In addition to the first of our Forex trading strategies, there is
another advanced strategy that can be added to scalping on the currency
market. This strategy is known as the martingale strategy and can be
combined with a good scalping method for better success.
Here’s how it works. Instead of using tight stop losses on a typical
scalping strategy, you won’t have to give up all of your earlier profits
every time you get stopped out. Instead, employ some restraint and
don’t buy into your trade too heavy in the beginning. Save some
firepower for later on if the trade starts to turn bad.
To make this clearer, think of the typical scalping strategy. Traders
set their stop-losses to about 10 pips. Then the general rule of profit
is only one to one-and-a-half times the spread. Setting your target to
such a low level as 2–5 pips is not that profitable. In addition, a ten
pip stop loss can kill 3 or 4 good trades. Instead, it can be useful
when you find yourself in trouble to increase the amount on your trade.
Keep the same direction but enter into the trade again. Here you can
give yourself a chance to be wrong and then still get out with a 10-20
pip profit later on.
Let’s look a little closer. If you remember, you may have already
determined how to find a long term trend with the first advanced
strategy you learned in ‘Scalping With Alignment of Trend.’ Now you are
going to add a Martingale strategy and this will move your average
position back to a better price each time your intuition proved to be
wrong. This advanced strategy makes it more likely that the market will
now turn in your favor because you have both a long term trend in your
favor and a better average position from the Martingale insurance.
If you were correct to begin with, you won’t need to add to your
position with any Martingale strategy. You will simply take an initial
profit of 10-20 pips and this can be very nice. Still, when you are
wrong, you may also wait as the market makes a typical correction. Then
you can increase your position after you find yourself 15-25 pips in the
negative. Just “double down” as they say in Vegas and watch how your
position improves!
Of course, you always need to keep your humility. Save your last piece
of ammunition for further down at 40-50 pips. You may end up with three
units at an even better price and it won’t be long before the market
turns back in your favor.
Remember, you were really only scalping so don’t get greedy when things
turn back in your favor. Get out at a 10-20 pip profit and call it a
successful trade! You will also have to remember your humility in the
rare cases when a 3-unit position still shows signs of a complete
turnaround. Sometimes the market simply turns against the long-term
trend and you will have to accept a fairly big loss below 30-40 pips.
Make sure and get out after the long-term trend has changed.
Regardless of the pain you experience in the occasional loss, you will
find that you are using a strategy that still works over the long term.
You will also enjoy steady profits each month and learn to determine
short term and long term trends with more accuracy. This is only one of
the many Forex trading strategies that can really help you to make
scalping a more profitable means of day-trading.
Instant Forex Profit Robot
Tuesday, December 6, 2011
Forex Trading Strategies With Sma (simple Moving Average) By: Kishore M
This is a system based on a simple moving average and trading the
currency pair EUR/CHF on a 4 hour chart. The MACD indicator is also used
to confirm the entry point along with the volatmeter. The system is
based mainly on the 100 period simple moving average which serves as a
support/resistance line. The SMA line can also be used later to
determine exit points. The indicators used in this strategy are the 100
Period Simple Moving Average, Damiani Volatmeter set at 13, 50, 1.3,
True, and the MACD set at 15,26,9.
The entry rules for this strategy are to buy or take a long trade when the price closes above the 100 SMA and the MACD histogram goes above 0 line. You can sell or take a short trade when the price closes below the 100 SMA and the MACD goes below 0. The volatmeter must also show the green line to have crossed above the white in either case. This assures you that there is actually a trend going on and it is safe to trade on the direction of the SMA.
Here is a warning to consider on this strategy. If the price bar that closes above or below the 100 SMA is more than 100 pips, don’t enter the trade. This is an extremely large move in price and you should wait for a retracement back to the SMA before you decide to enter.
For the exit of this strategy, the first positions can typically get 40 pips but a re-entry may take place on a second position and can be carried beyond the 40 pip profit into the 70 pip range. Then, if you manage to get three entries before taking profit, the last position can also have a trailing stop of its own set at breakeven.
Follow this link to a sample chart of an example: http://ifxprofits.com/article09a.jpg . The example shows a price break above the SMA and below that, the other two red circles indicate further confirmation from the volatmeter and the MACD.
Another example entry and re-entry is shown in this chart: http://ifxprofits.com/article09b.jpg . In this example, we see one entry point and four possible re-entries when the price returns to the SMA line and closes above it once again. Of course, profit taking would likely have happened before all re-entries but long term investors may choose to hold these positions and take profit later.
It is important to note, in this example, how all these price breaks are confirmed by the volatmeter and the MACD readings. A final note indicates how the second re-entry point is not confirmed by the MACD after the first candle closes above the SMA. It is only the first candle in that red circle which is tradable according to this system. However, the other candles do prove to be profitable later on, illustrating a leniency of the price movement in favor of the upward trend.
The entry rules for this strategy are to buy or take a long trade when the price closes above the 100 SMA and the MACD histogram goes above 0 line. You can sell or take a short trade when the price closes below the 100 SMA and the MACD goes below 0. The volatmeter must also show the green line to have crossed above the white in either case. This assures you that there is actually a trend going on and it is safe to trade on the direction of the SMA.
Here is a warning to consider on this strategy. If the price bar that closes above or below the 100 SMA is more than 100 pips, don’t enter the trade. This is an extremely large move in price and you should wait for a retracement back to the SMA before you decide to enter.
For the exit of this strategy, the first positions can typically get 40 pips but a re-entry may take place on a second position and can be carried beyond the 40 pip profit into the 70 pip range. Then, if you manage to get three entries before taking profit, the last position can also have a trailing stop of its own set at breakeven.
Follow this link to a sample chart of an example: http://ifxprofits.com/article09a.jpg . The example shows a price break above the SMA and below that, the other two red circles indicate further confirmation from the volatmeter and the MACD.
Another example entry and re-entry is shown in this chart: http://ifxprofits.com/article09b.jpg . In this example, we see one entry point and four possible re-entries when the price returns to the SMA line and closes above it once again. Of course, profit taking would likely have happened before all re-entries but long term investors may choose to hold these positions and take profit later.
It is important to note, in this example, how all these price breaks are confirmed by the volatmeter and the MACD readings. A final note indicates how the second re-entry point is not confirmed by the MACD after the first candle closes above the SMA. It is only the first candle in that red circle which is tradable according to this system. However, the other candles do prove to be profitable later on, illustrating a leniency of the price movement in favor of the upward trend.
Carry Trade In Forex Trading by Kishore M
In the Forex market, there is a common method of trading known as the
carry trade which is made in relation to fundamental analysis. It should
be a common term once a trader has studied their fundamentals and
learned how to apply the knowledge they have gained. Still, many traders
do not understand what a carry trade is or how to use it because they
may have only focused on technical analysis rather than fundamental
analysis.
Before a Forex trader decides whether they can make a carry trade, they must first evaluate different currencies and the economic conditions in their associated countries. This is the basics of fundamentals and interest rates are probably the most important of these basics.
In a carry trade, Forex traders try to get a better idea of the true value of a currency through various news reports, political events and economic statistics. Then the carry trade can be used as a good strategy based on the interest rates in a particular set of currencies.
The basic idea is that, when a trader decides to sell a currency with lower interest rates, they can also purchase a currency that’s offering higher interest rates. They sell the low rate and they buy the high rate. This is also similar to what is known as “hedging” and comes from the gambling term “hedging your bets.” By taking two trades in opposite directions, a Forex trader uses the strategy of capturing the difference of two different rates.
A real example of this has commonly been known as the “Yen carry trade.” When Japan began decreasing their interest rates in 1999, they eventually got to where they were almost at zero. This was essentially a great loan to get in on and investors would take the money they got from their easy loan and use it to buy something else later on.
To make the idea simple, just suppose that the interest rate for loan in US was 2%. Then imagine that the same loan in another country was 5%. You could take advantage of the difference in these two rates of interest by taking out a loan with the 2% interest rate in the US and simply exchanging the money into Australian dollars. Then, if there was no fluctuation in the market, the trade would earn you a profit of 3%. You never used any money of your own to begin with and you ended up keeping 3% of the original loan you got! This is called a carry trade. You literally carry your loan from one place to another and the trade you make results in a profit.
Of course, you wouldn’t want to get “carried” away! These kind of trades still have a risk involved. Exchange rates can fluctuate while you are moving your money from one place to another. For example, the country with the 5% interest rate could suddenly see a weakening of its currency due to political turmoil or a sudden announcement from their central bank.
Investors are often very careful with carry trades so as to research the market beforehand and make sure there are no major news events coming out that day or week. Then they go ahead and hedge their bets as they trade the loan from one currency into another. Make sure and understand the risks in Forex trading before you get involved with high leverage trading. Then you will find the carry trade to be a very promising way to make a quick profit!
Before a Forex trader decides whether they can make a carry trade, they must first evaluate different currencies and the economic conditions in their associated countries. This is the basics of fundamentals and interest rates are probably the most important of these basics.
In a carry trade, Forex traders try to get a better idea of the true value of a currency through various news reports, political events and economic statistics. Then the carry trade can be used as a good strategy based on the interest rates in a particular set of currencies.
The basic idea is that, when a trader decides to sell a currency with lower interest rates, they can also purchase a currency that’s offering higher interest rates. They sell the low rate and they buy the high rate. This is also similar to what is known as “hedging” and comes from the gambling term “hedging your bets.” By taking two trades in opposite directions, a Forex trader uses the strategy of capturing the difference of two different rates.
A real example of this has commonly been known as the “Yen carry trade.” When Japan began decreasing their interest rates in 1999, they eventually got to where they were almost at zero. This was essentially a great loan to get in on and investors would take the money they got from their easy loan and use it to buy something else later on.
To make the idea simple, just suppose that the interest rate for loan in US was 2%. Then imagine that the same loan in another country was 5%. You could take advantage of the difference in these two rates of interest by taking out a loan with the 2% interest rate in the US and simply exchanging the money into Australian dollars. Then, if there was no fluctuation in the market, the trade would earn you a profit of 3%. You never used any money of your own to begin with and you ended up keeping 3% of the original loan you got! This is called a carry trade. You literally carry your loan from one place to another and the trade you make results in a profit.
Of course, you wouldn’t want to get “carried” away! These kind of trades still have a risk involved. Exchange rates can fluctuate while you are moving your money from one place to another. For example, the country with the 5% interest rate could suddenly see a weakening of its currency due to political turmoil or a sudden announcement from their central bank.
Investors are often very careful with carry trades so as to research the market beforehand and make sure there are no major news events coming out that day or week. Then they go ahead and hedge their bets as they trade the loan from one currency into another. Make sure and understand the risks in Forex trading before you get involved with high leverage trading. Then you will find the carry trade to be a very promising way to make a quick profit!
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