Don’t use the scalping method when this happens- must read!

I want to share with you a few tips about a trade technique I use.

The first thing I would like to say is that it isn’t always possible to make a trade when ever a pattern appears.

This is part of the reason automated trading systems don’t always work. It takes an experienced forex trader to stop and analyze the activity taking place in the market at the time a potential trade develops.

Sometimes the signals will be mixed. You might see a BUY order on your charts but the economic data and market expectations may be telling you a different story.

When I see conflicting signals between the fundamental and technical analysis, I will consider staying out of the trade even if it appears that there is a trade. I would rather watch how price reacts without risking my money than to test a theory or my ego, and lose money.

There will always be another trade and there are many to chose from.

The first thing any Forex trading strategy should include is a very specific plan that gives an exact entry and target with appropriate stop loss.  But each time that pattern or trade sets up, you must confirm it with the economic data that is available or at the very least, market sentiment.

This is because not every trade will work and that’s were it takes trained human analysis.

The scalping trade I use is a specific candle pattern that is easy to use and identify. However it requires confirmation. The confirmation is what a automated trading system can not do and something that will take time to learn on your own, or you can speed up the process by finding an experienced professional to teach you to details and nuances that cant be over looked.

The scalping technique developed on both the EUR/USD and the GBP/USD and they both needed confirmation of course. Looking at the charts I could see that GBP/USD was clearly inside consolidation.

What is consolidation?
Well we all know for sure that it is not a trending environment with momentum behind any move. When price is inside of consolidation it will usually move around with no clear direction and trying to use certain trade techniques will usually result in a stop loss triggered.

So that’s our first lesson, don’t use this scalping method when price is inside consolidation.

I used the method on the EUR/USD because price had broken outside of the consolidation range and the GBP/USD had not. I watched the GBP/USD at the same time just to make sure my analysis was correct and if I would have tried the scalping technique on the GBP/USD, I would have been stopped out. And soon after price went to the anticipated target. This is an all to familiar situation for all of us. Getting stopped out yet price still goes to the target.

How do we eliminate the chances of that happening?
Looking for an opportunity for price to move in a predictable manner with momentum behind a move. The perfect example of this is the EUR/USD. This one was on its way with price breaking the consolidation and traders driving price when they saw the breakout occur.

So remember, you must know the difference between consolidation and a trending market. There are different trading strategies for each situation.

LC
www.udaytrading.com

L.C. is the head trading coach and mentor at udaytrading.com with over 7 years Forex trading experience.
He has mentored hundreds of students with his Forex trading startegies.

Patience in your Forex trading strategy

Whether we can admit it or not,
Patience will make or break your Forex trading strategies. Especially a scalping Forex scalping strategies.

There are times when there simply isn’t a trade to be made. And even if we need the money, we might lose more than we could make if we don’t find the strength to restain ourselves and our thoughts.

Today I was watching the EUR/USD. (april 21st 2009).
For the most part, the EUR/USD remained inside consolidation with nothing more than perhaps a small scalping opportunity. If you are not in at the right time, you might as well forget it because the stop loss on days like this ends up being more than any potential profits.

My first suggestion, learn how to correctly identify consolidation.
Not just on large time frames, but on the time frame you are trading and looking for your entry.

Once you can correctly identify consolidation, knowing when you should stay out of the market and refrain from trading becomes a lot easier. Again, there are simply days when we shouldn’t be trading and your Forex trading strategies should include methods for identifying what state the market is currently in.
Is the market trending or inside of consolidation and what time frame are you using to identify the state of the market? These are serious questions you should ask yourself before ever considering any trade.

A tip I can share with you and one that has probably kept me in the game a lot longer than most,
“Only analyze closed candles, regardless of what time frame you are looking at. Never assume that a candle will close in a certain way. Just wait till the candle closes before making your decision.”

A second tip is to obviously spend as much time as you possibly can learning how to identify consolidation.
Watch and learn everything about it. Watch it during holidays, watch it during news events, watch it when certain markets are closed. Remember learning to successfully trade the forex will take time and you will need as much experience as you can possibly get. It’s the only way!

LC
www.udaytrading.com

L.C. is the head trading coach and mentor at udaytrading.com with over 7 years Forex trading experience.
He has mentored hundreds of students with his Forex trading startegies.

The importance of using larger time frames for Forex trading strategies

A larger time frame can be considered any time frame larger than the one you are looking at to identify a trade entry.

There are valid trading techniques and methods for almost any time frame however it is always important to be aware of what is actually taking place on the larger time frames such as the four hour and daily charts.

Support and resistance are key levels we must always be aware of even if we trade on a five or 10 minute chart.
Often times day traders will use a smaller timeframe to identify entries and profit targets and their focus becomes myopic and they no longer look at the larger four hour and daily charts.

I would like to discuss an example of using the four hour and daily charts to determine whether or not the market is trending or inside of consolidation which often times can be found using the larger time frames.

Knowing where support and resistance is on the daily or four hour chart isn’t always possible to see using the 30 minute chart. Always giving the larger time frames a quick look before making a trading decision will work in your favor.

When I conside entering a trade on the 30 minute chart (for example) price might be inside consolidation. When it appears price may be making a move, however looking at the daily chart might show a significant old resistance level that is now possibly acting as a support level, if only temporary. This daily support level might not noticeable on the 30 minute chart by itself.

Identifying this support level on the daily chart keeps me from making a trade decision to quick without looking for confirmation.  I may need to wait for some significant economic data that will make some kind of an adjustment and re-evaluation of this currency pair or it may simply take time before sentiment wins over in one direction or another.

At this point, I will isolate the consolidation area on the 30 minute chart and when I see a breakout candle, again I will look at the four hour or daily chart.  Hopefully at the time of the breakout candle on the 30 minute chart I will see some kind of candle pattern on the four hour or daily.  This could either confirm the bounce off of this possible support area on the daily chart or indicate that price will be moving lower and breaking through the support level.

No matter the outcome, what is very important is always to remember using the larger time frames as an additional source of confirmation for your Forex trading strategies.

Thanks for reading
Good luck
L.C.

www.udaytrading.com