European session (which are released around 4 am) have already been absorbed, most traders choose to sit back and reconsider their strategies before North American players enter the forex game. The London and Frankfurt markets are both open at this time, but liquidity lessens as trading desks reduce gear.

This period is a more volatile version of the last two hours before the North American market close around 7 am. Let’s also note that sometimes the pre-news release volatility in the market can assume a directional character as prices rise or fall significantly but slowly over the one and a half hours preceding the 8:30 release. In spite of the directionality, the slow nature of the price movement can make scalping a favorable option over a buy-and-hold strategy in the period leading to the release. Triangles are common, and it is possible to scalp them by remaining in side the range implied by the triangle.

8:00-10:00 am

The best time of the day to apply Scalping strategy in Forex is the opening of London session. Starting at 8:00am GMT and till 9:00am GMT Forex market appears to be more predictable, there are less whipsaws, price movements are more defined.

The two major European currency pairs - EUR/USD and GBP/USD are the perfect target for morning Forex scalping.

The opening of the London trading session is always busy, it brings a lot of participants to the market. During the first trading hour a prevailing trend is established. Quite often it is a continuation of the initial trend before 8 am.

3:00-7:00 pm

This period can itself be divided into two separate phases. Between 3pm and 5pm, many banks in the U.S. are still open, but they are closing gradually as the day progresses. The period between 5 pm and 7 pm is the quietest part of the trading day. Almost all major markets are closed, and while trading is still continuing, activity is subdued significantly. This is the golden sixth of the scalper who prefers calm, and slow markets where small, directionless oscillations can be exploited with great effectiveness. During this one sixth of the trading day, scalping strategies can be employed both manually, and through automation by traders who seek rapid and low risk profits.

The first part between 3-5 pm is more suitable to scalpers who prefer some volatility in the markets in order to realize more sizable profits. On the other hand, since many banks in the U.S. are still open during this period, volatility and risk are somewhat higher than the following period. Between 5-7 pm, on the other hand, almost all major banks in the developed world are closed, and extremely choppy, quiet conditions prevail.

P.S: Throughout this post, all times are ET (New York time).

Criticism Of Forex Scalping.

Now we'll talk about some disadvantages involved in scalping. Scalping is popular, and profitable for some traders, but it is not without its risks. In this section we’ll analyze the scalping strategy and discuss some of its disadvantages so that you can trade with calmer, more reasonable expectations while employing it.

Is it a good idea to scalp in strongly trending markets?

Many traders favor scalping in strongly trending markets. This approach is defended on the basis of the notion that scalpers thrive in volatility, and that trends cause a great deal of volatility creating many trading opportunities. But is this idea justified on the basis of facts and analysis?

Let’s first remember that while scalping, one misplaced, carelessly created trade can wipe out the gains of tens of successful trades in a short time. A scalper needs consistency above everything else. Discipline in trade sizes, take profit, and stop-loss orders, and a degree of skepticism towards arising opportunities are important components of a successful trading strategy. Let’s ask ourselves, then, which kind of markets offer the best conditions for the implementations of these principles? Would scalpers thrive in strongly trending and volatile markets, or quiet, calm markets where activity is subdued and volatility is low? Naturally, the best conditions will be found in the latter. Calmer markets allow us to exploit small fluctuations over a long time with little risk and good profits. Trending markets move rapidly, with widening and contracting spreads, where exiting a position before it reaches its full potential can be dangerous, and maintaining a calm and composed attitude is an additional problem.

We read online that scalping is best in strongly trending, liquid, volatile markets, and some of us wonder why so many people subscribe to these beliefs. This attitude is present either because the traders who write the articles don’t have that many experiences in scalping or because they use scalping strategies on a trend following scheme. The latter approach is not very useful to beginners, however, because they mostly choose the scalping style to make quick profits without worrying much about analysis or strategy.

Brokers Hate Scalpers

Let’s first state that no forex trader will do himself any good by making real, or imagined enemies of brokers. Regulated brokers are monitored by authorities, and most of the firms in the business are legitimate actors with decent practices. There’s no way of trading the market without brokers (or ECN’s, but they are not used very often, and have their own disadvantages). And there’s no logic or merit in demonizing brokers as crooks or thieves. We, as traders, want to trade the markets, and to do that we need the services of firms which are monitored and regulated by the authorities.

In previous sections we have already discussed how brokers hedge against client losses, and noted that a majority of client positions can be netted out against each other without the broker having to commit any funds. In fact, when such matches can be found, the broker does not even need to pass the buy or sell order client to the bank: all that it must do is matching the order with another customer’s opposing order while pocketing the commission, and assuming zero risk. The problem with scalpers arises because their rapid entry/exit orders make the task of hedging hard for forex brokers with slow servers or outdated software. When they can’t do so, they get nervous, become worried that the scalper is trying to manipulate the system (exploiting latency issues, as they are called), and sooner or later terminate the account of the scalping trader.

There are no statistics on the success ratio of scalpers, but there is no reason to assume to their success rate is any different from that of the overall market. Indeed, scalping is a demanding, and somewhat more sophisticated trading style in comparison to day-trading, or swing trading; there is no reason to expect that beginners will do better in scalping in comparison to their performance in these other trading styles.

Emotional Pressures

Scalping is probably not the best choice for a beginning trader. The style demands constant attention, concentration, and diligent adherence to principles. The fact that trades are small-sized and quick means that there is a need to be very methodical about trade sizes especially, because irregular sizes will make us blind while trying to determine the performance of our account, and prevent the achievement of a smooth, regularly rising trading account.

For a real scalper, fear is not the main emotional issue, unlike the case with many other types of traders. Since risk in each trade is usually very small, and it is possible to stop and exit any position without much trouble, there is little danger of the account being wiped-out or greatly reduced as a result of any single trade. Yet, the major emotional issue faced by scalpers is overtrading and agitation.

The scalper must know where to stop, and yet if he’s nervous, he’ll be unable to stop. Overtrading, based on the belief that the next trade will be the successful one “since one’s luck can’t go wrong so often” may quickly erode the account balance of any trader, and it’s especially dangerous for the scalping strategy. It is on the whole a good idea to suspend scalping activity if you’re feeling that the emotional burden of scalping is too much for you at any time. Do not fight yourself, or the market, but stop trading for a while. It is certainly better than losing your wits trying to profit by battling the market, in other words, trying to improve by worsening your condition.

Illusion

Let’s conclude this part by briefly discussing the dangers posed by faulty interpretation of data. Sadly, many beginning scalpers still evaluate their results on the basis of some ethereal concept termed luck. In a string of wins, good luck is thought to be the causal agent, while a strong of losses makes us think that we have no luck on that day. Since many believe that one cannot have bad luck continuously, there’s a tendency to expect profits soon after a string of losses, and vice versa. Since individual results in short term trading are random, there is no justification for this reasoning, and at least as far as mathematics is concerned, a gain or a loss are equally likely even after a string of ten or twenty gains or profits in a raw.

The other issue which traders must grapple with while evaluating their results is the clustering illusion. In this case, traders will see “order” in a string of random data (such as a list of scalping trade results). After seeing a string of, let’s say, five wins, they will begin to assume that this time their strategy makes wins more likely, and in response they will increase trade sizes, with often disastrous results.

In order to achieve profitability and a degree of safety in scalping it is extremely important that consistency in trade sizes be maintained. If you make small profits with ten 1 lot scalps, and occasionally decide to throw in 3, 2 lot trades where you feel you’re doing well, you’re taking the risk of never going beyond breakeven, in the best case scenario. Make sure that you don’t get deluded by luck, or the clustering illusion to randomize your trade sizes. You can instead use methods like the z-score to see if the win-loss streaks of your scalping strategies are any different from random results.

Some Forex Scalping Tips That Anyone Make Benifit From.

If you pay attention to trading techniques, then you probably have heard of a little thing we like to call Forex scalping .But there are several things that newer Forex scalpers must take into consideration.

1. Always ask if it's allowed.

This is the first and biggest thing that you need to do when scalping Forex. Many users try this technique and make huge sums of money only to find that their account has been deleted! This is because many brokers tend to look down upon Forex scalping. But why you ask? To know the answer to this question, you need to know a little more about how a brokerage ultimately works. Most brokers trade against their customers. Some of the bigger companies have workers that do nothing except taking positions against their traders. This hedging allows the company to easily triple or quadruple their profits. When a persons scalps Forex, the person on the other side can't take the correct position in time. Along with the fact that many scalpers trade with a 95% accuracy. This severly hampers their profits. So many call it cheating the market. Even though we all know that it is virtually impossible to do so. So always make sure your brokerage allows you to trade with this amazing style! I like to call and talk to a manager or someone important. I have asked people on the chat if scalping forex was allowed, they all said that it was. Then when I traded, I had emails telling me to either slow down or be kicked out. So give them a call, it was well worth it.

2. Scalping in numbers is the secret!

Remember earlier when I told you that scalping a single pair won't make you much money? Have you ever heard of the saying, "There's power in numbers?" Well this is a scientific fact, that has been proven over and over again. When you scalp a pair make sure that you purchase a high amount. This is to maximize your profits. So if your trade makes 2 pips you can make upwards of a couple hundred to a couple thousand dollars.

3. Be careful.

This is probably going to be one of the most important tips ever. Along with the quick profits, you can and most likely will come across a couple big losses on this magical Forex scalping journey! This is why you have to be able to accept these losses. Trading on a small scale can be easier for some. I always suggest that newer traders should really try to scalp on a demo account. Get comfortable with trading on a short term scale. I would advise that you should only scalp on a live account when you feel 100% comfortable with every trade. Imagine the demo account being your money. Imagine taking a huge loss in real life when you make a mistake. When you feel fully comfortable with everything even after a big loss, then you are ready grasshopper.

4. Scalp the Forex market with a plan!

This is the best way to avoid losses during your adventure. Use that demo account that we talked about earlier to find a suitable set of indicators or oscillators or even both! The demo account allows you to trade in a real time setting while trying out different systems. This can greatly increase your odds of making a good profit. Try every single combination of technical indicators. Do this until you find a pair that you like. Once you find one then you will truly be on your Forex scalping journey.

Forex Trend Following VS Forex Scalping.

Let's take a quick view of trading. Trend following has been around for decades. Markets had to be viewed from a much different perspective than we can look at them now.

Because of this there is decades of information about trend following. That is why trend following is so popular. There is a direct relationship to the increase in individuals getting involved in the markets to the increase in the flow of market information to individuals. Hence, most individuals that started trading in markets typically where trend followers. Because of this growth in trend following. Trend following became a self fulfilling prophecy.

Online trading was not very popular until everyone had high speed internet access. Which statistics show was a little as over 5 years ago. This is when high speed internet began to become readily available.

Online trading is now the fastest growing segment of all markets. Because online trading is relatively new, so too is scalp trading. Which means there is mountains of information about trend trading, compare to the amount of available information about scalping.

The reality is that because scalping is still relatively new. Most individuals attempt to learn to trade a trend following technique and try and scale it down to a smaller time frame to trade on an intra-day basis. That concept does not yield consistent profits over time. But it is the direction most people take because there is more information available on trend following than scalping.


A common mistake the self-taught or trial and error trader makes is to co-mingle strategies and techniques. Ultimately becoming what I have labeled the 50/50 trader. Sometimes things work and sometimes they do not.

Which means trading performance was based on more luck than skill. As a scalper you do not use any trend following techniques. This means you have to be careful what type of information you are viewing.

Since 90% of the available information is founded on trend following. Once again that is where most start and why they are not successful attempting to scalp trade.

Scalpers need lots of volatility. Scalpers want the directional bias of the market to be changing constantly. Trend followers steer away from volatility. Trend followers need the directional bias of the market they are trading to be consistent.

Trend followers cannot trade in range-bound conditions. Trend followers typically have more losing trades than winning trades. They need the winner to overcome the losers.

Scalpers love range bound conditions and can trade in either condition (trend or range). Scalpers have more winning trades than losing trades. That keeps the trader in a positive frame of mind.

The forex is the perfect market for scalp trading. The forex is the most volatile market on the planet. This equates to more trading opportunities for the scalper. The forex is range-bound 80% of the time and trending 20% of the time.

To use a trend following technique trading the forex you have to use extremely large stops. Because of the consistent range bound activity that occurs. Because of the large stops (greater risk) trend following requires trading accounts in excess of $25,000 in order to aligned with sound equity management principles.

If a currency pair moves 75-100 pips a day. How easy would it be to find one 15 pip move? This would equal a net 10 pip profit on average. How would you like to make $500 in less than 30 minutes, instead of 6-8 hours? Scalpers do that. Trend followers have to hold on to trades for hours, days and weeks.

There is also a higher probability that you will be able to find a net 10 pip move daily than a 100 pip move. This means less stress and anxiety. Technology now makes scalping possible. We are now at a point where telephone access via a landline for the individual is at a decline. Cell phone technology has overtaken old telephone technology. Trend following is a dated style of trading. Scalping is on the leading edge of technology.

Trade 5 lots on one net 10 pip trade and the = $500 in under 60 minutes, instead of hours or days in a trade. There is simply no need to trend follow in the forex market. You can make the same money in less time.

Steps To Create Forex Scaliping System.

In this post, we will go through some of the forex scalping strategies so that you can put them to use for your trading.

When it comes to scalping the market, there are a few factors you have to put in mind.

* You are going to have low risk reward ratio. When you are scalping the market, you are only looking for profit around 15 to 20 pips but it is hard to find entry with low stop loss less than your profit. Therefore you are going to lost more than you can make for every loss trade.

* To compensate for that, you need to have a high winning probability for forex scalping to be feasible for your account.

Here are some forex scalping system that you can use:

* Look for key support and resistance: As price usually are repelled by the key support or resistance level, there are a high chance that you can enter a trade opposite to the current movement trying to make profit from the repulsion.

What are the key support and resistance levels?

* Pivots: pivot trading are used by big dog and it usually provides very strong support or resistance and this is where you can enter your trade.

* Fibonacci Extension: Fibonacci also serve as good level of support and resistance especially the 0.318, 0.5 and 0.618 level. “Keep a LOOKOUT for them”
















* Past Highs and Lows: You need to know that the previous high will now turns into your new support and previous low will now turns into your new resistance.












With the understanding of these important support and resistance levels, you can now setup your own forex scalping system with these levels in mind.