The Definitive Guide to Scalping

The Definitive Guide to Scalping, Part5: Scalping Ranges

Talking Points

• When markets are flat, scalpers can trade ranges.
• Traders should identify support & resistance before considering entries.
• Range trading can continue until price breaks.

Scalpers have a variety of choices when it comes to an execution strategy. This decision should be decided after carefully evaluating current market conditions for the currency pair of their choosing.

For today’s scalping lesson, we will focus on ranges and how to trade them by planning entries between key levels of support and resistance.

Learn Forex – USDCHF Scalping Ranges with Cam Pivots

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Trading the Range

As a range trader our first task is to identify key levels of support and resistance. This can be done through a variety of methods mentioned in the 4th installment of the Definitive Guide to Forex Scalping. Once traders have found these points and price is confirmed to be traveling in a range, entries become very straight forward. Traders can set an entry order to sell levels of resistance and buy levels of support. From this point, scalpers must become patient and wait for the market to turn at one of these designated points.

In the example below, we can see this technique in action. Support and resistance have been found using Camarilla pivot points. Traders can set entry orders to sell the USDCHF back in the direction of the primary trend, near resistance at .9051. In the event that price touches these entries, they will be executed selling the USDCHF. Risk has been managed by placing a stop at the next line of resistance, designated as R4 at .9068. Taking profit should be done when price has reached the opposing point of the range. When selling a range, limit orders can be placed at support. Conversely in the event of buying range support, price targets can be set at range resistance.

Learn Forex – USDCHF Range Entries & Targets

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Ranges with Oscillators

Traders can also choose to scalp market ranges
through the use of an oscillator. Again traders should wait for price to reach a key level of support and resistance prior to considering an entry. Once this occurs, traders can turn to an indicator such as MACD, CCI, or RSI to time their entry. In the event price touches resistance, as highlighted below, traders will enter the market on a return from an overbought level. This process can be replicated to buy levels of support when Oscillators cross back above an oversold value.

Trading with an oscillator can potentially help trader’s better find market momentum and even keep traders out of some bad positions. However, it should be noted that this does not give scalpers license to use sloppy risk management! Just as we would with our example using entry orders, traders can manage risk by placing a stop above the next line of resistance, while targeting range support to take profit using limit orders.

Learn Forex – USDCHF Range Entries with CCI

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It should be noted that ranges can be traded as long as support and resistance remain intact! In the event the currency pair you are trading breaks or begins trending, it will be time to abandon the range and either switch to a new chart or a new strategy.

This concludes the 5thinstallment of The Definitive Guide to Scalping. If you missed one of the previous installments, don’t worry! You can catch up on all the action with the previous articles linked below.

---Written by Walker England, Trading Instructor

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Talking Points

• Support and resistance levels are critical areas for scalpers to identify.
• Price action, pivots, and moving averages can all be used to find these values.
• Once identified, traders can then look to employ the strategy of their choosing.

One of the most important concepts a scalper needs to master is how to find levels of support and resistance. These levels will act as price ceilings and floors which will ultimately help us determine our scalping strategy.

While there are many ways to identify support and resistance, today we are going to take a look at three of the most common methods that can be applied in our day trading.

Learn Forex – EURUSD and Price Action

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Price Action

The first way of finding support and resistance is by using price action. Scalpers should become comfortable with finding swing highs and swing lows on their charts as they are natural areas of support and resistance. A swing high is identified as a peak on the graph and a swing low can be pinpointed as a valley. These extremes in price can help us prepare for either a swing or breakout trading opportunity depending on what the graph is displaying.

Above we can see today’s price action on a EURUSD 5minute chart. A price channel has been drawn by connecting a series of swing highs and swing lows. The swing highs help denote resistance and areas where scalpers may look for opportunities to sell. By connecting the swing lows, we have created an area of support where traders may wish to close existing sell positions, and potentially look for opportunities to buy.

Learn Forex – EURGBP with Cam Pivots

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Pivot Points

Pivot points also make great areas of support and resistance. These lines are drawn using a preset formula and are often favored by scalpers because they can be added to virtually any chart. Above is a great example of support in action on a EURGBP 30 minute chart using Camarilla Pivot Points. Once added, you can clearly see levels of support denoted by an “S” whereas lines of resistance are marked by an “R”. It should be noted that there are a variety of pivot points to choose from. Regardless of the pivots you use, their key purpose is to find these support and resistance levels for you. With that in mind, let’s look at an example.

Looking at today’s price movement on the EURGBP, we can clearly see price remained supported at the S3 camarilla pivot point. Traders looking to purchase the pair can wait for price to bounce off this value before looking to buy towards higher highs. It should be noted that resistance lines can also be used to find areas to sell as long as price remains in the trading range. In the event that price breaks the final levels of support or resistance, this would be identified as a market breakout. Knowing this, scalpers can adapt their pivot trading strategy to any market environment.

Learn Forex – AUDUSD with 200MVA

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Moving Averages

Last we will take a look at using simple moving averages (MVA) as a level of support and resistance. Most traders may be familiar with this average on longer period graphs, but is just as effective on shorter time frames such as the 30 minute and 5 minute charts. If price is above the average, traders can wait for dips and look to buy a currency pair. Conversely if price breaks below this value, the 200 moving average will change from an area of support to new resistance. Traders can then look for selling opportunities as long as price remains under the indicator.

Above we have a 200 period MVA displayed on an AUDUSD 5 minute chart. For the majority of trading on January 27th price stayed above the displayed 200 MVA. Traders could have used this as an opportunity to buy retracements or look to trade breaks towards higher highs on the AUDUSD. This morning however, support was broken with price moving through the 200 MVA. At this point, traders should consider the average as resistance while potentially changing their trading bias.

This concludes the 4th installment of The Definitive Guide to Scalping. If you missed one of the previous installments, don’t worry! You can catch up on all the action with the previous articles linked below.

The Definitive Guide to Scalping, Part 1: Market Conditions
The Definitive Guide to Scalping, Part2: Currency Pairs
The Definitive Guide to Scalping, Part 3: Time Frames

---Written by Walker England, Trading Instructor

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Talking Points

• It should be a top priority to determine the appropriate chart for your trading.
• Reference a specific date range to begin your analytics
• Finalize your execution by moving to a shorter term timeframe

One of the most frequent concerns voiced by new Forex scalpers is how to identify which timeframe and charts to use in their analysis. This question is often addressed after selecting a currency pair for scalping, and makes sense because the possibilities are almost limitless. The image below includes 12 different time frame charts for the EURUSD. If all of these possibilities seem overwhelming, don’t worry you’re not alone.

To help simplify this process today we will look at charts for scalping, and how to identify the appropriate timeframe for our selected strategy.


Learn Forex – EURUSD and Time Frames


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A Frame of Reference


Whether you are a position trader or scalper it is always good to begin your charting with a frame of reference. A frame of reference is specifically looking at how much data is displayed on your chart. This reference is designed for scalpers to find the short term trend while identifying key levels of support and resistance. Think of it this way, scalpers looking for 10 pip gains would be ill advised to begin looking at multi-year graphs on a daily chart to begin their analysis. So what reference point and what timeframe charts should a scalper use?


Scalpers can begin by referencing 7 days’ worth of data. This allows the trader to take in exactly one weeks’ worth of pricing to establish short term market direction. Traders can then identify market swings and key levels of support and resistance for the week without getting analysis paralysis from having too many candles on their charting screen.


Below we can see two EURUSD charts, both looking at one weeks’ worth of data. Notice how we can easily identify the trend on both graphs? Once this frame is selected, the time frame chosen simply denotes the number of bars displayed for the period selected. I find that a 30minute is a great place to begin, while traders wanting fewer bars may opt for a 2Hour or 1Hour selection.


Learn Forex – EURUSD Weekly Reference


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The Execution Chart


Now that you have narrowed down the trend, it’s time to consider an execution chart. This graph should be the final chart that you use in accordance to your scalping trading plan. While this chart may be the reference chart mentioned above, more often than not, scalpers prefer moving into shorter time frames at this point. This can aid in identifying intraday trading opportunities, and is most commonly called multi time frame analysis.


The final question you must ask yourself as a scalper is how many positions you wish to take in one day. While this answer will vary from trader to trader, normally in my experience the answer tends to fall in the 1 to 5 trade range. If you are looking to take 1-2 positions a day, I would recommend starting off with a 30 or 15 min chart. Traders looking for 3-5 positions a day can begin by looking for entries on a 5minute graph. Finally traders looking for 5 or more trades may be best served by consulting a 1 minute graph.


Of course everything is customizable when it comes to trading! My final recommendation is to find what works for you. Below is an example of a trade taken today, based off of a 5minute strategy. Join me for next week’s article for our Forex scalping guide as we look at different ways to determine support and resistance.


Learn Forex – EURUSD 5Minute Execution


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Talking Points

• Forex Scalpers should always identify market conditions before trading
• Factor in the spread to reduce transaction costs
• Consider liquidity when trading to maximize trading

Scalpers are continuously faced with choices and tough decisions when trading Forex. On a day to day basis however, none is as important as deciding which currency pair to trade. Choosing a currency not only will affect the strategy we choose but ultimately our profitability as well. So today we will review two key factors that need to be evaluated prior to implementing your favorite scalping strategy.

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Spreads and Cost

Spreads and costs should be on every trader’s minds, but they are particularly important to scalpers. Since scalpers tend to favor high frequency strategies, this means they will incur the spread more often than their average positions trader. So throughout the trading year, to keep costs down scalpers should gravitate to pairs with lower spreads. Let’s look at an example.
Above we can see the effects of trading a currency with a lower spread by comparing two yen pairs. First we have the USDJPY with a 1.1 pip spread compared to the NOKJPY with a 5.5 pip spread. Being Yen pairs at some point a trader may have to decide between the two pairs above. However when looking at spreads it should make this decision considerably easier. It costs more to trade the NOKJPY! Traders save approximately $44 in spread costs per 100k transaction trading the USDJPY!
For a complete list of spreads at FXCM, click the link embedded HERE.

Liquidity

Next when choosing a currency pair it is also important to consider liquidity. Liquidity in Forex is easily defined as the amount of currency quoted at any specific price point. Scalpers should value liquidity because it will ultimately coincide with the ease we enter and exit the market.

From a traders perspective, illiquid markets are known to be volatile and are more prone to market gaps based off of fewer buyers and sellers present in the market place. This happens since every buyer must transact with a seller, and the further they are off in regards to price the more a pair is prone to jump while exposing scalpers to slippage. This is compared to a deep market where there is a breath of market volume at multiple pricing points. With more liquidity available we increase the ease that we can enter and exit the market because more buyers and sellers are readily available to cross a scalper’s transaction.

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Currency Pairs

Now that you know what to look for it’s time to narrow the field of potential pairs for scalping. Out of 56 different pairs offered at FXCM, traders should consider scalping pairs comprised of the G8 currencies shown above or one of the Forex Majors pictured below. These pairs are comprised of the most frequently traded currencies in the world which helps when it comes to factoring in both spreads and liquidity.

Now that you are a little more familiar with the best currency pairs for scalping, we can now begin to look at the technical aspect of trading. Join me next week as we begin to evaluate charts and price action for Forex scalpers.

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---Written by Walker England, Trading Instructor

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Talking Points

• Forex Scalpers should always identify market conditions before trading
• Markets can be broken into three major environments. Trends, Ranges, and Breakouts
• Once identified, traders can select the appropriate strategy that fits present price action.

Before any scalper places their first trade it is important to identify the markets current technical condition. Every day will bring a new price action, and it is important that we are using the appropriate trading strategy to meet the day’s challenges.

Today we will review the three most common market conditions presented to Forex traders. All of these conditions can be identified by identifying key points on your chart through basic technical analysis. Once we have a grasp on market direction, we can then look to better implement the scalping strategy of our choosing.

Learn Forex – USDCAD Trend, Range, and Breakout

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Price Ranges

Identifying a trading range is the first market condition we will review. A range occurs when price is moving virtually sideways which can also be associated with channel trading. Even though the market doesn’t have a clear direction, it can still provide opportunities for diligent scalpers once one is identified.

The first step to finding a range is to identify support and resistance on your chart. These pricing levels can be found by connecting a series of recent market highs and lows using horizontal lines. Resistance is the current ceiling on price and Support is defined as price actions current floor. These points will be the basis for our strategy, and should be clearly marked on our chart before moving further.

As long as a range holds, scalpers can take a neutral market stance. This means they can look to take both buy positions near levels of support and sell look to sell levels or resistance.

Learn Forex – Identifying a Trading Range

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Strategic Breakouts

When market ranges end, we are most likely to encounter a breakout. A breakout market occurs when price moves through or “breaks” an identified level of support or resistance. Immediately following a breakout, traders can look to take advantage of scalping opportunities with the fresh market momentum.

Below we can see a breakout from the previously identified range on the USDCAD 30 Minute chart. Once the previous price ceiling broke, traders had the opportunity to buy the market. The process of trading a breakout can be simplified through the use of an entry order. These orders will remain pending and execute once the price selected becomes available for trading.

It should be noted, in the event of price breaking a level of support, this process can be replicated. However, with new downward momentum scalpers will look to sell the market.

Learn Forex – USDCAD Price Breakout

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Trending Markets

Breakouts normally signal the beginning of a market trend. The Forex market is known for its propensity to continue moving in a singular direction for an extended period of time, and once found scalpers can trade in the direction of the trend.

The process of identifying the trend begins with the identification of a series of swing highs and lows. A swing low is identified by a current valley on a graph, which normally represents a temporary low. Swing highs will identify temporary peaks in price action. If a currency pair is making a series of higher highs as in the USDCAD 30Minute chart below, you are probably looking at prices advancing in an uptrend. This is a strong signal for scalpers to begin looking for fresh buying opportunities.

It should be noted that markets are just as prone to declining in downtrends. In the event that a chart is printing lower lows and lower highs, scalpers should then look to sell the market with the charts current direction.

Learn Forex – USDCAD Uptrend

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Now that you are a little more familiar with various market conditions, we can proceed to look at some of the different topics that are vital to Forex scalpers.

Talking Points:

• This is an archived webinar from the Live Classroom of DailyFX PLUS, in which I trade my scalping strategy in live conditions
• This webinar was recorded on December 17, 2013; the day before the FOMC Taper announcement
• After showing the strategy, and how I trigger positions; we look at how a profitable position can be managed as the market moves in the ideal direction.

http://youtu.be/4PiL_BT6ue4


--- Written by James Stanley

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Public sections :

Scalping thread is here.

Trend scalp
- Trend scalp indicator is on this post.
- Trend scalp_v1 indicator is on this post. This is MTF version with ability to plot the color levels

Trend Scalp Hacolt trading system is on this post.

Premium section :


TickScalper EAs
- TickScalper_v3.44 with 'more safe' settings is on this post.
- TickScalper_v3.44 with 'super more safe' settings is on this post.

PolyFitScalper EAs
- PolyFitScalper_v1.59_noHedge EA is on this post.

Scalp_net EAs
- Scalp_net_v1.5 EA is on this post. Scalp_net_v1.5 manual trading system is on this page
- Scalp_net_v1.3_tf EA is on this post.

PolyBands Ichimoku systems is on this thread.
- files and rules of the system (howto trade) is on this page.

At this point in our trading education, we should be aware of the fact that FX spreads are variable and can widen to levels several times larger than their typical spreads. These spread increases are most often seen during news releases and can affect our positions rapidly. But, what is the best way to weather the storm during times of widening spreads?

How to Truly Protect Ourselves Against Widening Spreads

The only way to protect ourselves during times of widening spreads is to restrict the amount of leverage used in our account (which in my opinion, should be less than 10x leverage). Spreads can only hurt us when a trade is being opened or closed. If we aren’t opening or closing a trade during a news events, we won’t be affected. Prices will eventually go back to normal and at some point we will close on our own terms.

The only time the market can force our hand to liquidate our positions is with a margin call. If we reduce our leverage, we reduce our chances of liquidation.

The “Hedging” Myth

Helping traders around the world means that I have seen many different methods to trade this market, both good and bad. One of the most damaging methods I’ve come across is the idea of ‘hedging’ a Forex trade by opening an opposing trade in the same currency pair and holding both long and short positions simultaneously. This not only incurs greater trade cost (by paying additional spread) but does not protect your position against additional losses.
Hedgers attempt to lock-in their profit or loss on a trade by opening an opposing trade, but if the spread widens, this negatively affects both sides of the trade. If the trader is over leveraged on these trades, a wider spread could incur a margin call and liquidate both positions. Worst of all, you would most likely be filled at the widened spread prices, adding insult to injury.
So now we know, hedging is not the proper way to secure a profit or a loss. Only the closing of a position can do that. Hedging also can be dangerous around widening spreads and can cause margin calls, so we need to limit the amount of leverage we are using to 10x or less.

Good trading!
---Written by Rob Pasche

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Talking Points

• Breakout traders should first find support & resistance
• Entries can be set as close as 1 pip above these values
• Support and resistance can also be used for managing a position

Scalpers have a variety of choices when it comes to an execution strategy. This decision should be decided after carefully evaluating current market conditions for the currency pair of their choosing.

Today we will continue the Definitive Guide to Scalping as we focus on scalping breakouts.
Learn Forex – GBPCAD Early Morning Breakout

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Trading a Breakout

The first key to scalping breakouts is to identify key levels of support and resistance. This can be done through a variety of methods mentioned in the 4th installment of the Definitive Guide to Forex Scalping. Once found, setting up a breakout trade is a straight forward process. In the event of a level of resistance breaking, traders will look to buy. An example of this is depicted above using todays GBPCAD price action. Conversely, traders will look to sell when a key level of support falls.

The big question is always where to enter into the market in the event of a breakout. Theoretically a breakout occurs if a level of support or resistance is breached by even 1 pip! This allows aggressive scalpers to get into the market as soon as possible. Some traders may flock to this methodology as it lets traders maximize their profits when a trade moves in their favor. However, getting into the market first also will expose you to be the first trader stopped out in the event of a false breakout. Traders that need further confirmation can wait for a 30 minute candle close and then make a decision whether to enter the market.

As with any strategy, there are risks when trading breakouts. Let’s now look at managing an open position.

Learn Forex – GBPJPY False Breakout with Stop

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Risk and Breakouts

The first question I inevitably get regarding breakout trading, is how to prevent false breakouts. While I understand that no one intends to take a loss, it will happen at some point regardless of the strategy that you use. With that being said, there is NO way to prevent false breakouts. All we can do is to manage our risk when price moves back against a breakout.

Above is an example of a false breakout this morning on the GBPJPY. Notice how price broke cleanly through support, and then abruptly changed directions. Even though at one time the trade might have been profitable, when the market moves back above the designated breakout area, traders should have a plan for exiting the market. When selling a breakout of support, stops can be placed above this value which becomes new resistance.

Learn Forex –GBPCAD with Risk:Reward levels

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Risk VS Reward

Overall, trading breakouts is an exciting way to approach scalping. It should be noted since breakouts occur during times of market volatility it is imperative to maximize your profits when the market breaks in your favor! This can be done byusing a positive risk reward ratio. This means traders should look to make more in profit, relative to what is being risked through the placement of a stop order.

Highlighted above is a 1-2 Risk:Reward ratio with traders looking to make 2x the amount of profit on a breakout relative to the amount risked. This ratio can be improved by either reducing the amount risked or increasing the amount of pips in profit targeted on a position.

This concludes the 7th installment of The Definitive Guide to Scalping. Next week we will conclude the Definitive Guide to scalping, with a closer look at managing risk. If you have missed any of the previous editions of this scalping guide, you can catch up on all the action with the previous articles linked below.
The Definitive Guide to Scalping, Part 1: Market Conditions
The Definitive Guide to Scalping, Part2: Currency Pairs
The Definitive Guide to Scalping, Part 3: Time Frames
The Definitive Guide to Scalping, Part4: Support & Resistance
The Definitive Guide to Scalping, Part5: Scalping Ranges
The Definitive Guide to Scalping, Part6: Scalping Retracements

---Written by Walker England, Trading Instructor

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Talking Points

• Risk management should be considered prior to entering into a trade
• Never risk more that 1% of your balance on any single trade idea
• Stop trading if losses amount to more than 5% in one trading day

The final lesson scalpers must learn is probably the most important, risk management. The decision on how to manage risk can have a great impact on the bottom line of your account than deciding where your entry orders should go or even what time frame to trade on.
Today we will conclude the Definitive Guide to Scalping as we focus on managing risk when scalping.

Learn Forex – GBPCAD Early Morning Breakout

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Stop Placement

The first key to risk management is to identify a key level of support and resistance. This can be done through a variety of methods mentioned in the 4th installment of the Definitive Guide to Forex Scalping. Once found, regardless if you are trading retracements, breakouts, or ranges will have a definitive area to place your stop. In the event you are looking to buy a currency pair, risk should be managed underneath a line of support. Conversely, if a trader is selling a currency pair, risk should be managed above a level of resistance.

Traders should also consider how close to these lines of support and resistance to place their stop. Aggressive traders can set their stop very close to these values to close losing positions as quickly as possible. This is opposed to a more conservative approach where stops would be placed further away to allow positions more space to breath.

When it comes to placing stops it is important to remember that each traders strategy and risk tolerances will be different! But regardless of your choices, always scalp with a stop. Now let’s look at a few other rules scalpers should remember.

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The 1% Rule

While no one wants to experience a loss on their account, it is an inevitable part of scalping. Because of this, it is always important to have a plan of action to manage risk before entering into a trade. While placing a stop is important, traders should also consider the 1% rule. This means that traders should never risk more than 1% of their account balance on any one trading idea. That means using the math above, if you are trading a $10,000 account you should never risk more than $100 on any one positions.

The 1% rule can also be coupled with a favorable risk reward ratio. Using a 1:2 setting, this means if we risk 1% in the event of a loss, at minimum we should look to close our trades out for a 2% profit. This would translate into a $200 profit on a $10,000 account balance. Now that you are familiar with the 1% rule, let’s look at our next risk management tip.

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The 5% Rule

While no one wants to lose 1% of their account balance on any one trade idea, it is also beneficial to review the maximum exposure you have for your TOTAL account balance. The 5% rule reminds scalpers to never have more than 5% of their total account balance at risk across all trades. I also recommend this as a final cutoff point for trading. Meaning if you lose more than 5% in one day, it is probably best to call it quits and look to pick up trading again when the market is more favorable.

To put this into perspective a scalper with a starting balance of $10,000 on 5 consecutive open positions, at 1% risk per trade , your balance would still have $9500 remaining at the end of the day. This is critical because even on your worst day, you can still come back tomorrow and pick up your trading strategy! Also this rule can prevent revenge trading and accruing even more losses.

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Risk Management

To help traders control and manage their risk, programmers at FXCM have created a simple indicator to help decipher how much risk is being assumed on any one particular trade. Once added to Marketscope 2.0, the FXCM Risk Calculator, as depicted above, has the ability to help a trader calculate risk based off of trade size and stop levels.

We walk through the application, as well as how to manage risk in several videos embedded into the brainshark medium. After clicking on the link below, you’ll be asked to input information into the ‘Guestbook,’ after which you’ll be met with a series of risk management videos along with download instructions for the application.

This cncludes the 8th and final installment of The Definitive Guide to Scalping.I hope you have enjoyed this series, and if youhavemissed any of the previous editions of this scalping guide you can catch up on all the action with the previous articles linked below.

The Definitive Guide to Scalping, Part 1: Market Conditions
The Definitive Guide to Scalping, Part2: Currency Pairs
The Definitive Guide to Scalping, Part 3: Time Frames
The Definitive Guide to Scalping, Part4: Support & Resistance
The Definitive Guide to Scalping, Part5: Scalping Ranges
The Definitive Guide to Scalping, Part6: Scalping Retracements
The Definitive Guide to Scalping, Part 7: Scalping Breakouts

---Written by Walker England, Trading Instructor

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Talking Points:

• Scalpers look to trade session momentum
• Scalpers do not have to be high frequency traders
• Anyone can scalp with an appropriate trading plan

The term scalping elicits different preconceived connotations to different traders. Despite what you may already think, scalping can be a viable short term trading methodology for anyone. So today we will look at what exactly is scalping, and who can be successful with a scalping based strategy.

What is a Scalper?

So you’re interested in scalping? A Forex scalper is considered anyone that takes one or more positions throughout a trading day. Normally these positions are based around short term market fluctuations as price gathers momentum during a particular trading session. Scalpers look to enter the market, and preferably exit positions prior to the market close.
Normally scalpers employ technical trading strategies utilizing short term support and resistance levels for entries. While normally fundamentals don’t factor into a scalpers trading plan, it is important to keep an eye on the economic calendar to see when news may increase the market’s volatility.

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High Frequency Trading

There is a strong misconception that all scalpers are high frequency traders. So how many trades a day does it take to be considered a scalper? Even though high frequency traders ARE scalpers, in order for you to qualify as a scalper you only need to take 1 position a day! That is one of the benefits of scalping. You can trade as much or as little as you like within a giving trading period.

This also falls in line with one of the benefits of the Forex market. Due to the 24Hr trading structure of Forex, you can scalp the market at your convenience. Take advantage of the quiet Asia trading session, or the volatile New York – London overlap. Trade as much or as little as you like. As a scalper the choice is ultimately yours to make!

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Risks

There are always risks associated with trading. Whether you are a short term, long term, or any kind of trader in between any time you open a position you should work on managing your risk. This is especially true for scalpers. If the market moves against you suddenly due to news or another factor, you need to have a plan of action for limiting your losses.

There are other misconceptions that scalpers are very aggressive traders prone to large losses. One way to help combat this is to make scalping a mechanical process. This means that all of your decisions regarding entries, exits, trade size, leverage and other factors should be written down and finalized before approaching the charts. Most scalpers look to risk 1% or even less of their account balance on any one position taken!

Who can Scalp?

So this brings us to the final question. Who can be a scalper? The answer is anyone with the dedication to develop a trading strategy and the time to implement that strategy on any given trading day.

---Written by Walker England, Trading Instructor

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Talking Points:

• Scalpers should look to systematize their approaches and strategies.
• Multiple Time Frame Analysis can help day-traders see ‘the bigger picture.’
• Traders can use MACD to initiate positions in a day-trading approach.

When a scalper begins their day, there are usually quite a few questions that need to be answered before ever placing a trade.

What’s moving the market this morning?
Which markets are most active?
What drivers (or news) might come out to push the market further?
Is my coffee ready yet?

These are just a few examples… but suffice it to say that those who are day-trading in markets have quite a bit on their mind every single trading day.

In this article, we’re going to look at how day-traders and scalpers can look to integrate MACD into their trading strategy.

The Setup

Before a scalper ever triggers a position they need to first find the appropriate market environment.

For fundamental-based traders, Multiple Time Frame Analysis can be helpful; but more important is their outlook or opinion and the fact that that outlook or opinion should mesh with the ‘bigger picture’ view of what’s going on at the moment.

For scalpers, the hourly and 4-hour charts carry special importance, as those are the ideal timeframes for seeing the bigger picture.

After that, traders should look to diagnose the trend (or lack thereof).

A great indicator for investigating trend strength is the Average Directional Index (ADX). Also popular for investigating trends is the Moving Average Indicator.

In the below graphic using a 4-hour chart on GBPUSD, a 55 period Exponential Moving Average is being used as the ‘trend tool.’ If prices are above the moving average, the trader looks to only scalp to the long side (in the direction of the price relationship with the Moving Average). If prices are below the 55-period moving average on the 4-hour chart, then only short positions are investigated.

Using a 55-period EMA as a ‘Trend Tool’ on the 4-hour Chart before looking for scalp-positions

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The Entry

After the day-trader has found a promising setup, they then need to decide how to trigger into positions, and MACD can be a very relevant option for such situations.

Because the trader already knows the direction they want to trade in, they merely need to wait for a corresponding signal via MACD to initiate the position.

When MACD crosses up and over the signal line, the trader can look to go long.

After a long position is triggered, the trader can look to close the position when MACD moves down and under the signal line (which is usually looked at as a sell signal, but because you did the ‘bigger picture analysis’ with the longer-term chart, this is merely a ‘close the long signal.’)

Scalpers can trigger positions when MACD Signal takes place in direction of their bias

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On the other side of this equation: If the trader had determined the trend to be down on the longer-term chart or if their fundamental bias is pointing lower, they can look for MACD to cross down and under the signal line to trigger their short position.

And once MACD crosses up and over the signal line, the trader can look to cover their short position.

Scalpers can close positions when opposing MACD Signal takes place

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The Context

The aforementioned approach can work phenomenally in a day-trading/scalping approach. But the fact-of-the-matter is that scalping profitably entails a lot more than just a trading plan, and an entry strategy.

Risk management is the undoing of most new traders; and day-traders and scalpers fall victim to this susceptibility even more so than most.

--- Written by James Stanley

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Talking Points:

• Pivots can help easily identify support & resistance levels
• Traders should monitor R4 and S4 values for breakouts
• As with any strategy, identify areas to exit your position

Trading breakouts is one of the most popular strategies available for scalpers. When a major level of support or resistance breaks, this momentum can provide scalpers opportunities to capitalize on new orders. Today we will look at scalping breakouts using camarilla pivot points. Lets begin!

Scalping with Pivots

Pivot points can be great ways to identify key levels of support and resistance for the day trader. There are many types of pivots we can use and in today’s example, we will use camarilla pivots added to today’s AUDUSD graph seen below. Key levels of resistance are denoted with a green line (R1-4) while key levels of support (S1-4) are denoted by a red line.

In an uptrend, such as the AUDUSD chart below, traders will want to watch for a breakout above resistance. As R4 is the last line of resistance this line is an opportune place to look for potential market entries. Let’s look at a sample setup.

Learn Forex: Support & Resistance with Pivots

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Breakout Entries

Once you have identified support and resistance, it is time to plan your entry. The most common methodology of trading breakouts is to set entries to buy a currency pair, in an uptrend, when resistance is broken. As well, traders can look to sell levels of support in a downtrend as price breaks to lower lows. This can be done using entry orders to enter the market as soon as price moves beyond one of these values.

Market orders can also be used to trade breakouts. This method is normally preferred by traders who have time to remain in front of their trading console and monitor their positions. Traders using market orders may often wait for one candle close to confirm a breakout prior to entering into their trade. Regardless of the entry method preferred, the objective is still the same.

Learn Forex: AUDUSD Breakout

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Managing Risk

The last portion of any active trading strategy is to manage risk. When using pivot points, these pricing levels become fairly intuitive. When buying a breakout over R4, trades can be managed by placing stops under the R3 value. In the event that prices begin mobbing back through earlier levels of resistance, traders will want to exit the market at the first available convenience.

Once a stop has been placed, traders can then extrapolate their profit target. A simple methodology is to extrapolate a positive risk reward ratio of a traders choosing. This ensures in the event that the trade moves favorably profits are maximized, while cutting losing positions as quickly as possible.

---Written by Walker England, Trading Instructor

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Talking Points:

• CCI is a momentum oscillator used for Overbought / Oversold values
• CCI can be used in conjunction with a MVA to determine trading signals
• Scalpers can time entries when momentum returns with the trend

Timing entries is one of the most difficult parts of trading retracements in the trend. This is especially true for scalpers looking to take advantage of quick changes in price and momentum in the market. Normally an oscillator can be used to simplify this process and give traders a clear execution signal. Today we will review using the CCI (Commodity Channel Index) oscillator for scalping trends. Let’s get started!

CCI and Overbought / Oversold Levels

If you are already familiar with RSI, Rate of Change, or other oscillators you are one step closer to trading with CCI. Like many oscillators, CCI uses a mathematical equation to depict overbought and oversold levels for traders. Pictured below is CCI, which uses a +100 reading to indicator overbought conditions, while a reading below -100 represents an oversold level.

Normally 70-80% of the values tend to fall between these points, which can be interpreted as buy or sell signals. As with other overbought/oversold indicators, this means that there is a large probability that the price will correct to more representative levels. Knowing this, trend traders will wait for the indicator to move outside of one of these points before reverting back in the direction of the primary trend. Let’s look at an example using the strong trend on the GBPCAD.

Learn Forex –CCI Overbought / Oversold

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Timing a CCI Entry

Below we can see an example using a 5minute GBPCAD chart. The currency pair is in an established uptrend with price remaining above a 200 period moving average. Knowing this, trend traders should look to initiate new buy positions. The primary way of timing entries with CCI in an uptrend is to wait for the indicator to move below -100 (oversold), and enter into the trade when CCI moves back above -100. This creates an opportunity to buy the currency as momentum is returning back in the direction of the trend. In the event you are trading a downtrend, the process can be reversed. Trades to sell can be timed as momentum pulls the indicator back beneath an overbought value.

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More...

• Always identify market conditions prior to trading
• Your strategy and entries should reflect the market
• Plan your risk and write your trades down to stay accountable

Traders should have a checklist to consult prior to making any major trading decisions. These steps are critical for Forex scalpers as they often have to make these choices on a moment’s notice. To help with the process it can be helpful to keep a checklist and determine your options prior to approaching the market. Today we will review the scalper’s checklist. Let’s get started!

Identify Market Conditions

The first task assigned to day traders and scalpers is to identify market conditions. Is the market trending or ranging? Is the volatility of an asset low or high? These are both important questions that should be answered prior to entering into a new trade idea. Not only will this help Forex traders which currency pair to trade, but also help determine their strategy. Every scalper and day trader should check this off their list, prior to considering any market entries!

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Choose a Strategy

Once market conditions are found, traders need to identify a strategy that is congruent with the market. If you are trading a trend, you will need to not only find market direction but also decide if you are going to trade a retracement, momentum or breakout strategy. In lack of a trend, traders again need to decide how to approach pricing patterns, support & resistance values, as well as potential breakouts. With so many strategies to choose from, it is worth taking your time and doing your due diligence prior to checking this off your scalping list.

Plan Your Entry

Next traders need to select how they are going to enter into the market. Typically traders need to first determine if they will trade with market orders or entry orders. Market orders allow you to trade immediately if conditions are met and you are immediately in front of your trading terminal. Entry orders can be used and will execute at a designated price even if you aren’t watching the market.

Once this is decided, traders need to evaluate which indicators if any will be used for trading. In the event an indicator is added to the graph, prior to execution, plan on its use and know its strengths as well as limitations. When you are 100% certain on your entry triggers then you can proceed to the next portion of the checklist.

Manage Risk

This point of our check list goes beyond the simple placement of stop and limit orders. Scalpers must carefully consider how much they should risk on each trade. At this point specific questions should arise. How many pips are you risking per trade? What is your average profit target per trade? How does a stop order being executed equate to a loss on my account?

While no trader wants to take a loss it is paramount to determine these values prior to scalping. Once these values are set, you can mark this point off your checklist. Now all you have left is to hold yourself accountable to your trading decisions.

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Log the Results

Traders, especially short term scalpers, have a tendency to always be looking for the next trade. While looking for trading opportunities isn’t a bad thing, we should also remember to go back and review past events. Keeping a trading log can help us establish market patterns and reflect if your strategy is working in current conditions.

To help with this process, traders should note, why, when and how they entered into a trade. If your strategy is working, stick with it and keep your original strategy rules. If you’re trading is not working out as planned, with a log you can identify what must be changed and make appropriate adjustments.

While this checklist may seem daunting at first, these are all important steps to consider before scalping. To help you along the way, read through The Definitive Guide to Scalping. This is a great resource to review prior to tackling some of trading’s tougher challenges!

The Definitive Guide to Scalping, Part 1: Market Conditions
The Definitive Guide to Scalping, Part2: Currency Pairs
The Definitive Guide to Scalping, Part 3: Time Frames
The Definitive Guide to Scalping, Part4: Support & Resistance
The Definitive Guide to Scalping, Part5: Scalping Ranges
The Definitive Guide to Scalping, Part6: Scalping Retracements
The Definitive Guide to Scalping, Part7: Scalping Breakouts
The Definitive Guide to Scalping, Part8: Risk Management

---Written by Walker England, Trading Instructor

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Talking Points:

• Scalpers should identify the trend
• Short term momentum pinpoints direction
• Based off of strength or weakness, traders can the plan entries

For scalpers and day traders it is imperative to master identifying the market trend and momentum. The idea is that traders will sell in a downtrend, and buy in an uptrend when the market has the strongest likelihood of continuing in a singular direction. Today we will examine how you can identify these two components on your charts, while identifying one of the markets strongest trends. Let’s get started!

Currently the EURGBP continues to be one of the markets strongest trending currency pairs. Taking a look at the 4Hour graph below, we can see the pair declining as much as 346 pips from its March high. Knowing this, scalpers should have a specific bias to sell the EURGBP. However, before traders consider new positions they should also review short term momentum to identify if price is retracing or moving with the trend.

Learn Forex –EURGBP 4Hour Trend

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Market Momentum

Rarely does the market head in one singular direction all of the time. That is why it is imperative to check and see if short term momentum is moving with the longer term trend. For this we can move into our 30 minute chart and identify the current direction of price. If price is heading in the same direction, traders may then consider taking new scalping positions. To help with this analysis we can turn to a series of pricing blocks. Let’s look at an example.

Below we can see the current EURGBP 30 minute chart divided into two pricing blocks. Block 1 starts with last Wednesday and runs through Sunday June 8th. It should be noted that during this time frame, price indeed moved to a lower low, while declining as much as 59 pips. Knowing this, Block 2 can now be used to confirm the strength of the current downtrend. Block 2 does indeed form a lower low signaling the continuation of downward momentum. With both blocks pinpointing lower lows in the direction of the trend, traders can continue looking for fresh selling opportunities using the strategy of their choice.

Learn Forex –EURGBP Trading Blocks

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Further Analysis

To continue our analysis, traders should notice price is currently trading under the Block 2 low at .8063. This means that price has already moved to a lower low, and the next pricing block on the graph will also be painted red pending the absence of a higher high.

---Written by Walker England, Trading Instructor

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Talking Points:

• Price action is the study of price movements in a market.
• Many traders look at and use price action because it’s the cleanest view of technical analysis in a market.
• In this article, we discuss the most basic relationship at the center of price action: Supply and Demand.

One of the most difficult aspects of learning to trade is finding which systems, strategies, or indicators might work best given your personal goals in the market. Surely, there are quite a few choices out there and there are numerous different ways of going about speculation in a market; making this ‘journey’ to find a personalized approach even more difficult.

Further exacerbating this issue is the topic of ‘lag,’ or the fact that any technical indicator that is used (or any strategy based around technical indicators) will be delayed in its responses. The reason for this is simple: To create an indicator, a series of past prices are used to compute its values which create a type of ‘averaging’ effect. This can be good in the fact that it can help to smooth out volatile events (after all, this is why people use moving averages in the first place), but it can be bad because this averaging effect (whether it’s with a moving average or RSI) introduces delays and lag to the trader.

This is where price action can help. Price action is the study of price and price alone in a market, with no indicators required. With price action, traders can look to grade trends and market conditions, enter and trigger positions, and manage the risk of their trading operations.

In this article, we’re going to examine the most basic premise that allows price action to work: Supply and Demand.

The Most Basic Relationship in Markets: Supply and Demand

One of the best aspects of price action is that it offers traders a clean depiction of supply and demand at any one point in a market. As mentioned above, the lag introduced by indicators can create dissonance in a number of ways, least of which is allowing this ‘averaging’ effect to obscure the relevancy of near-term price movements.

Here’s an example: Imagine that we go into a Non-Farm Payrolls report and the USDJPY has been stuck in a tight trading range for the past 5 months. So moving averages on the daily, and the weekly chart are both moving flat to reflect this lack of vertical movement on the chart. But when NFP is released, we receive a ‘blow out’ figure that far eclipses even the most bullish analyst expectations.

Once NFP is released and prices spike, do we still take into account the relevancy of the moving average values? Because surely the periods used in the calculation of that moving average before the NFP print are quite a bit less relevant than the periods since, given that there is now new information that can create additional supply or demand (and thereby create additional price movements).

Supply and demand is at the core of price action.

If there is more demand than supply – prices will go up. This isn’t just FX or financial markets or commodities: This is all-around us in the world we live in.

Those Rolling Stone Tickets? Ya, they’re sold out at the box office so you have to pay exorbitant prices on Stubhub. (Demand has outstripped supply so prices go up as sellers can command a premium)

And Rolling Stones ticket prices can be charted just like this hourly chart on USDJPY:

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Relating Supply and Demand to Trend Identification

But it takes a lot more than just one instance of higher prices to denote a trend, right? Otherwise, we’re seeing an anomaly that may be irrelevant to our goals of analyzing a market. So we have to look at each of these price movements with relative scope.

For a trend to take place, we need progressively higher (or lower) prices to continue for a prolonged period of time. Once we zoom out on the chart to see what this price spike means relative to previous price movements, we can get a significantly better view of what’s taking place in that market:

Higher-highs and higher-lows highlight up-trend in the US Dollar 15-minute chart

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In the chart above, we take a look at an up-trend and as you can see, the market made progressively higher-highs and lower-lows over a prolonged period of time. We can reverse this relationship to investigate down-trends:

Lower-lows and lower-highs accent down-trend in AUDUSD

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As you can see from the above charts, trend identification with price action is relatively simple, and maybe more importantly than that, it makes sense. Indicators can have a tendency to obscure the trend given the lag or disconnect involved, making them somewhat esoteric for many trader’s purposes.

But a bigger question must be asked; and this is applicable to not just price action but Technical Analysis in general: Which time frame is best for grading the trend?

As an example – if you look back to the second chart in this article, the US Dollar 15-minute chart, you’ll notice that the up-trend seems fairly robust. Higher-highs and higher-lows show prices tearing away on the 15-minute chart, but if you backed out to the weekly chart, you’ll notice a significantly different picture:

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This is the conundrum of time frames, and brings up the old saying ‘if you want to find a trend, just change the time frame.

But which of these is the correct trend? And more importantly, which ones should traders follow? Think about these questions in scope of your personal approach, because there isn’t one ‘right’ answer here.

There’s somewhat of a sweet-spot here: If your time frames are too far apart, then price action may feel disconnected between the trend and entry charts; if they’re too close together than you’ll lose some of the benefit of the analysis.

In the article we proposed that traders should look for a ratio between 1:4 and 1:6 between time frames, as shown in the table below.

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This would mean that if you’re looking to enter trades on the hourly chart, you can use the 4-hour chart to see the bigger picture trend. If you’re using the daily chart to enter positions, you can look to the weekly for trend analysis.

--- Written by James Stanley

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Talking Points:

• This article is an extension in our series on the topic of Price Action.
• In our last article, we saw how supply and demand can be seen via the study of price.
• In this article, we take this a step further in looking at intra-candle dynamics.

Price action can give traders a clear and concise view of supply and demand at any one point-in-time. This can be extremely important for finding new trends, locating potential reversals, and those beautiful situations in which traders can confidently look to ‘buy low’ in an up-trend or to ‘sell high’ in a down-trend.

But this is just scratching the surface of what traders can do with price action analysis…

In this article, we’re going to delve deeper into the topic of supply and demand via price action. We’re going to look at how traders can identify swings and potential points of entry using price action analysis.

The Secret Messages of Price Action

Increasing demand in a market will generally be met with higher prices. It doesn’t really matter how or why that demand increased, the very act of more buyers entering the market means that sellers can command a higher price.

As prices rise, sellers are more incentivized to sell. This creates price swings in the market (notice the two red boxes inside of the larger blue box in the below chart).

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Eventually, prices rise to a level at which sellers take control of the market… but not only are more sellers entering the market to initiate new short positions, but buyers are more hesitant to chase these new higher prices. This is what creates resistance in a market (noted on the above chart with the black line at 1.7175 on GBPUSD).

This is the beauty of price action: It gives the trader an accurate depiction of supply and demand at any one point-in-time to offer the cleanest view of that particular market. But how can this proactively be used in a trading approach?

The Power of the Wick

We can take these ‘messages’ via price action to the next logical step: locating points of emphasis within a single candlestick or a series of candlesticks to find areas of interest for potential trade entries.

Since price action can show us supply and demand, the act of a market showing an elongated wick can highlight reversal potential. Let’s look at an example below.

After an extended run from 1.6700, GBPUSD continued to rally to new six-year highs. That is, until the market traded into 1.7175; at which point sellers came in to move prices lower (indicated by the red box). Sellers controlled the market all the way down to 1.7100, at which point buyers came in to offer support (highlighted by the yellow circle).

This wick highlights reversal potential. It shows traders that during this candle’s formation; prices ran all the way down to previous support of 1.7100; and then buyers came into the market to bring prices higher (which creates the wick on the bottom-side of price action).

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This is evidence of buyers entering to take advantage of a ‘perceived value’ in the market, as a previously hot-running trend is now cheap with prices at support.

This shows traders that prices may continue running higher after this inflection with support, and that a long entry may be possible.

Why are Wicks so Important?

Wicks are a pivotal part of price action analysis (pun intended) because they show us potential price reversals at the very earliest stage, while also validating support and resistance levels in the market.

Imagine this on a granular scale using the GBPUSD setup we had looked at previously.
After setting six-year highs, prices began retracing as long position-holders closed positions to take profits off-the-table while sellers came into attempt to trade a reversal off of 1.7175. This is what created the retracement in the red box.

But once we get to the previously-established support level of 1.7100, something changes… more buyers enter the market to push prices even higher above 1.7100.

Once this hourly candle had closed, a long wick is showing on the bottom side of price action – indicating that the retracement in GBPUSD may be over and that price may begin moving higher.

The trader can use this to identify a defined-risk play… meaning that should prices continue moving higher; this low should hold as up-trends show higher-highs, and higher-lows. If prices don’t continue trending higher, this allows the trader to close the position quickly; before they find themselves on the wrong side of a trend.

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Long wicks validate support and resistance, and allow the trader to define their risk in any entries that may be taken in the market.

--- Written by James Stanley

More...

• When markets pullback from the trend consider trading retracements
• Traders can time entries at support and resistance using oscillators
• Manage risk over previously market swing highs or lows

Scalpers have a variety of choices when it comes to an execution strategy. This decision should be decided after carefully evaluating current market conditions for the currency pair of their choosing.

Today to continue the Definitive Guide to Scalping, we will focus on trading retracements and pullbacks in price from the primary trend.

Learn Forex – USDCHF retraces in a downtrend

Attachment 8479

Trading a Retracement

As a retracement trader our first task is to identify the trend. This can be done through a variety of methods mentioned in the 2nd installment of the Definitive Guide to Forex Scalping. In the event that price is trending downwards, retracement traders will look to sell the market after price retraces, which means the market has moved temporarily against the primary trend. Likewise in the event that price is trending upwards, traders would wait for prices decline before buying towards a higher high. Above we can see a series of retracements on the USDCHF currency pair offering selling opportunities.

Once a retracement is found, it’s time to begin planning where to enter the market. The easiest way to do this is to place entry orders near a converging level or either support (to buy in an uptrend) or resistance (sell in a downtrend). Below we have an example of this technique in practice. Displayed you can see resistance in the form of a trendline as well as a 78.6% Fibonacci retracement line. Traders can look to sell the market at this point near .9035. Risk should be monitored above resistance to close positions in the event of a price breakout, and finally profit targets should be set towards lower lows.

Learn Forex – USDCHF Support & Resistance

Attachment 8480

Retracements with Oscillators

Traders can also choose to enter retracements through the use of an oscillator. Similar to trading a range should wait for price to reach a key level of support or resistance prior to considering an entry. Once this occurs, traders can turn to an indicator such as MACD, CCI, or RSI to time their entry. In a downtrend, such as the $USDCHF example depicted above, traders will wait for momentum to return to the downside prior to entering in the market.

Trading with an oscillator can potentially help trader’s better find market momentum returning back in the direction of the primary trend. Below we can again see the USDCHF 30 minute chart, but this time the RSI indicator has been added to the graph. Price has moved off of resistance, but oscillator traders will wait for RSI to close below an overbought value prior to entering into the market. Once a trade is placed we should again evaluate our positions exits. Even when trading with a confirming oscillator a stop should be used!

Learn Forex – USDCHF & RSI Oscillator

Attachment 8481

Overall, trading retracements is an exciting way to approach scalping. It should be noted however that retracement trading is all about timing and may not be for everyone! The key to retracement strategies starts with becoming comfortable at pinpointing pullbacks in the market and managing risk appropriately.

Trend scalp
- Trend scalp indicator is on this post.
- Trend scalp_v1 indicator is on this post. This is MTF version with ability to plot the color levels

Trend Scalp Hacolt trading system is on this post.

Scalping thread is here.
The Definitive Guide to Scalping thread is here.

Talking Points

• Risk management should be considered prior to entering into a trade
• Never risk more that 1% of your balance on any single trade idea
• Stop trading if losses amount to more than 5% in one trading day

The final lesson scalpers must learn is probably the most important, risk management. The decision on how to manage risk can have a great impact on the bottom line of your account than deciding where your entry orders should go or even what time frame to trade on.

GBPCAD Early Morning Breakout

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Stop Placement

The first key to risk management is to identify a key level of support and resistance. This can be done through a variety of methods mentioned in the 4th installment of the Definitive Guide to Forex Scalping. Once found, regardless if you are trading retracements, breakouts, or ranges will have a definitive area to place your stop. In the event you are looking to buy a currency pair, risk should be managed underneath a line of support. Conversely, if a trader is selling a currency pair, risk should be managed above a level of resistance.

Traders should also consider how close to these lines of support and resistance to place their stop. Aggressive traders can set their stop very close to these values to close losing positions as quickly as possible. This is opposed to a more conservative approach where stops would be placed further away to allow positions more space to breath.

When it comes to placing stops it is important to remember that each traders strategy and risk tolerances will be different! But regardless of your choices, always scalp with a stop. Now let’s look at a few other rules scalpers should remember.

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The 1% Rule

While no one wants to experience a loss on their account, it is an inevitable part of scalping. Because of this, it is always important to have a plan of action to manage risk before entering into a trade. While placing a stop is important, traders should also consider the 1% rule. This means that traders should never risk more than 1% of their account balance on any one trading idea. That means using the math above, if you are trading a $10,000 account you should never risk more than $100 on any one positions.

The 1% rule can also be coupled with a favorable risk reward ratio. Using a 1:2 setting, this means if we risk 1% in the event of a loss, at minimum we should look to close our trades out for a 2% profit. This would translate into a $200 profit on a $10,000 account balance. Now that you are familiar with the 1% rule, let’s look at our next risk management tip.

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The 5% Rule

While no one wants to lose 1% of their account balance on any one trade idea, it is also beneficial to review the maximum exposure you have for your TOTAL account balance. The 5% rule reminds scalpers to never have more than 5% of their total account balance at risk across all trades. I also recommend this as a final cutoff point for trading. Meaning if you lose more than 5% in one day, it is probably best to call it quits and look to pick up trading again when the market is more favorable.

To put this into perspective a scalper with a starting balance of $10,000 on 5 consecutive open positions, at 1% risk per trade , your balance would still have $9500 remaining at the end of the day. This is critical because even on your worst day, you can still come back tomorrow and pick up your trading strategy! Also this rule can prevent revenge trading and accruing even more losses.

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---Written by Walker England, Trading Instructor


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This is template for M5 which I used to estimate the market condition on the way about the following: will I trade today by scalping, or not.
We can use this template for trading as well.

Indicators and template are attached.

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FXCM and DailyFX are happy to announce the winners of our first $10,000 Monthly Challenge for the 2016 trading year! January’s $10,000 contest proved to be one of the most exciting yet with two close finishes. Only one percentage point separated our second (Georgi C.) and third (Jessica F.) place finishers as well as our fourth and fifth place contestants. Our winner Phong V. however stood out among a field of tens of thousands of contestants to become our new Challenge winner! Congratulations to all of our winners and participants for the month of January!

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Premium section link:

Uni Absolute Scalping trading system is on this page.

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Premium section story: TickScalper EA

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This week:

- EURUSD : 26 pips, or 2.60 dollars
- USDCHF : 29 pips, or 6.53 dollars

The EUR/USD continues to trade lower despite the release of lackluster NFP figures. Today’s NFP release was expected at +175k, and was released at +161k an actual. The big surprise on the day was a revision of September’s employment figures to 191k. This revision was up from the reported 156K, causing US Dollar based pairs to rally.

Technically, the EUR/USD may be seen below being rejected from a 50% Fibonacci retracement value at 1.1108. This line has been acting as resistance now for three consecutive sessions, and is measured by taking the distance between the August 18th high at 1.1366 and the current October low of 1.0850. If prices continue to trade below this value, traders may see this rejection as the resumption of an ongoing 4th quarter downtrend. However if prices can break above this point, it may solidify a broader EUR/USD retracement.

EUR/USD, Daily

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The EUR/USD has started Mondays trading pushing to new 2017 highs at 1.0754. With today’s rally, the EUR/USD has now risen as much as 414 pips from the current 2017 low at 1.0340. Technically the pair remains bullish in the short term, as the EUR/USD remains trading above its 10 day EMA (exponential moving average). This line is currently acting as short-term support for the pair and found at 1.0647.

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On a longer-term basis, the EUR/USD is still arguably in a downtrend as the pair trades below its 200-day MVA (Simple Moving Average). While the 200-day average at 1.1022 remains a critical point of resistance, traders will next look for the EUR/USD to clear the December 8 high at 1.0873. Failure to trade beyond this point would help classify this short-term bull run as a retracement in an otherwise downtrend.

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Looking for a breakout in all the wrong the places

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Trading last year’s headlines today is comforting but ineffective

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Do not ‘set it and forgetit,' stay nimble and keep checking the market’s vital signs to manage trades

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Table of Contents

• Introduction
• Changes made since the release of previous version
• Overview of the CPanel graphics library
• Synchronizing the tick stream with the order book
• CGraphic Basics
• Integration of CGraphic with the CPanel library
• Installation. Performance in dynamics. Comparative characteristics of Market Depth features
• Conclusion

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Comfortable Scalping - the article

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This article describes an algorithm of trade opening that allows to make scalping more comfortable. However, this algorithm can also be applied in other trading approaches. Actually, the article offers a method of helping a trader at such a fast trading.

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Premium section link -
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Uni Absolute Scalping trading system is on this page.

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When looking at algorithmic trading, we can see that it has become more and more popular because of its speed and ability to minimize risk. It accounts for a large portion of trades, which is why it is important for traders to understand the different trading strategies.

What Is the Purpose for Algorithm Trading Strategies?

Since algorithm trading is based on a rule-based process, it has the ability to avoid human behavioral biases that can otherwise create large risks and losses. However, to successfully use this method, rules need to be pre-decided, and there is absolutely no place for subjectivity hence, why it is referred to as a rule-based process.

What Are the Main Types of Algorithms Trading Strategies Used?

Two types of popular algorithms are execution and high-frequency focused algorithms. An execution algorithm focuses on minimizing the market impact and fair price. The second is high-frequency trading, which focuses on profits by consistently looking for patterns.

How Does Execution Algorithms Work?

Execution algorithms look to break down large orders to avoid sending out a signal to other market participants. The main strategies used are the following:

• Volume weighted average price (VWAP)
• Implementation Shortfall
• Market Participation Algorithm

Each strategy has a different approach. The VWAP calculates the volume of trades at different points throughout the day by multiplying the price by the size of the trade and dividing it by the total volume. The purpose is to see whether the price paid to trade was favorable and by doing so, it needs to be compared to the VWAP. If the trading price was higher than the VWAP, then the trader received an unfavorable price and if the price was below the VWAP, then the price was favorable.
When looking at VWAP, it works best for small trades and in nontrending markets. The reason for this is because VWAP is calculated by averaging the volume of trades and if a firm were to place a large trade, they may account for the majority of the volume traded that day. This will result in their average price to equal to the VWAP, which can make the firm look like the price they paid was reasonable whereas it may have been fairly high.

The implementation shortfall may be best used to minimize opportunity cost since trading is done at the beginning of the trading period. Another benefit is being able to see the break down of different components that allow you to see how much your idea would cost.
Unfortunately, this method is not very common since many traders are not familiar with this strategy and more data is needed in comparison to the other strategies. However, one major benefit to this strategy is that there is less chance for gaming. Whereas with VWAP, traders can use the current price to estimate the VWAP. By doing so, traders can choose to either trade now or to wait until the next day so that they may appear like they performed better than the VWAP.
The last strategy, market participation algorithm, focuses on fraction of volume. For instance, if the participation rate is 5%, whatever number of shares is being traded, the firm will participate in 5% of the total volume to reduce market impact and transaction cost.

How Does High-Frequency Trading Work?

Although algorithm for execution focuses on how to trade to avoid market impact, high frequency trading algorithm focuses on how, when and what to trade in order to come up with strategies to exploit opportunities and to consistently outperform competitors.

High-frequency trading accounts for a large portion of trades in the market. Other than HFT being computer based and extremely fast, it also trades with small spreads because of its ability to create liquidity, which is one of the reasons why it has gained such popularity.

High-frequency trading is programmed to incorporate fundamental analysis in its decision making. This is done by reading millions of webpages at the same time. However, it can be influenced by algorithm predators. For instance, on April 23, 2013,Associated Press’ Twitter account was hacked. The hacker sent a tweet saying that there were two explosions at the White House and President Barack Obama was injured. This triggered a trading signal and resulted in a crash. Although the crash was brief and recovered after AP addressed the tweet, it still illustrates how the misuse of information can make the algorithm act up.

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Crypto Scalper - expert for MetaTrader 4

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"Crypto Scalper" EA uses MFI indicator as Overbought and oversold indicators ,has Trailing Stop Loss &Take Profit, it is for 5M timeframe but can also work with all time frames, major forex pairs, Crypto and stocks NASDAQ.

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Thanks for sharing valuable tips on scalping. Almost each year, many foreign currency exchange traders are using scalping as their preferred trading stratagem here. Scalping will facilitate a trader the effective trading way to work with lower hazards due to working with smaller price fluctuations. Scalpers always require working with a contemporary trading platform which can ensure them profitable trade executions with simple risks level yet effective method to endow with lucrative expedition here.

Forex scalping is based on making quick trades, where regardless the outcome profit or loss, a trade is closed within 1-2, less often in 5-7 minutes from the start. Get any scalping system you can find online, set it up on 1 minute charts and start analyzing the performance while trying to improve the sequence of profitable trades. Shorten the profit targets and stops if needed, and work out the money management.

cm spresd 2 symbol - indicator for MetaTrader 4

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When trading on a pair trading strategy, sometimes you need to know how the spread on the history of each instrument behaved. The cm spresd 2 symbol indicator displays the spread for 2 instruments in real time. Those. shows only that part of the story on which it is installed.

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excellent post helped me a lot, thanks for the help

QQE of Velocity - indicator for MetaTrader 5

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QQE (Quantitative Qualitative Estimation) is normally made using RSI (Relative Strength Index) as a "basic" indicator.
This version is using Velocity (smoother momentum) and it can help in determining trend. Adjust the calculating period to your trading style: longer - to trend traders, shorter - for scalping.

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I was not going to become a scalping trader, but I had to. Furthermore, I did not want to be a trader or a developer of automated trading systems. Luckily, I did become a trader and a developer. My research work resulted in the appearance of an eternal technology which can be inherited by children, grandchildren, great-grandchildren and so on. Unless the world changes dramatically. Unless exchanges stop working.

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