What Thomas Edison Can Teach You about Trading Forex.

Thomas Edison is one of the biggest inventors we know. His inventions made big improvements and progressions in human life. They say he has more than 200 inventions. Was he genius? Definitely he was not an ordinary person but this is not his success secret. There are thousands of genius people but they have not and will not make any changes in anybodies life - even themselves.

What made Thomas Edison a different person? How can you copy him in your life and business? What you can learn from him to improve your Forex trading business?

Let’s know Thomas Edison more through his quotes and I will tell you how you can follow him in forex or any business that you have.

1. Work Smart

“Being busy does not always mean real work. The object of all work is production or accomplishment and to either of these ends there must be forethought, system, planning, intelligence, and honest purpose, as well as perspiration. Seeming to do is not doing.”

Maybe Thomas Edison knew nothing about the way that we trade forex these days but as you see he talked about having system and planning. Sitting at the computer and looking at the charts doesn’t mean that you are trading or learning forex. You should know what you are doing and what are you waiting for.
If you sit at the computer for several hours per day and you still have no special system (strategy) or you have not learned enough or you have an incomplete knowledge about the forex market and forex trading, then you are wasting your time and money.
2. Work and Wait

“Everything comes to him who hustles while he waits.”

It seems so easy to make money with forex when you just start learning it. Maybe your first few trades with the demo or real account were successful trades and this has made you think that forex is the easiest way to make money. But after a while that you see the other side of the forex market coin, you will get realized that something that you make in several days can be lost in less than one hour. And you will get realized that forex is not easy and it needs learning and hard working.
There are a lot of people who give up after losing some money but only those who follow the right direction consistently and seriously will become good forex traders finally.
3. It Takes Work

“Genius is one percent inspiration and ninety-nine percent perspiration.”

Deciding to learn forex and having enough talent to learn is just the beginning. To become a successful trader, it needs hard working and seriousness.
4. Failing Takes You Closer to Succeeding

I have not failed. I’ve just found 10,000 ways that won’t work.”

You try several different systems, time frames, currency pairs and … to find something that works for you properly. When you see a system doesn’t work for you, don’t think that you have not been able to use it and make it work. Just look for a better and easier system.
When you see that you have not made any money through forex after several months of practicing, don’t think that forex doesn’t make any money or it is impossible to make any money through forex. Be like Thomas Edison. Don’t give up and try more.
5. Don’t Give Up Too Early

“Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.”

Yes! Try one more time any time that you fail. Learning forex is all the matter of practice and gaining more experience.
6. Make it Fun

“Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.”

Do you enjoy trading forex? If you learn or trade forex just because you have to make money, you will not become a good forex trader. You have to take it seriously but you should not do it if you don’t like it. You should not trade forex if it seems boring to you. Try to enjoy it in the way that you enjoy a computer game.

Learn Some Trading Tips from Albert Einstein.

I am sure all of you have heard about Albert Einstein. Probably he is one of the most famous scientists who created a big revolution in the scientific world and opened several new gateways of research and development. Theory of relativity, founding of relativistic cosmology, the prediction of the deflection of light by gravity that was later ended to understanding of black holes, the quantum theory of atomic motion in solids, the zero-point energy concept, the quantum theory of a monatomic gas, and… are only some of the things that he has done. But does Einstein have anything to teach us about trading? Yes, he has 8 amazing trading lessons.
1. Persevere
“It’s not that I’m so smart; it’s just that I stay with problems longer.”
When you read the above quote, you may think that Einstein just tried to look humble and down to earth, because everybody thinks that Einstein was a genius. He really was a genius but at the same time humble and down to earth, however do you think even a super genius can do anything if he/she just ignores the problems, gives up and walks away? Definitely not. The top secret is, to do something extra ordinary, you do not need to have an extra ordinary IQ. You need to be a hard working and focused person. There are so many genius people who come to this world and go without doing anything important and useful. But there are so many ordinary people who focus on something and make a big positive change finally.
You can not achieve anything overnight. It takes time to become a good trader. If you like to become a good trader, you also have to spend time on trading. There is no holy grail, nor a magic system or robot that can make you a millionaire trader within a short time. The holy grail is you and the experiences that you gain and experience can be gained through working and “staying with the problems longer” as Einstein says.
2. Focus:
“Any man who can drive safely while kissing a pretty girl is simply not giving the kiss the attention it deserves.”
Staying with the problems is not enough. We have to focus on them. In trading, “focus” doesn’t mean over-trading. You can trade 30 minutes per week only. But be focused during that 30 minutes. Also do not distribute your time and energy on trading so many different currencies, stocks, CFDs through so many different trading strategies and systems. You can not focus on several things at the same time. Novice traders think that analyzing several different markets and finding as many trade setups as possible is the best way to make more money faster and sooner. It is such a big mistake. Most of those who think so are among the traders who will give up finally.
3. Create Value:
“Strive not to be a success, but rather to be of value.”
In trading, success means profit and profit is the value of the work of a trader. “Profit” can be made only by having more “successful” trades and successful trades can be acheived only by finding valuable trade setups that do worth taking the risk.
That was very easy to understand, right?
4. Be Curious:
“I have no special talent. I am only passionately curious.”
You do not have to have any special talent to become a good trader. You just need to learn a trading system and wait for the trade setups. Trying to be too smart makes you lose, because the market is smarter than you. Just learn a simple trading system and be curious for the trade setups. That is all that makes you a good and profitable trader.
5. Make Mistakes:
“A person who never made a mistake never tried anything new.”
During the past a few years that I have been in touch with so many forex traders through my website, I have seen so many novice traders who start very passionately and eagerly but give up so easily by losing the first trade or blowing up their first live account. Obviously, most of these people will never try the trading anymore and will lose the chance of making any money through the forex market, for the rest of their lives.
On the other hand, most of the successful traders that I have seen, have been able to achieve their success through a very hard way and losing a lot of money, before finding the right way. I am not saying you should also lose a lot of money to become a successful trader finally. In fact, I believe one can become a good trader through losing the minimum amount of money, if he/she learns and follows the money management rules first.  What I am trying to say is that you learn some of the lessons from your own mistakes and if a mistake causes you to lose money, you should not give up. If a losing trade tells you that you should have a proper stop loss, take it as a good lesson and never take any position without a proper stop loss anymore.
6. Don’t Be Insane:
“Insanity: doing the same thing over and over again and expecting different results.”
Are you still losing because of having no stop loss in your trades, working with an improper time frame, trading with an unreliable platform or broker or following a useless trading system? If you answered yes, then the next question is why you expect a different result by repeating the same thing over and over?
If you lose because you do not set a proper stop loss or you do not follow the money management rules, or because you still do not have a proper trading system or you try to make money through a time frame which is not for you (it is either too fast or too slow for you) then why do you still do it?
If you answered “Because I am insane!”, then you should expect more losses
7. Expect Opposition:
“Great spirits have always encountered violent opposition from mediocre minds.”
Probably you are blamed by some people after losing some money in the forex market or any other businesses that you tried to run and develop. Discouraging words can stop you at anytime, but if you stop, then you’d better not to think about making any changes in your life and just leave yourself to the events and chance. Pessimistic, negative, jealous and according to Einstein, mediocre people are always around. If you want to be one step ahead of the mediocre minds, you should do something more than ordinary and usual and you should not listen to those people.
Since the time that I have published the $53,000/month article, I have been criticized or even accused by some “mediocre minds” who did not even bother to read that article carefully just once to see what it is about exactly. But I always had one answer for them:

George Bernard Shaw:
People who say it can not be done, should not interrupt those who are doing it.

Just do whatever you think is right to do. It doesn’t matter if you are wrong. You will become a more experienced person, when you find out that you were wrong. If everybody wanted to think like these “mediocre minds”, now we still had to cover our body with the plants’ leaves
However, keep in your mind that in trading you should always limit your risks by having a good money management plan. Do not let the first mistake be the last.
8. Learn the Rules, Play Better:
“You have to learn the rules of the game. And then you have to play better than anyone else.”
You have to learn the rules of your trading system. Then you have to wait for them to occur. If you sit at the chart while you still don’t know what you should wait for, or if you are used to enter the market while you have no answer if I ask you why did you take this and that position, it means you still don’t know the rules of the game.

The big secret behind gold's collapsed.

If you have been watching gold, I don't need to tell you how fear-filled this market is right now.Watch Adam's analysis on  this emotional market using our "Trade Triangles," the Williams%R, and the MACD indicator. 
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New Video - A look at 5 Energy Markets..

Today's video is a little different than usual. It covers energy markets and is a lead in to
tomorrows webinar. As many partners know webinars are a very successful sales tool. They giveviewers an inside look at our service, a chance to ask Adam questions directly and
a look at how we can give them added value.
         This webinar will be on our energy portfolio, more specifically how MarketClub users can easily follow along and profit from yet another part of our service they didn't even know existed.
            The video    http://www.ino.com/insider/?affid=CD4414

Click here to download "Think and Grow Rich"

Click here to download "Think and Grow Rich"

Turtle Trading Rules That Made Over $100 Million!

Richard Dennis was a small time trader who started trading commodities with only $300 and ended up making more than $150+ million. In early 1980s, he gathered a group of individuals who had little prior experience of trading and trained them to trade commodities with his trend following methods.
Over the next few years, his students became famous as the Turtle Traders and as a group made over $100 million following his Turtle Trading Rules. These trading rules are not difficult to understand and master. These trading rules that are generally based on Richard Donchian Channel Breakout Methods are pretty simple to follow. These were the entry rules for the Turtle Trading System;
Turtle Trading Shorter Term;
Enter into a long position on the breakout above price high of the preceding 20 days. In the same manner, enter into a short position on the breakout below price low of the preceding 20 days. If it was a true breakout, it will result in a winning trade. If it was a false breakout, the current breakout signal could be taken.
Turtle Trading Longer Term;
Enter into a long position on the breakout above the high of the preceding 55 days or enter into a short position on the breakout below the low of the preceding 55 days.
Those turtles who followed the above two turtle rules rigorously without any emotions made over $100 million profit as a group while those turtles who did not follow these rules religiously and allowed their emotions to come into play when making their trading decisions did not do well.
Richard Dennis used to say that he could publish his rules in the newspaper but it won't make any difference as long as the person who used them applied them with discipline and without emotions. Basically, these rules tell you how to trade channel breakouts. Richard Dennis made his fortune trading channel breakouts. Channel Breakouts are frequent in the currency markets. You can adopt these rules to the currency market as well. Download the Turtle Trading Rules FREE!

Why fear and greed will wreak havoc in your life.

Hey,
 
Whenever I hear or read about how 95% of forex traders lose money on the market two words spring to mind: Fear and Greed. I consider these two, all too human, emotions to be the worst enemies of any trader, capable of wreaking havoc in any account, no matter what size or how experienced.

Why do fear and greed play such a big role in the psychology of traders? The reason is Money.

After all, Money is the reason why anyone gets into trading financial markets in the first place. It is the (achievable) goal of making more money with as little work as possible. This is Greed, because you wish to make more and more over and over again.

The problem is that there also is an inherent risk in trading forex. The risk of losing money exists every time you enter into a trade. It can go your way (you make money) or the opposite way (you lose money).

Losing money is something no-one wants or enjoys. In fact, it can be downright scary as money buys us food, keeps a roof over our head and contributes to the overall sense of safety for ourselves and our family. This is where Fear comes in, the fear of losing money.

The fact that these emotions exist is not a problem in itself. The problem is that they are capable of playing with a trader's decision making process by eliminating logic and common sense. They
can cause irrational trading decisions.

Here are two examples of how Fear and Greed can interfere with your decision making:

- Example 1
Let's say you're into a trade and it goes against you. You set a Stop Loss as the trading strategy recommended. But now you are having second thoughts. You don't want to admit this trade may close at a loss because you are Greedy.

You want this trade to make money. You act irrationally and move the Stop Loss, giving the trade more room to go against you.

Finally, you end up closing the position at an even bigger loss than you should have suffered. Why? Greed.

- Example 2
On the other hand, let's say you are into a position and it's going in your favour. It is now a small profit. You've already set a higher Target Profit so you leave the trade to run further.

However, now Fear grips you and you begin fearing that unless you take this profit while it's still there, you will end up losing it.

This causes you to close the trade at a small profit and you end up missing out on a bigger profit as the trade could have earned more for you.

To be a successful forex trader you have to learn to control your emotions. Until you do that, you will never join the 5% of successful traders.

In the next email I will give you the top six secrets to mastering fear and greed, and turning them to your advantage.

In the meantime, why don't you join me on Twitter?

http://twitter.com/Alberto_Pau

Yours,
Alberto

Trade Balance.

The Trade Balance is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit.  If a steady demand in exchange for exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the Currency.

Start small...and make as much as you want.

	Hi,This is the e-mail.i got from alberto.very useful and knowledgeable for traders. I wanted to email you today and touch back on the importance of starting with a small investment in the forex market before going for the big bucks. I know starting to trade the currency markets can be daunting with big numbers being made every day. It's a tough market where you can make (or lose) a lot of money very quickly. Sometimes you feel like you can't participate in the market as you just don't have big amounts of cash...people often think that in order to trade the currency markets successfully you need to have a lot of money to start with. Believe me, nothing could be further from the truth. The reality is that if you never start investing (and trading) in the forex markets you will never learn how to do it and profit from it, nor will you ultimately have the money to make a living out of it. A big mistake many wanna-be investors make is to wait until they have $100,000 or $50,000 to start thinking about ways to invest their money. This is a mistake because of the very fact that one of the main components of a trading strategy is time. Sure, you will need some capital and a profitable investment strategy to start trading the markets. But most importantly you need a strategy that you can start implementing with a small amount of money today, so that if something doesn't work out as planned you don't lose a big amount of money. For example, you may decide to invest in the forex market by buying the EURUSD (buying EUR, selling USD). The return on your investment will be the result of the price movement by the amount invested. So if you open a long position with $100 and EURUSD appreciates by 2%, you make $100 x 2% = $2. However, if EURUSD depreciates by 2%, you only lose $2. If your "up" days are more than your "down" days, you could easily be achieving returns of over 20% per month (in the next few emails I will tell you more about identifying those strategies). If you implement a strategy that only allows you to deal in minimums of $100,000, on a down day for a 2% unfavourable move you can be losing $2,000! If this happens more than a few times you can easily be looking at losing all of your initial investment. So when you start trading a new strategy you want to start small, so that if things don't go as intended you haven't lost a lot of money and have your initial investment in your bank account. Having a lot of money to start trading forex is not as critical as having a profitable strategy that is quick and easy to understand, as it will allow you to test different alternatives and ultimately make a living from it. This strategy can be invented by you, based on your own knowledge of the markets, or you can take advantage of the strategies used by the most successful traders in the field. Don't forget to add me on LinkedIn! http://uk.linkedin.com/in/albertopau Stay tuned...in my next email I will tell you more about how to identify an easy to learn and fast to implement trading strategy... Alberto

Fibonacci retracement.

Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician Leonardo Fibonacci in the thirteenth century. However, Fibonacci's sequence of numbers is not as important as the mathematical relationships, expressed as ratios, between the numbers in the series. In technical analysis, Fibonacci retracement is created by taking two extreme points (usually a major peak and trough) on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%. Once these levels are identified, horizontal lines are drawn and used to identify possible support and resistance levels.                                                                                                                                                                                                          

FX Option Volatilities What are they?

FX option volatilities measure the rate and magnitude of the changes in a currency's price. Implied option volatilities measure the expected fluctuation of a currency's price over a given period of time based upon historical fluctuations. Volatility is measured by calculating the past annual standard deviations of daily price changes. Volatility is one of the key components of option pricing. Higher volatilities generally make option premiums more expensive. Professional option traders will typically buy options when volatilities are low and sell options when volatilities are high. Traders who only trade volatility need to hedge their options by buying or selling spot foreign exchange.

How is it used in Foreign Exchange?

When option volatilities are low - Look for a potential breakout When option volatilities are high - Look for range trading opportunities

Option volatilities are useful in timing FX movements. When currencies range trade it is likely that implied option volatilities are declining. The reason this happens is because range trading means lack of movement, by definition. When option volatilities have a pronounced movement downwards, this is usually a good signal for a significant upcoming movement and this is very important for both range and breakout traders. Traders who usually sell at the top of the range and buy at the bottom, can use this tool to predict when their strategy will stop working. Breakout traders can monitor option volatilities to make sure that they are not buying or selling into a false breakout.

The EUR/USD and GBP/USD charts on the following page contain examples of when sharp drops in option volatilities have predicted large moves in the FX market. These specific examples highlight upward movements, but are equally as useful for the inverse. In April of 2003, EUR/USD 3 month implied volatility took a sharp plunge downward when EUR/USD was trading within a tight range. If a trader bought EUR/USD based upon this move in option volatilities, he would have been in the market for the 700 pip move that occurred during the following 3 months.

There is also a case for GBP/USD. In April of 2003, option volatilities plummeted from 8% to 7.3%, while GBP was range trading. In the following months, GBP/USD rallied from 1.5550 to 1.6100. This strategy generally works well, but traders must be cautious because volatilities can have long downward trends. This is evidenced in the period between June 2002 and October 2002. Therefore, it is important that traders look for sharp movements in volatility as opposed to gradual ones, because declining volatilities can be misleading.

Buy the Strongest, Sell the Weakest.

One important tool FX traders can use in their analysis is the concept of relative strength. I'm not referring to the technical indicator RSI, but rather a comparison of the currencies to determine the strongest currency and the weakest currency. Once we identify those currencies, we can match them up and check the pair that includes both currencies and we should see a strong trending market.

Here are six 4-hour charts of different EUR pairs. The first thing we should notice is that the EUR has been moving up against all of these currencies for almost a week now. Short-term traders have many possibilities when looking for buys in that the EUR has been strong across the board. There is one exception though, the EUR has struggled against the GBP when compared with the other pairs. While those short-term traders might avoid buying the EUR/GBP, longer-term traders might find that information valuable too. Since the longer-term trend of the EUR has been down, some traders are looking for the EUR to reverse back to the downside. Noting how strong the GBP has been against the EUR on this move up could very well lead to a stronger move down if these markets do reverse. That might mean that selling the EUR/GBP on a reversal could offer a better chance of success than selling any other EUR pair.

Simple comparison between currencies can be done quite easily in the FX markets because of the match up of each currency with another in the pairs we can trade at FXCM. This is an edge to trading FX and is a valuable tool for FX traders.

Limit Entry.

Limit Entry (LE) Orders are orders to enter the market at a more favorable price. For example - if we were buying a currency pair, a Limit Entry order would be below the current market price. Only if the market went down to that price, would the order be able to be filled. If placing a LE on a short trade, entry price will be above current market price.

What’s the best way to determine if a pair is trending?

Instructor’s Response:

Thanks for your question on this very important topic.Take a look at the historical daily chart of the EURUSD below...

A pair on a lower time frame chart may appear to be trading in a range. So, to gain more insight I like to look at the bigger picture and consult a daily chart.

As can be seen on this chart, this pair demonstrates the most compelling signs that the pair is trending to the upside: it is building higher highs and higher lows. On the other hand, a pair that is in a downtrend will be building lower highs and lower lows.

Once the overall trend has been identified, the trader can then take advantage of that trend by only taking trades in that dirction.

Pattern Scalping Strategy.

Most scalpers try to benefit from price patterns in trading the markets. Those who like calmer markets choose to exploit formations like triangles and flags, while those who prefer trading the news tend to be active during breakouts. There’s no single type of market where scalping can be applied to best benefit, because there are many different kinds of scalpers. But there are some technical patterns which offer their greatest benefits to a scalping strategy, and those are the patterns which we’ll examine here.
First we’ll take a look at scalping during breakouts, and then study ranges. Afterwards we’ll discuss trend-scalping with fibonacci levels under a separate heading.

a. News Breakouts

The most typical and significant breakouts observed on any trading day are those associated with important news releases, regardless of their nature. Volatility maybe caused by an unexpected government announcement, at other times a surprising result from a statistical release, and sometimes a mundane piece of data which the markets choose to interpret in an agitated manner. The characteristic of these events is a rapid rise in volatility: a strong initial movement which then has aftershocks, so to speak, lasting over hours and generating swings and fluctuations which are then exploited by scalpers. Scalping in the aftermath of news releases is different from scalping in stale, range bound conditions with respect to its stop-loss requirement, the average life of a trade, and the necessary risk controls.
Although this kind of scalping has some resemblance to fundamental trading, in fact it is a purely technical approach, and has little to do with the real nature or significance of the news or data releases. It is not possible to fully evaluate the meaning of a piece of economic data in the ten minutes where market reaction is most intense, and as such, there is no point in giving fundamental meanings to the market’s behavior during the same time period. This is especially the case when we consider that news releases are revised frequently, and sometimes drastically following the initial release.

In the above graph we have the hourly EURUSD chart and the highlighted region shows the immediate price reaction to the news release at 8 am, followed by its subsequent legs. As soon as the important piece of news was released the market generated a rapidly increasing momentum which never gave traders a chance to look back. The maximum value around 1.4290 was also the opening price of the hourly bar, and it was never revisited. It is easy to conjecture that soon after the release, and in the period immediately preceding it, spreads had widened significantly, and opportunities for scalping were limited. Yet, right after the news release liquidity came gushing back to the market, as traders hastened to readjust their positions. Favorable conditions for scalping would exist within about ten minutes after the news release.
The most important rule while exploiting a news breakout is to stay away from the market during the short period around the news release itself. Unless one is using automated tools for scalping, this brief period is too agitated, and chaotic to allow informed decisions. Worse yet, in the short term the brief but powerful widening of spreads makes technical planning an insurmountable task at times. Instead, a successful scalper will use this brief period to identify the possible direction of the market before entering positions in accordance.
In the example above, we’d be able to scalp the market for a four-hour long period, during the four red candles in the highlighted area. The best way to ensure against suffering losses in the volatility of this period is using a reasonably tight stop with a somewhat looser take-profit order. In example, if we open a short position at around 1.4250 during the third hour, with a 3-pip spread cost to be paid to the broker, we’ll place our stop loss at 1.4255, while our take profit order will be at around 1.4240. This would ensure a 2:1 risk-reward ratio for the position being maintained.
It is a good idea to add a time-stop to a scalping position as well. What is a time stop? This is a kind of stop order which will close a position once a certain period of time is reached, regardless of the amount of profit or loss involved (although of course, both the potential loss or profit are less than what would be indicated by the stop-loss or take profit orders). For example, in our previous example, we had placed our stop loss at 1.4255, while our take profit order was at 1.4240. When we add the time-stop to our initial order at, say, 2 minutes, we’ll close and exit our position two minutes after its opening regardless of the profit or loss involved in the trade.
Why do we use the time stop? We had defined previously that as scalpers we don’t want to be exposed to the markets for a long time. But the market does not need to listen to our expectations, and might as well refuse to hit both the stop-loss and take-profit points for a long of period (at least in the terms of the scalper). The longer we expose ourselves to market moves, the greater the risk of a sudden, sharp movement against our expectations. In order to prevent being caught in such an indecisive, but also dangerous market, we use to time stop as a safety valve allowing us to bail out of our positions if things don’t turn out as we had initially expected.
Scalping of news breakouts can be very profitable, because all the ideal conditions required by scalpers are present. The swift, large, moves which occur in the brief timeframe during which scalpers are willing to expose themselves to the market allow the formulation of profitable forex scalping strategies.

b. Technical breakouts

What we term a technical breakout is the case where a range breaks down without any obvious news catalyst. News are released continuously all over the world during the trading day, and although it is often possible to tie a piece of the price action arbitrarily to a piece of news being released somewhere in the world, it is not always practical to identify what causes what in the chaotic trading environment with any certainty or exactitude. These seemingly inexplicable, sudden and difficult to predict breakouts will be termed technical breakouts in this text.
Scalping this kind of breakout requires a lot more conservatism in comparison to the scalping of the usual news breakout. There is very little clarity as to what is causing what, and a market that is up may soon reverse and go down with little or no warning. To avoid being caught up in the chaos of such conditions, it is a good idea to use even smaller trade sizes, sensible stop-loss orders,

In this chart we see the hourly movements of the USDJPY pair confined between 94.02 and 94.71. The highlighted area shows the region we would like to trade. Since the established range rests between support and resistance levels which are tested only twice, we would not have had the opportunity to trade the range itself developing on 28-29 July for profit, using scalping or any other method. On the other hand, we are ready to do some scalping in order to exploit the breakout which occurs at around 7 am on 29th July.
The volatile nature of breakout is demonstrated by the green candle next to the small red arrow on the chart where we see observe the closing price of the bar only slightly above the resistance line displayed. Scalping is suitable conditions such as these because scalpers do not need to think long and hard about the ultimate direction of the price. In the timeframe of a one or two hours, five, ten minutes, the price action is more or less random, and it is not very sensible to try to seek logical explanations for it. Scalpers can avoid doing so, and that is their advantage in breakout scenarios, and similar sudden and unpredictable markets.
While scalping this breakout, we’d use a chart with a shorter term, and not the hourly graph which we see above. Fortunately, the fractal nature of price charts allows us to trade a 5-minute chart in a way the same way that we trade a 5-month chart; the scalper only needs to apply the general rules of technical trading to the shorter time frame. The key issue is making sure that you’re on board the trend, or in harmony with the phase of the range pattern (up, or down) while scalping.

c. range Patterns

A scalper trading a range pattern will try to identify the time periods and price patterns where activity is most subdued, and will exploit them for profit. We have already discussed some of the general concepts in trading ranges, here we’ll try to apply them in greater detail.
Price charts are similar to fractals. They are self-similar at multiple time periods, with a price range at 30 minutes sometimes accompanied by a trend on a 30 second chart. While trading ranges scalpers must keep both the hourly, and the minutely price events in mind. We’ll use hourly charts to ensure that overall activity in the market is subdued, while using the short term price action to identify and trade profitable periods.

The hourly chart of the USDCHF pair presents an interesting scenario for scalpers. A large hourly range lasting for a number of days is coupled to fairly strong directional movements requiring some trend following skills for successful exploitation.
At this stage, observing the price action in the chart, we must ask ourselves the question: can we determine the severity of short-term volatility by examining charts which show long term activity? The answer is no. Although we can determine the ultimate direction of short term price movements by examining long term charts, volatility on an hourly chart, for example, does not need to be duplicated on a short term chart exactly. The price may move 100-pips in the course of an hour, and the chart would show a large green candlestick, but all that large movement could have happened in the last ten minutes of trading, with the previous fifty minutes presenting choppy, and boring conditions. In other words, the scalper must concentrate on the time period before him, especially if he is aiming to exploit random price movements that go nowhere (as in range trading), in contrast to scalping a strong directional trend. In the latter, the perspective provided by long term charts may be helpful, but in range scalping utmost attention must be devoted to the 1-minute, 5-minute graph which is being traded.
In the graph above the price is confined between 1.0654, and 1.0741. The three red arrows show us the opportunities where we can be confident that the range will hold: when the resistance line is tested for the third time, we will consider this an opportunity for sell-side scalping. When, at around 27th July 5 am the price rebounds from the support line for a second time, and later for a third, we’ll regard the market conditions as being ideal for establishing long positions repeatedly.

d. Flags

Many scalpers prefer to exploit range patterns as they present quiet, tame conditions where various strategies can be utilizied without the danger of large losses which would arise in conditions of high volatility. Scalpers who thrive in these conditions have no great expectations from individual trades, and are perfectly content with unexciting, slow markets where “nothing is going on”, from the point of view of a trend follower. In spite of the brief lifetime, and small profit of individual trades, great gains are realized as profits of several hours are combined at the end of the trading day.

In this fifteen minute chart of the USDCHF pair we observe a strong hourly trend only briefly interrupted by the highlighted flags. Although the formations are not perfect, they are perfect as continuation patterns, and present quite, subdued periods where the scalper can test his skills. Of the three flags highlighted in this chart, the first and the third are the tamest, and the easiest to exploit. In both of these the price moves up and down in a simple range, and doesn’t possess directionality.
How does the trader exploit this situation? In essence we’ll regard the flags as small range patterns the upper and lower bound of which can be used as trigger points telling us to reverse the direction of our trade. When the price rises and approaches the upper edge of the flag, we won’t trade, but wait until it is reversed and a sell order is possible (we don’t want to enter a sell order immediately because of the possibility of a breakout). After that we’ll enter and exit small and quick sell orders trying to exploit the established range pattern. Conversely, when the price falls and touches the lower bound of the flag pattern, we’ll wait until it begins to rise again, and then we’ll scalp the market with buy orders.
It is quite simple and easy to scalp the market when there are flags appearing. But flags are very strong continuation patterns, and we must be careful not to get caught in the breakout when the flag pattern dissipates and gives way to the momentum of the main trend.
Triangles can be traded in the same manner as well, and any consolidation pattern can be used for scalping within the range established. As we mentioned before, the rules of range trading can be applied, along with the appropriate strategies, while using the necessary risk controls inside the preferred brief time frame of scalpers.

Two different scalping strategies, two different timings.

It is possible to think of scalping in two different ways. In one approach, the trader is concerned purely with the slow price fluctuations that occur in a short period time, and uses technical methods to trade them. In the other approach the scalper can also be a trend follower, or a swing trader, but he uses very small, fast trades as a rule. The latter approach tells the trader to exploit rapid and sharp price movements, while maintaining an eye on the overall market direction in order to control risk exposure. The first approach, on the other hand, requires that the trader benefit from slow, and small price movements which go nowhere: while the price is moving slowly up and down, it will generally return to where it left, and it is possible to trade it without taking great risks.
In this section we’ll take a look at both approaches. We’ll discuss the pure scalping approach in the context of ranging markets where volatility is the main method for generating profits. We’ll also examine the combined approach while studying the subject of scalping with the Fibonacci extensions in trending markets. Let’s note here that technical strategies that can be applied in day , or swing trading are equally valid in scalping as well, and that there’s no difference (apart from the role of the spread) between a 5-minute or 5-month chart as far as analysis is concerned. The reader is invited to read about technical indicators and strategies here.
Before going on further and discussing the details of the subject, however, we wish to say a few words on the psychological aspect of scalping. As we mentioned before, scalping is an emotionally intense activity where the trader must keep calm nerves in the face all kinds of unexpected events. Clearly, overcoming these issues and maintaining a consistent and disciplined approach to trading is a precondition to achieving any kind of profit in the forex market. So how does the trader achieve this necessary degree of emotional restraint and composure?
People remain calm and composed in conditions with which they are familiar and knowledgeable about. Most of us are disturbed if a car makes a sudden movement, but are not bothered while an airplane is taking off with great momentum and speed. Similarly, the same person can perceive anxiety by a small unexpected cut on a finger, yet feel relatively composed while heading to the hospital in order to be operated on by a surgeon. In other words, our emotional responses to risky activities and disturbing conditions are not entirely dependent on the nature of what is being experienced, but more on what is being perceived by us.
As such, in order to be successful a scalper must accustom himself to market conditions in such a way that losses and profits in the markets are expected and acceptable. We need to convince ourselves, and teach that there is no danger, so that we can trade with confidence. Needless to say, if there are real causes for concern, fear is appropriate. If we are risking more than we should, taking too much leverage, or don’t know what we are doing, we’ll feel nervous, timid, and insecure about our trading decisions. In that case, the first step is ensuring that we are not taking unnecessary risks. It is difficult for scared money to profit, and even more so in scalping, therefore, we need eliminate the logical causes of fear from our practice.
If after removing such causes we still feel nervous and worried about what we are doing, it is necessary to take additional steps to deal with the causes of our irrational perceptions. These steps should involve the automation of our tactics. The suggestion for scalpers is to begin this learning process with very small sums which are then increased and combined as experience allows greater, healthier returns. Since at the earliest stages the purpose is not to make profits, but gaining experience, small accounts with minimal leverage are necessary. There is very little point in worrying about a small loss if by realizing it we are gaining important lessons about what should and should not be done in the markets. By being accustomed to difficult market conditions which accompany scalping in the markets, we can prepare ourselves for the ultimate challenge of trading significant sums in the forex market. As we like to say, no body can leap to the top of a mountain or a skyscraper, but by climbing on rocks, or using the stairs many people are capable of realizing such an seemingly impossible deed.

The Best Times for Scalping Forex.

In scalping, the time period preferred will depend on the technical strategy employed. 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 section we will not discuss the methods, but will consider the time periods when a particular approach is likely to bear the best results.
Also let’s add here that a scalper is under no logical obligation to exit a trade if there is enough reason to believe that holding it a while longer may be profitable. The rules that should not be broken are about money and risk management, and there is nothing iron-solid about trading styles. Although in general scalpers should liquidate their positions rapidly in order to maintain consistency, there is no rule which forbids the combining of several trading styles by the same trader. It is common that during the most volatile periods of trading, positions held longer than what is common with scalping can be more beneficial and prudent. If that is the case, there is no reason to avoid doing so just because the trader considers himself a pure scalper, so to speak.
Throughout this text, all times are ET (New York time).

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.
Scalpers preferring choppy conditions may find an excellent environment for practicing their skills and refining their talents during this period. Since the market is choppy, strategies that aim to exploit small oscillations in the price to either side can be applied effectively and consistently. It is important to remember, however, that in some cases some anticipated economic event may make the market agitated and stir the water more than what is appreciated by the scalper.
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

During this period, the New York, London, and Frankfurt markets are all open; there are a number of important news releases, and option expiries also take place. As such, this is by far the most liquid and volatile period of the trading day, and requires appropriate scalping strategies for exploitation.
During these two hours micro-trends proliferate, in other words, rapid and sharp directional swings are commonplace as many market events and news releases stir the waters of the forex market repeatedly. In order to exploit these movements effectively, the scalper must possess a reliable technical approach which can be used to exploit rapidly changing conditions. Although we will discuss the technical aspects of trend scalping later, we will mention the importance of building up positions and letting profits run, if possible, in this highly trending market. Of course, scalping involves rapid opening and closing of positions, but unless we let profits run in the sharp moves encountered during this period, the rapid swings that cause us lossess will be able to erase whatever profit we gain with other positions. It is a good idea to be alert, and if caught in the middle of a strong trend which we have guessed correctly, there’s no reason to avoid exploiting it to the full.
If we decide to build up positions in this period, we may move stop-losses gradually to breakeven for our trades so that some of them can be left to run for as long as they can. Since the stop-loss will generate a profit even if it is activated, we can go ahead and continue our scalping while the positions which are safe continue running.

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.
The best way to scalp in these conditions is to use very small and rapid trades, and avoid building up positions. Since directionality in such choppy conditions is unlikely, there is little point in accumulating positions, and tampering with take-profit or stop-loss orders. Quick, multiple trades taken in quick succession without much consideration given to the overall conditions in the market constitute the favored approach of traders during this time period.

The Best Currencies for Scalping Forex.

Scalping is a highly specialized activity which requires a favorable technical and fundamental setup to yield its full potential. In the previous section we examined the necessary preconditions sought from a broker, here we’ll take a look at the currency pairs which are best suited to scalping strategies.
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.
We do not advise beginners to scalp with the carry pairs. Experienced scalpers can trade them with typical trend following strategies in order to exploit breakouts and other sharp movements.

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.

Forex Scalping – Extensive Guide on How to Scalp Forex.

Forex scalping is a popular method involving the quick opening and liquidation of positions. The term “quick” is imprecise, but it is generally meant to define a timeframe of about 3-5 minutes at most, while most scalpers will maintain their positions for as little as one minute.
The popularity of scalping is born of its perceived safety as a trading style. Many traders argue that since scalpers maintain their positions for a brief time period in comparison to regular traders, market exposure of a scalper is much shorter than that of a trend follower, or even a day trader, and consequently, the risk of large losses resulting from strong market moves is smaller. Indeed, it is possible to claim that the typical scalper cares only about the bid-ask spread, while concepts like trend, or range are not very significant to him. Although scalpers need ignore these market phenomena, they are under no obligation to trade them, because they concern themselves only with the brief periods of volatility created by them.
Forex scalping is not a suitable strategy for every type of trader. The returns generated in each position opened by the scalper is usually small; but great profits are made as gains from each closed small position are combined. Scalpers do not like to take large risks, which means that they are willing to forgo great profit opportunities in return for the safety of small, but frequent gains. Consequently, the scalper needs to be a patient, diligent individual who is willing to wait as the fruits of his labors translate to great profits over time. An impulsive, excited character who seeks instant gratification and aims to “make it big” with each consecutive trade is unlikely to achieve anything but frustration while using this strategy.
Scalping also demands a lot more attention from the trader in comparison to other styles such as swing-trading, or trend following. A typical scalper will open and close tens, and in some cases, more than a hundred positions in an ordinary trading day, and since none of the positions can be allowed to suffer great losses (so that we can protect the bottom line), the scalper cannot afford to be careful about some, and negligent about some of his positions. It may appear to be a formidable task at first sight, but scalping can be an involving, even fun trading style once the trader is comfortable with his practices and habits. Still, it is clear that attentiveness and strong concentration skills are necessary for the successful forex scalper. One does not need to be born equipped with such talents, but practice and commitment to achieve them are indispensable if a trader has any serious intention of becoming a real scalper.
Scalping can be demanding, and time-consuming for those who are not full-time traders. Many of us pursue trading merely as an additional income source, and would not like to dedicate five six hours every day to the practice. In order to deal with this problem, automated trading systems have been developed, and they are being sold with rather incredible claims all over the web. We do not advise our readers to waste their time trying to make such strategies work for them; at best you will lose some money while having some lessons about not trusting anyone’s word so easily. However, if you design your own automated systems for trading (with some guidance from seasoned experts and self-education through practice) it may be that you shorten the time which must be dedicated to trading while still being able to use scalping techniques. And an automated forex scalping technique does not need to be fully automatic; you may hand over the routine and systematic tasks such as stop-loss and take-profit orders to the automated system, while assuming the analytical side of the task yourself. This approach, to be sure, is not for everyone, but it is certainly a worthy option.
Finally, scalpers should always keep the importance of consistency in trade sizes while using their favored method. Using erratic trade sizes while scalping is the safest way to ensure that you will have a wiped-out account in no time, unless you stop practicing scalping before the inevitable end. . Scalping is based on the principle that profitable trades will cover the losses of failing ones in due time, but if you pick position sizes randomly, the rules of probability dictate that sooner or later an oversized, leveraged loss will crash all the hard work of a whole day, if not longer. Thus, the scalper must make sure that he pursues a predefined strategy with attention, patience and consistent trade sizes. This is just the beginning, of course, but without a good beginning we would diminish our odds of success, or at least reduce our profit potential.
Now let’s take a look at the contents of this article where forex scalping is discussed with all its details, advantages and disadvantages. Our suggestion is that you peruse all of this article and absorb all the information that can benefit you. But if you think that you’re already familiar with some of the material, to shorten your route, we present the table of contents of this article.

Contents

1. How scalpers make money: Here we will take a look at the logic behind scalping, and we’ll discuss the best conditions and necessary adjustments which must be made by a scalper for profitable trading.
2. Choosing the right broker for scalping: Not every broker is accommodative to scalping. Sometimes this is the stated policy of the firm, at other times the broker creates the conditions which make successful scalping impossible. It is important that the novice scalper know what to look for in the broker before opening his account, and here we’ll try to enlighten you on these important points.
3. Best currencies for Scalping: There are currency pairs where scalping is easy and lucrative, and there are others where we advise strongly against the use of this strategy. In this part we’ll discuss this important subject in detail and give you usable hints for your trades.
4. Best times for Scalping: There is an ongoing debate about the best times for successful scalping in the forex market. We’ll present the various opinions, and then offer our own conclusion.
5. Strategies in Scalping: Strategies in scalping need not differ substantially from other short-term methods. On the other hand, there are particular price patterns and configurations where scalping is more profitable. We’ll examine and study them in depth in this section.
a. Range Scalping: Some traders consider ranging markets better suited for scalping strategies. Here we’ll examine why, and how to scalp under such conditions.
b. Breakout Scalping: We’ll examine news breakouts, and technical breakouts separately and discuss suitable scalping strategies for both.
c. Trend Scalping: Here we’ll take a general look at forex scalping in trending markets.
6. Trend Following while Scalping: Trends are volatile, and many scalpers choose to trade them like a trend follower, while minimizing the trade lifetime in order to control market risk. In this part we’ll examine the usage of Fibonacci extension levels for scalping trends.
7. Disadvantages and Criticism of Scalping: Scalping is not for everyone, and even seasoned scalpers and those committed to the style would do well to keep in mind some of the dangers and disadvantages involved in using the style blindly.
8. Conclusions: In this final section we’ll combine the lessons and discussions of the previous chapters, and reach at conclusions about who should use the forex scalping trading style, and the best conditions under which it can be utilized.