FOREX SCALPING

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Forex ScalpingFOREX SCALPING“Tiny Trades For Terrific Profits”eBook By Robert Borowski 2005 Evergreen Forex Inc.Read Legal Info & Disclaimers at end of DocumentUse of this material is subject to the legal terms, conditions, and understanding of thestatements at the end of this document. Unauthorized redistribution of this material isillegal, strictly forbidden, and will be punished to the fullest extent of the law. Read thelegal text provided at the end of this document.1

Forex ScalpingThis eBook has been formatted for easier on-screen readingI dedicate this eBook to Brian. Little did I expect when smallcoincidences introduced us that you would become such a huge part ofmy life. You are far more than my business partner and best friend –you are a kindred spirit. You have enriched my life and exponentiallyadded to my own boundless enthusiasm. I cannot express my immensegratitude for getting to know you, and can’t fathom the marvelousjourney yet ahead of us.2

Forex ScalpingTABLE OF CONTENTSPrerequisite ReadingIntroductionWelcomeWhat is “Scalping”?The Joy of ScalpingGreat ExpectationsUse with “Forex Freedom”?WarningBasic ConsiderationsPractice Makes WisdomTools of the TradeYour ComputerSerious Trading ComputerBrokerChartsPractice AccountBroker Spreads & Tradable CurrenciesPip PaddingOverview of the TechniquesStop FrequencyEquity ManagementKamikaze ScalpersCurrency Pair ChoiceThe TechniquesTrading MechanicsPremises of ScalpingPicking Tops & Bottoms (Part A)Petit TrendsStagnationsSharp ReversalsCaffeinated MarketSecure Your EntryBi-Directional In-Wave EntrySafer StopsFibonacci GuidanceSpecialized Fibonacci ObservancesAdding S.E.X. Lines3

Forex ScalpingExit / Enter Reverse ThinkingPicking Tops & Bottoms (Part B)Compounding GainsWatching Multiple ChartsBigger PerspectivesThe OpportunitiesThe Four Main OpportunitiesMicro Trends & TrendsPattern BreakoutsAfter FAWithin RangesAdditional TipsModified Slanted Channel Surf ZonesDay Running ScalpCreative CombinationsScale ShiftingSunday TradingQuick TrendsFA ConsiderationsWine & CheeseExtra ExamplesThe BeginningPREREQUISITE READINGThis eBook assumes that you have already read the following eBooks: Forex Surfing Explosive Profits (revised edition)The above are prerequisites as this eBook assumes that you alreadyunderstand a lot of the concepts originally taught there and those concepts willbe referenced but not repeated here.4

Forex ScalpingINTRODUCTIONWELCOMEIs it possible to score hundreds or even thousands of dollars (euro, pounds,yen, whatever) of profits in just a few minutes in the Forex markets? Yes itis! In this eBook we explore the fun & wildly profitable technique of“scalping” in the Forex markets. It is amazingly simple to learn and you’llprobably be able to proficiently start using these ideas today!Here we shall look at a few variations of how to accomplish “scalps”. We’lldiscuss the pros and cons of this style of trading, and how to be well on yourway to success with these techniques.WHAT IS “SCALPING”?“Scalping” can have various descriptions depending on whom you ask. Somefolks would say that some “Forex Surfing” techniques are considered “scalps”due to the small size and duration of the trades. Different traders havedifferent techniques for scalping, but one thing that can be universally agreedupon is that scalping involves tiny trades (both in amplitude and duration).Typically, “scalping” is a specialized technique that involves making a tinytrade to capture a very small movement in the market. Whereas a “positiontrader” may engage in trades that are intended to last for multiple days tomonths (aiming for targets of hundreds to thousands of pips), and a “daytrader” typically engages in trades that are intended to last for less than a day(aiming for targets ranging from 20 to 100 pips), a “scalper” engages in tradesthat might only last a few minutes aiming for targets of 5 pips.A scalper typically trades multiple Forex lots (mini or regular lots dependingon the size of the account and risk tolerance), often more lots than one wouldnormally trade if trading as either a “day trader” or a “position trader” (simplydue to the fact that those styles typically require larger stops thus shrinking theamount of lots one can safely trade according to equity managementprinciples). By trading more lots a scalper can achieve significant gainscomparable to the gains expected by day & position traders in the same timespan even though the scalper engages in much smaller individual trades. Forexample, a scalper that succeeds in capturing just 5 pips could have made 500 in under a minute if he traded 10 regular lots. In some circumstances5

Forex Scalping(that you’ll learn later in this eBook) the scalper could successfully capture10, 20, 30 or even more pips that (assuming he traded 10 regular lots) wouldresult in profits of 1,000, 2,000, or even 3,000 in a very short amount oftime. Some scalp attempts can occasionally yield over 100 pips (over 10,000trading 10 lots) – and YES, set ups like that happen several times each month!Scalping is often considered to be an advanced trading style. Though scalpingis quite simple in concept many consider it to be advanced because it requiresvery quick decision making, very quick reflexes to react when set ups arespotted, and the scalper must be skilled at quickly executing a trade. Thekeyword for the scalper is “speed”. What makes “scalping” an advanced skillisn’t that it’s complicated; it is just that one must be both skillful andfast. Drinking coffee or energy drinks while scalping is a good idea. Thisstyle of trading certainly isn’t for slow minded or slow moving people (pleasedon’t interpret this comment as being insulting for certain groups of people).Scalpers often engage in multiple trades a day. Some scalpers execute dozensand dozens of trades each day, but don’t worry; I’ll teach you to dofewer. Scalps are executed in the direction of the current trend, usually takinglittle bites of the market movement, but can also be an entry technique intolonger day trades to capture even larger profits. Skillfully scalping one canliterally buy very close to the actual low and sell very close to the actual top ofmarket movements; much closer than day traders, and certainly positiontraders, would normally accomplish.Scalping is suited for some people & personalities better than others. Sometraders love it, making it their primary trading style, whereas some tradershate it for their own personal reasons. Scalping is best reserved for tradersafter they are already familiar with other trading styles, but if this is your firstexposure to trading Forex don’t worry about it – you can easily learneverything you need to know to make some HUGE profits by scalping just byreading this eBook (however I strongly suggest you first read my other eBook“Forex Surfing” as there you’ll learn many basics that I won’t be coveringhere in this eBook).“Scalping” seems to me to have a slightly negative perception in the minds oftraders in general. I believe it is simply due to the name of the technique, as“ticket scalpers”, people selling over priced tickets for concerts or sportingevents, are commonly thought of as being sleazy. It seams to me that some“advanced / experienced” traders look down upon “scalping” techniques asbeing beneath them, or even unethical (perhaps this is from the days whenfloor traders at stock exchanges would sometimes scalp stocks). It’s funny6

Forex Scalpingthat even FXCM clearly doesn’t like scalping for whatever reason (at the timeof this writing FXCM has been hosting a mini trading contest called “King ofthe Mini”. If you read the contest rules it is stated as rule #8, “NOSCALPING – At FXCM’s discretion, entrants may be removed from thecontest for employing trading techniques resembling ‘scalping’ or‘picking’”. This doesn’t make logical sense to me since they profit for the pipspreads of each executed trade, so while writing this eBook I decided to askFXCM why this is a rule. They responded saying that scalping is generally“frowned upon”, and though they permit traders to employ such techniques(since they profit from each trade entered) they simply disallow it for thecontest because they feel it is an unacceptable practice for their tradingcontest. ). I don’t really know why there appears to be some kind of negativestigma to scalping, and I don’t think it is justified. As far as I am concerned aprofit is a profit regardless of what trading technique used, and as a trader allthat matters is the profits.Here is a link to an article on the web titled “Scalping: Small Quick ProfitsCan Add Up”. I have included it here for your reference to be able to read athird party’s definition of scalping. (Note: This is an external link. You needto be connected to the Internet to view this page. As I have no control overthe content of their website this link may become inactive at some point in thefuture.)THE JOY OF SCALPINGWhy be a Forex Scalper? Simply put, it is both fun AND profitable! Theconcepts are easy to learn, easy to do (once you’re skilled at it), provides youwith an adrenaline rush, and can fatten your bank account.Personally, I think that of all Forex trading methods that scalping is simply themost fun. The trading style is mentally stimulating, and it’s exciting to watchyour profits grow.If you are a chronic trader, someone who enjoys doing frequent trades, you’llfind that here you’ll have the chance to be “trigger-happy”. Day traders oftenhave to wait for hours before a good trading opportunity comes along(sometimes they don’t even trade that day if nothing seems to happen),position traders often have to wait for days or even weeks before a suitabletrading opportunity presents itself, but a scalper can be joyfully raking infantastic profits while the other traders are bored out of their minds! For thesereasons experienced Forex traders can also add scalping to their trading7

Forex Scalpingtoolbox; so that they have another tool to work with.I’ll elaborate upon when traders employing other styles of trading mightswitch to scalping. Generally speaking when a currency pair goes into a tightrange or consolidation in the time frame view one is normally looking at, ifyou were to zoom in even closer it would be apparent that there is plenty ofmarket move on a tiny scale. A trader could then scalp the tiny movementswhen otherwise they couldn’t trade at all.Often times it is generally best for most Forex traders to restrict tradingactivity to only the times when two markets overlap (typically 2am to 6amand 8am to 12noon EST (New York time)), however even outside of thosetimes a trader can engage in scalping, thus a scalper can trade virtually at anytime 24 hours a day. Because many people are simply part-time traders,trading as a hobby, due to having to go to work at some job, scalping is amethod that may allow those people to trade who might not be able tootherwise participate in trading during the optimum times mentioned above.Scalping professionally sure beats going to work at some J.O.B. (Just OverBroke – ever notice that you’re still broke soon after getting paid?) that youhate everyday. As a scalper you can hang around your computer for a fewhours, make say 5 trades, and profit as much or more than you might earn allweek going to a job working for a grueling 40 hours. If you have a job thendon’t despair after some time your “hobby” of Forex Scalping can possiblysave you from a lifetime of being a slave working to make some companyrich.All hype aside, I think that scalping is a useful skill for all traders to have forvarious reasons. As mentioned above, it allows a trader to trade during timeswhen other styles of trading would make you sit on the sidelines (not trading),so you can engage in profit making activities when you otherwisecouldn’t. Scalping is best used in conjunction with, as a supplement, to otherstyles of trading – so keep trading your primary methods and add scalping toyour trading toolbox.The downside of scalping is that it is the most labor-intensive style oftrading. Whereas longer-term styles of trading might only require minimal“work” each day (as some of the techniques presented in the eBook “ForexSailing”), and some kinds of day trading (as taught in the eBook “ForexSurfing”) may only require periodic checking of charts during a tradingsession, scalping however requires that you spend more time paying attentionto charts throughout a trading session, and active concentration while engaged8

Forex Scalpingin a trade (you can’t leave your computer to grab a coffee as easily). Despitethe fact that it is the style of trading that most resembles “work” you shouldstill take the time to learn this style regardless of whether you intend to trade itoften or sparingly as it is a useful skill that can help improve your othertrading methods in a variety of ways.Remember also that you don’t have to scalp everyday, but you can treat it asan occasional sport or game (best “played” in a demo account) for the shearjoy, thrill, and instant gratification that this style of trading offers.GREAT EXPECTATIONSWhenever I start teaching someone how to trade the Forex the most commonquestion they ask is “how much can I make each day doing this?”. I alwayssmile and shake my head once they inevitably ask this question. Everyonealways asks this question (I remember asking this question too when I firststarted), and when you start teaching your friends (if you haven’t already)then you too will get asked this question. Pay attention to how I answer it sothat you too can give your protégés the correct answer.It is first of all incorrect and inappropriate to state what can be expected interms of dollars earned. Dollars (or whatever currency you are accustomedto) is by no means a relevant measuring unit to make comparisons with. If Itold you that ‘John’ scored 50 today whereas ‘Simon’ scored 500 it wouldbe understandable that at f