Scalping Forex Trading Strategy – Trading On The News

Dec 112011
 

Though the main principle of scalping trading is clear and very simple, there are few approaches in applying this Forex trading strategy among Singapore Forex traders. In this article we will look into the trading on the news using scalping.

The most significant news breakdowns that occur almost every day in the Forex market are usually taking place after the important economical news releases. Moreover, the news itself should not be very important. The essence of trading on the news is the initial strong movement of the market that lasts for a few hours or so and generates fluctuations.

The main difference between scalping on the news from other news Forex trading strategies is in the size of a stop-loss, the average duration of the transaction and the risks control.

Despite the similarity of this Forex trading approach to fundamental analysis of the news, in reality, a scalping trader approaches the issue only technically. Scalper is not interested in the real nature or significance of the economical news. The market’s reaction is at its strongest only during the first 10 minutes after the news release that is why it is recommended not to start scalping immediately after the news release. It is also worth to know that very often the statistic data is reviewed, and these figures may significantly differ from the original one, which may create strong pullbacks in the market.

Why scalper should not trade during the first 10 minutes after the news release? First, some Forex brokers broaden the spread, so it becomes complicated for scalping. Second, it is difficult to define market direction in the first few minutes of the news release. But traders are quickly restore liquidity of the market as the big players use this time to adjust their positions. In few minutes after the news release brokers return spreads to normal, the market direction is defined and you can begin to scalp. Therefore it is better to wait a little (10 minutes or so) and then start trading in the Forex market.

How to scalp after the news release? We are waiting for 10 minutes, during which the direction of the market determines, and then scalp in a certain direction.

The stop loss order is based on time. For example a trader takes a rule to close a trading position in 2 minutes after it was opened disregarding on the current price. Since we do scalping, we are not intending to hold positions open for a long period of time. It is quite possible that the price will not move either to the Stop Loss, or to Take Profit, and hence, increases the risk that it will move sharply against our position. A stop loss based on time helps us avoid the dangerous and chaotic market.

Scalping on the news is often very profitable, because this Forex trading strategy has all the ideal conditions needed for successful trading. By this we mean strong movements after the important news release that last during a short period of time that suits the trading strategy of scalping.

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Scalping in Forex Trading

Dec 022011
 

Today the term “scalping” became very popular among Singapore Forex traders. Especially among the newbie traders who like to do scalping when starting trading Forex. Different trading strategies of scalping are widely used by traders at the Forex and stock (futures) markets. The main feature of scalping trading is that a trading position is closed in a few seconds or in several minutes by reaching a profit of at least 1 pip. In most cases a scalper trader is not waiting for a big profit and often closes positions of less than 10 pips gain. Thus, trading with a minimum lot, and making a large number of transactions during a trading day a scalper makes a good profit, even if it’s only few pips from each transaction.

What are the necessary conditions for a scalping trading? First of all a trader needs a highly volatile currency pair, low spreads, low commissions, or its absence and the ability to track the current quotations. With this in mind, a favorite pair of scalpers in Forex is EUR/USD.

The essence of scalping is in making a large number of trades, where profit or loss for each of them is minimal. Clearly, all scalping strategies are aimed at getting the total profit, despite some losses. But the methods for covering the losses vary in different trading systems. According to some strategies it is recommended to increase the amount of positions at a loss, while others recommend to stay flat, where the volume of the trading positions remain unchanged until the deposit increases (by 20-50% and more). As you can see the second type of strategy is less risky but at the same time less profitable.

Taking into the consideration that today a Forex trader can easily use high leverage, it increases the total gain of any scalping strategy and potential risks. Beginner scalpers are not recommended to use the leverage that is higher than 1:100, after getting a little practice you can increase leverage up to 1:500.

There are 3 main types of scalping:
1. Classic scalping. A Forex trader determines the imbalance between the amounts of supply and demand of the currency pair, which will lead to a certain movement of prices, even if this movement will be small.
2. Pulse scalping. According to this strategy, a trader always studies foreign markets, news and tools that can cause a movement of traded instruments. This approach is widely used in stock markets (futures) as well as in the Forex market.
3. Hybrid or mixed scalping. This type of scalping combines the features of the previous two approaches.

To sum it up, it is important to note that scalping is a very lucrative, but risky form of Forex trading. And the success of a scalping trader depends on his skills, experience and practice. Good luck!

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Daily Forex Trading Strategy for GBP/USD “Big Ben”

Nov 152011
 

GBP/USD is one of the most popular currency pair in Forex trading. Traders from Singapore and other places like to trade this currency pair due to its volatility.

The Forex trading strategy Big Ben is created for a currency pair GBP/USD and 5 minute time frame. The strategy is used during a day, so it is a daily trading strategy with the short time positions. Recommended time is 06.00 GMT, trading positions are opened not very often but with a great potential to bring high profits.

The Forex trading strategy Big Ben takes into account the closure of one market and opening of another one. Though Forex trading is active around the clock 24 hours a day, a trading day is divided into few trading zones.

According to the strategy of Big Ben, we are trying to catch the first daily market movement that occurs during the first few hours after trading opens in Europe. Impulse movement is important, especially for the British pound (GBP), since the closure of the London market (stock exchange) trading volumes of GBP currency are falling. Accordingly, at the opening of the London Stock Exchange, we get the “real” opening of the market followed by the increase of the trading volume for the British pound, rather than other currencies, which are distributed to other exchanges. This is the starting point of this Forex trading strategy.

Conditions for opening a short trade according to the Big Ben trading strategy:
1. Once the European market opens (06.00 GMT), we check if a new low for the currency pair GPB/USD was created.
2. After that, the price goes up, crosses the opening price and the upper limit is forming out. It must be a minimum of 20-25 pips higher than the candle opening.
3. Then again we see a movement of the pair GBP/USD down, and the price goes to the lower level range.
4. You need to sell at the break point when the price is 7 pips or more in the lower level of the formed band.
5. Stop Loss is better to place no higher than 40 pips from the entry point.
6. When the price went down on a distance equal to the value of Stop Loss, 50% of the transaction should be closed, and Stop Loss should be moved for the other half of the transaction to the point of opening (breakeven). Then you can watch your open position or use a trailing stop.

What is a trading strategy Big Ben based on? As mentioned above, trading with the currency pair GBP/USD has much smaller volumes when the stock exchange closed in London and Frankfurt. Volumes grow significantly during the European session, which allows seeing the demand-supply ratio for this currency pair.

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