trading pitt 4/7/2010 fx scalping. what is scalping scalping is a short term trading strategy that...
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TRADING PITT 4 /7 /2010
FX Scalping
What is Scalping
Scalping is a short term trading strategy that allows traders to make good use of the leverage that is available in the FX market.
Using short term charts for making trades.Scalpers look to make very quick small
profits while exposing their accounts to the possibility of small losses
Best Times for Scalping
By session and Time:Check out this link:http://www.forextraders.com/forex-strategy/fo
rex-scalping/best-times-for-scalping-forex.html
Divergence Scalping
Start with Daily Charts, then 1 hour, and finally 5 minutes and label the key Support and Resistance levels. In this example I used the EUR/USD
Then attach a 14 period RSI to the bottom.Add moving averages if you want. Open up your 5 minute chartsCheck out economic calender for news
releases and exchange openings.Mark not recently reached even numbers.
Daily Levels
Hourly Levels
Bullish Divergence
A Bullish Divergence is when the Price makes a relative new low and the indicator does not make a new relative low.
Categorized as a reversal pattern.
Indicates fading downside momentum
Bearish Divergence
Exact opposite, in that the price makes a new relative but fails to make a new high on the RSI.
Presents a Short signal and fading upside momentum.
How to size your position
Only risk 1% of your account per tradeTake .01 of account equity
Ex: 2500 * .01 = $25Then Divide that by your pip risk in our case
15 25/15 = 1.67 minilots Or 16.67 microlots round down to 16
Do Micro-lots (1000 units) if you have a small account
On first signal buy 8 microlotsSecond signal buy 2nd set of 8
Rules to the Trade: ENTRY
Start preparing for a Long (Buy) Entry when RSI gets 35.Start looking for a Short (Sell) Entry when RSI gets above 65.Once RSI gets below the 30 (oversold) or 70 (overbought)
mark that low or high respectively upon close. Wait until that level is reached again and enter half of your
planned position (half of 1% risk) with an order at that level. As long as RSI is not lower than previous marked point.
Enter second half of your position at the close of the candle. If the close is above your first marked level. Otherwise, just maintain original half
Wait at least 6 candles before entering 1st half of position, when price touches your marked level and recheck RSI
Rules of The Trade: EXIT
Exit half your position when RSI touches 50 – Not Closes.
Then move your stop to breakeven and if possible make it a trailing stop. This may not be possible depending on your broker
(i.e. MT4 or FXCM microCan place an OCO with your stop at
breakeven if your comfortable with that.Do not pay attention to your previous half lot,
just look for the next signal.
NEVER:
Buy or sell when RSI is only overbought or oversold.
Enter whole position at first test of your marked level.
Risk more than 1% of your account on each trade.Trade directly around a news release.Never leave half position without adjusting stop to
break even.Try this strategy without a few DEMO tests.Look at ONE minute charts, too much noise and
algorithms at work.
Notes:
Can be applied to longer charts besides 5 minutes but stops need to be wider and opportunities less frequent.
When in a longer term downtrend RSI often does not reach 70. Likewise, in uptrend RSI will not always touch 30.
3 consecutive (ex. long, long, long) does not occur very frequently.
5 min Charts 10-20 pip risk beyond initial marked level is common
If your target level isnt hit within 3 hours delete that level
Random Example 1
Random Example 2
Small Backtest Euro + Random Examples
Trades:Long: No Trade Low
never touched.Sell: +85Buy: +10Buy: +30Buy: +17Total +142 pipsReturn of around 7%
(assume 20 pips is 1%)With max drawdown 1%Period of less than 2 days St
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Resources:
http://www.smbtraining.com/blog/ SMB Prop Equity Trading
http://traderfeed.blogspot.com/ Covers psychology of trading
http://www.fxstreet.com/education/learning-center/ FX Street’s learning center.
Email: [email protected]: 724-594-3569StockTwits/Twitter: smcmannis3