Forex Trading – How to make a good living scalping the Euro
In these 2 videos I explain how you can make a nice living scalping the Euro for 2 hours a day. I do it every day between 06:30 and 08:30 AM London time (01:30 – 03:30 NYC time), which would be great for US traders who like a late night followed by a good old sleep in. These videos are in response to my previous videos about scalping the Euro, which were more long term in nature. In these I explain the tiny 1-7 pip trades that I make, sometime over 100 trades to achieve my daily goal of 40 pips. Once the goal is hit I make no further scalp or swings. The only other trades I will make are news related using SNW which make up about 30% of my profits.
As some of you know I used to scalp the DAX a lot more, and I still do occassionally during the NYC pre open and open, but only if I haven’t made my 40 pips scalping the Euro in the early morning. Both methods of day trading are an extreme form of intraday trading and will not suit all, these videos are how I do it, and I know that many have been inspired to do it too, proceed at your own risk mates. To see full size double click on video and watch it on youtube.
How high are the risk in Forex trading?
Forex is often traded in pairs, for example USD/Euro, USD/JPY, Euro/JPY, GBP/CHF, and CAD/USD. You get 'short' in one currency and you will get 'long' in the other one. Unlike conventional stocks market, Forex trading does not have a centralized trade market.
It is considered as Over-the-Counter or Inter-bank as trades are done between two counterparts via electronic network or telephone connections. Forex works truly as a 24-hour market.
Everyday Forex trade begins when the financial centers in Sydney start their day, and moves around the globe to Tokyo, London, and then New York. Traders can always response to the market regardless of the local time.
How To Be Successful Working On Forex?
Forex is the international currency market. There are a lot of large corporations, funds, banks, and simple traders which play exchange rates through specialized intermediaries. A question who of them will earn faster and more I consider is irrelevant. Because, the market will give the answer to it during the given concrete moment. And it is possible to answer other questions.
Question ?1: is it possible to earn on Forex if you are the simple trader? Very interesting question and the answer to it will seem to you rather ambiguous. The widespread and erroneous opinion that only the professional traders possessing some qualities can earn on Forex : having higher education; perfectly know English; understanding area of higher mathematics and world economy; good analysts; and experienced users of the personal computer.
Presence of these qualities certainly will prevent nobody. But more often they also stir that to the professional trader because he is assured that makes the correct trading decision. And the currency market is chaos. It has certainly laws but they don’t do its predicted. The situation in the market changes every second. Still yesterday you were the millionaire and tomorrow from your condition can remain nothing. To predict behavior of the market is almost impossible and the main quality which the good trader – iron self-discipline should possess. On Forex he doesn’t have chiefs, there are only assistants and competitors. You accept all decisions by yourtself and consequently should watch yourself and the emotions. The cold head, sober calculation, a little sharpnesses and a huge stock of patience – here that is required from the trader first of all. And it concerns not only beginning traders but also experts. The good trader is first of all the good psychologist who constantly is engaged in introspection and self-checking. Get hand in not under books and in real game. The more you participate in the market, the more you learn. Any result, even the negative is very important.
You will constantly study and open something new. But remember that Forex is played not by theorists and experts. If you have studied set of the literature on the market but don’t apply the knowledge also to sense from them won’t be. In a word, to learn to trade on Forex is necessary to trade constantly. And here is how it to do you learn further.
If you have decided to try the forces be assured of yourself, have taken over the control of the emotions and have postponed a certain sum of money to begin with you need to find firm-intermediary for trade on Forex. There are many firms-something ephemeral which promise you fantastic conditions at the minimum investments. Type the capital and disappear. For the computer it is necessary to approach to a choice of firm and the software very responsibly. Before to give the money try to collect as much as possible information on the given firm. How many years it exists, what reputation it has, presence of the newest software for the electronic auctions etc.
One of the methods to improve your online currency trading activity is to use forex trading signals. However, be advised that now the market full of forex trading signals – do you really expect that all of them work properly and bring revenue?
Surely no. That is why we seriously recommend you to visit this blog and read how to choose forex signals service that really work.
Forex Charts
Chart Pattern and trend line:
Tips: Most people will not consider side way pattern because the possibility to going up or ramping down is the highest. If you would like to trade in side way pattern situation. Here is your 5 sen.
- Play a bounce off resistance
- Play a break off resistance
- Play a bounce off support
- Play a break off support
- Wait for breakout. Don' t do anything.
CHARTS
Peter Bain use mainly daily, hourly, 15 minute, and five minute charts. The daily chart will help you define the overall trend from a position trading point-of-view, and the hourly (one hour) chart will give you a feel for the intraday trend. The 15 minute chart is used for entry and exit – with assistance from the five minute chart, where price is moving quickly, and you need to be closer to the action. Please note that the five minute is not to be used for scalping, as there is a lot of noise there, and you could easily get whipsawed.
Make sure you are using charts that are generated from the same data source that feeds the dealing engine, as is the case with both platforms mentioned above. That way, what you see is what you get when you buy or sell. Some charting packages do not ccurately reflect where price is at any given moment in time.
INDICATORS
Peter Bain really only espouse one – MACD (for divergence only). MACD Divergence is covered extensively in his course and my trading examples MACD is his favorite indicator, and that would be his choice.
The nine and 18 exponential moving averages are okay too to give you some sense of price direction, but he is not a believer in using moving averages for this market – so am not too thrilled about their application and use. Go ahead and plot MACD on the charts you are working with.
He will give you more information in tomorrow’s email on his simple, yet powerful Forex pivot trading system.
| EUR/USD July 14 , 5 minutes Chart | Negative Divergence on 5 Minutes chart |
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| Example of Big dog movement | EUR/JPY, NegativeDivergence on MACD |
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Forex Spreads
What is a Spread?
The spread represents the difference between the amount brokers will accept to sell a currency for (ask) and the amount that they will pay for a currency (bid). These prices change with time, but they are essentially always different from each other so that the broker is guaranteed to always make a profit. The broker's aim is to buy low and sell high; as a result, the ask price is always higher than the bid price. The spread is dependent on many factors. Some factors include the market demand for a particular currency, the market supply of a given currency, the liquidity of the currency, and the competitiveness of the currency. The main reason to be aware of the notion of spread is to maximize one's profits as a forex investor by minimizing the costs associated with engaging in currency trades.
How Does it Work?
As any seasoned traveler knows, exchanging currencies while traveling abroad comes at a price. It is nearly impossible to be able to get the exact amount of a foreign currency as deemed by the exchange rate because the supplier of the currency normally pockets a transaction fee. The state of affairs is no different on the forex market. A broker gets paid a commission whenever one of his clients performs a currency trade. The spread acts as an additional mechanism for the broker to make money on top of his transaction fees. Investors cannot escape transaction fees; however, they can limit the extra costs that they must bear by shopping around for forex brokers who offer the lowest spreads. The key for investors is to understand that the forex market is actually quite close to being a competitive market. First of all, the volume of daily transactions performed on the forex market totals to approximately USD 3.1 trillion. Compared with the daily U.S. GDP of USD 37 billion, the size of the forex market is simply staggering: It has more than eighty times the volume! Not only large in terms of total wealth flows, the forex market comprises a bevy of individual transactions. Its size helps to ensure that the prices on this market are competitive. Hence, if one looks diligently enough, one can be sure to find competitive spreads.
Examples of How the Spread Works
Let's solidify this discussion with an example. We want to show that the amount of profit that an investor can pocket decreases with the existence of transaction fees and bid/ask spreads. Suppose an investor has USD 5,000 to invest, buys GBP, but immediately regrets his decision, deciding to transfer his funds back into USD. We will assume that his broker charges a flat transaction fee of USD 20 per currency trade and that the bid/ask prices are given as USD 1.80/USD 1.90. The amount that the investor can spend on the first trade is USD 4,980 because of the initial transaction fee of USD 20. On the initial trade to GBP, he ends up with GBP 2,621.05 since the ask price is USD 1.90. At the end of the day, the trader gets cold feet and decides to wimp out, returning to USD. The bid price is USD 1.80, so he gets USD 4,717.89. The broker then takes another USD 20 in transaction fees, leaving the investor with USD 4,697.89. We see that the investor loses money in two ways here. The total amount that he is down is USD 302.11 of which USD 40 went to transaction costs. This means that the broker collected USD 262.11 just by having the spread!
WHAT IS FOREX?
WHAT IS FOREX?
Forex stands for the foreign exchange market. This is also referred to as the FX, Spot FX or Currency market. All of these names are just several ways of describing the very same market.
This market has been around since the 1970’s when currencies started to fluctuate when President Nixon took the U.S. off of the gold standard. Formerly, the U.S. currency was backed by gold and now it’s just backed by the “faith” in the government’s ability to honor and back the currency.
However, even though this market has been around for such a long time, it hasn’t been open to the retail public until the 1990’s and many market makers didn’t even get well established until 2000 or after.
Formerly, only the “big boys” could play around in this market. They usually had a minimum of $10 million to $50 million to throw around in this market. It was reserved basically for banks and big institutions.
However, with the advent of the internet, later on it was able to be opened up to the retail public as they were allowed to trade in smaller sizes that would be feasible for the “average Joe” to be able to handle.
SIZE OF THE FOREX MARKET
The Spot Forex market is the largest financial market in the world, with a volume of $4 trillion average daily trading volume. Now let’s put that into perspective. The New York Stock Exchange (NYSE) trades about $25 billion a day. So not only does this dwarf the trading volume of America’s largest stock exchange but if you combined the volume of ALL stock markets around the world, you still haven’t equaled the daily volume in the forex market.
Forex trading is simply the trading (exchanging) of money. It involves the simultaneous buying of one currency and the selling of another. The “exchange rate” is what you will see quoted. This determines how much currency that another currency can buy.You will find that there will be many factors that cause these exchange rates to go up and down. Ultimately, the exchange rate is determined by the confidence that the world collectively has in a particular currency. This will be made up of many facets: how their economy is doing, political stability, consumer sentiment, the trend direction of these exchange rates on the charts, etc.
WHERE ARE THESE CURRENCIES TRADED IN THE FOREX MARKET?
The good part about forex trading is that you don’t have to “literally” exchange money or set up foreign bank accounts or any of that nonsense. No, it’s as simple as opening up an account with a forex dealer (aka market maker…some even refer to them as brokers). They aren’t technically brokers and that’s why there’s not a commission in this market. It’s because you are dealing directly with the market maker. Market makers charge spreads (the difference between the buy and sell quote…which we’ll delve into more later) and brokers charge commissions.In your stock brokerage account, you incur a buy commission from your stock broker, a spread cost from the market maker and a sell commission from your stock broker. So there are three fees by the time you’ve bought and sold a stock. However, in forex, you don’t have the commissions and even the spread you pay is less than that of stocks when you consider how much currency you are controlling.
IMPORTANT NOTE HERE!
Make sure to open your account with a well capitalized, regulated market maker. I’ll suggest some to check out here. There are many reputable market makers out there such as: FXCM.com, Oanda.com, Forex.com. GFTforex.com, etc. Your market maker ideally needs to be regulated in one of the following countries: the U.S., Canada, the U.K., or Hong Kong.
These are the countries that regulate the best and hold their market makers to the most stringent requirements. The last time I checked, FXCM.com had the best combination of capitalization and regulation in multiple countries. However, check all of this out for yourself at each of these market makers and see what you feel is best for you.
HOW ARE CURRENCIES TRADED?
They are traded in pairs. Why? Because a currency can be strong vs. one currency but weak vs. another. Remember that currency values are the collective sentiment of investors around the world.
So if investors feel good about the U.K. economy and worse about the U.S. economy, then the British pound (GBP) will gain in strength to the U.S. dollar (USD). However, at the same time, investors could still feel better about the U.S. economy than that of Japan. If so, the USD would go up against the JPY (Japanese yen). So as you can see, it’s all relative to what it’s being compared to. In the first instance, the U.S. dollar is viewed as being weak (in comparison to the pound). In the second example the “buck” was viewed as being strong vs. the yen.
So these currencies are traded in the interbank market through these forex market makers. The market makers set the quotes based off of the buying and selling pressures that they see due to the demand for a currency vs. another.
Currencies trade in the spot forex market as OTC (over the counter). That simply means that they do not trade on a certain designated exchange around the world. An example that you might be more familiar with is the NYSE and the NASDAQ. The NYSE is an actual exchange that has a physical location where stocks are traded. The NASDAQ, on the other hand, is an OTC market where there is no physical place that you would see these traded. They are just two different ways that stocks are traded.
Generally, if you see a stock traded that has a 4 letter symbol, it’s traded on the NASDAQ. However, if it’s 3 letters or less, then it’s traded on an exchange such as the NYSE.
An advantage of an OTC market is that market makers have to compete for your business more than a specialist would have to on a physical exchange. Therefore, this ends up working in the actual trader’s favor.