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.
Monday, August 31, 2009
Sunday, August 30, 2009
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.
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.
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.
Saturday, August 29, 2009
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.
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.
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.
Friday, August 28, 2009
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.
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.
Thursday, August 27, 2009
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.
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.
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