Buy low sell high principal - Swing trading methods

If anyone is going to adopt the swing trading methods he or she must understand the very basic principle of it that is "Buy Low and Sell High". This is very simple yet it is ignored by many novice traders especially those who like to scalp the market.

Low and High happens in any market patterns whether it is uptrend, downtrend, or sideways. This is because the market move in stages, its not like one time shoot and reach certain target at once. In uptrend for example after reaching certain resistant level (usually mark by previous movement) it will make correction or retracement to put the market movement in its normal average point. So the market will move down for a while before moving further up to reach the new resistant level. So in order not to get caught in the correction movement try not buy at the new high, but after the correction.

Likewise in downtrend the market will retrace after reaching certain support level before making continuation further downwards. In order not to get caught in the correction, try not to be sell further when the market reaching a new low

On the sideways trend it is very obvious, the market will fluctuate within identical support resistant area. So in this case buy low and sell high principle is much easier to notice compare to uptrend and downtrend. In this case simply Buy Low and Sell High.

This is a great and simple principle of swing trading.

Scalping can be dangerous

Being a scalper one's worst enemy is habit, long term traders, and fundamental traders. Repetitive patterns can develop bad habits when you scalp the market, getting carried away by the perception the market will move repetitively at the same fluctuation level that can easily make you lost control of the real market direction. This is the natural habit of human being that must be put in control when you scalp the market.

Secondly the long-term traders can make any surprise move at any moment regardless of indicators position and direction when it reaches certain significant support and resistant level in the weekly or daily time frame. The volume of movement sometimes is so great that can wipe out any scalpers profits in a matter of minutes. This is because the long-term traders simply do not care much of using any indicators, and they setup their trade position as long as they think the market has reach the support and resistant level or (overbought oversold).

Thirdly the fundamental factors which is the instrument of the news traders. News happen anytime, even sometimes they are not listed into the economic calender. The news of war, natural disaster, or even minor economic news can affect the market movement significantly. As a result scalper often losing more because of the news as it happens out of sight and surprise.

So basically become a scalper can be a big disadvantage in forex trading especially when you trade the most turbulence market with the like of GBP-JPY, USD-JPY, EUR-JPY, CHF-JPY. 99% of your chances guarantee losing all your deposit in your trading account.

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Highest certainty at the smallest time frame

How certain are you that the market will move in the direction you want and stay exactly the way you want it? I bet not many experience it all the time as expected and it might annoys you more if the market make an immediate reverse to the opposite direction by the time you want to close your position.

For example you like to trade at 4 hourly and daily time frame. Everyday you expected the market will move in your expectation direction and achieve the target profit as set by you. Unfortunately this good things doesn't happen in forex. The high volatility of the market is very disturbing. Sometimes the market reach at certain point and reverses more than expected or else it might move the other direction from your expectation.

So how to tackle this dilemma is by playing the 5 minutes candle by candle. By using short-term time frame you will get the profit quickly without waiting every 4 hourly or 1 day. This also to anticipate any reverse in direction that might exceed the amount of gain within a long day of trading. Nobody knows what happen in between the days or every hours because so many factors that affecting the market making it so difficult to determine the unexpected to happen. Among the factors that can disrupt the market is currency correlation, news release, indicators setting differences, long-term trader strategies and so on.

By applying short-term time frame trading you are eliminating the doubts and your losses also very limited to 5 minutes candle movement.

Hope this will help
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Experiment 5 minutes candlestick trading

I have been experimenting 5 minutes candle trading for the past couple of days and the result is fascinatingly left in balance. As the price fluctuate the earning and losing also keep in balance which means the amount of losing and winning is almost identical.

Even though this sound like a pointless trading but it does give the insight experience about trading in short term. There is a lesson to be learn regarding the candlestick, MACD, and stochastic.

The discovery from this experience.

1. Candlestick move 2 by 2 in general. It means continuation or correction might happen after 2 candlestick has been formed.

2. MACD and Stochastic confirmation. If the two indicators move in the same direction. At least 2 candlestick will be formed in the direction where MACD and Stochastic move.

3. Support & Resistant Level. Plays important part to stop the movement from happening.

So in summary if the MACD and Stochastic move in the same direction meaning that 2 candlestick will be formed in that direction. However if it is occurring at the support and resistant level just be careful because it could be fake movement especially when the market movement is overbought or oversold. That's all the finding for the past couple of days and this experiment will continue for another 1 month to see the consistency of market movement.


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Forex Trading Strategies - Research

There are many methods and strategies out there that people use to trade in forex market. This time we will look at those various strategies and also evaluating the impact on the forex market movement. Consequently using these strategies we will make a collective assumption which one is the best.

Experience traders usually has more believe in the price action and they rely mostly on this method to trade daily. As one can notice on daily trading chart there is support and resistant that is created by the result of price action. Professional traders measure these points using the fibonacci, pivots, or the bollinger band which provide the same functionality to determine the significant point in market movements.

On the other hand the novice traders prefer to look at technical indicators (i.e. RSI, MACD, Stochastic, Bollinger Band, etc) because they tend looking for that precision in trading which actually does not exist. Even though precision does not exist in forex by using technical indicators you can be correct most of the time if one know the point of significant market movement. Therefore it is still very relevant in trading.

So how can one become a good trader? First you must study the price actions and the patterns of chart in support and resistant level. Then you can apply technical indicators to establish a more precise setup in trading.

This research is very significant as observation time takes more than 3 years. You need to study it to see the real facts.
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Ultimate Focus - Winning Pips

Trading in forex has too many thing to look at and consider before making your move to open a trade position. Many things involve such as time, technical indicators, economy data release, market volatility movement, etc to consider before entering the trade. This often resulted in trader's lost of concentration and fail to recognize the ultimate goals which is the green pips.

Being too technical with no regards to instinct can bring more devastating effect to a trader because they don't always achieve their goals as expected based on analysis. As for those who merely focus on making pips can be more profitable and less stress because they only focus on making the green pips. So the advice for those who are very technical just get relax yourself and discover the feeling of making green pips instead of focusing on the chart.

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Candlestick Common Sense Strategy

Do you know that it any methods in the forex trading is possible. And it is a matter of how good you can master the strategy. Today i am going to discuss about scalping with common sense by just using the simple candlestick.

I have made some success in the past when i was really a real beginner. It was because of fear of losing i have come to think of an idea how can i make sure there will be no substantial losses.

So i set my target profit around 5 to 10 pips and put the limit to allow automatic close when it reaches those points. And set your stop losses around 4 pips or a little more. I have made a good statistic records from this trade.

Even though you may think that this system is like a zero sum game keep practice it and you will the results whether you make more or less.

Unlike lottery where your chances is very low forex has 50:50 or more chances of winning. Small losses of 4 pips mostly can be overcome easily. Try a demo account and track your statistic you might notice something interesting. This is one of the way professional who are playing million of dollars playing the forex. They use common sense and expecting to earn 4 to 5 pips because the amount is so large.

Use smaller pip spread pairs like EUR-USD.

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Hedging Strategy

Hedging is one strategy that every trader should learn in forex trading. This trading method will be able to reduce your losses in case of break-out and also enable trader to trade at any moment without waiting. Therefore you don't have to wait to open position and regardless whether you are opening position on the right place or not.

How hedging work?

The idea of hedging is derived from the mathematics of correlations between the currency pairs where each of the currency pairs will affect each other whenever it moves. For some pairs I.e. EUR-USD and GBP-USD usually fluctuate in identical manner which means that when one of the pair moves the other pair will move in the same direction and vice versa. This is called positively correlated pairs.

Other pairs such as USD-CHF and EUR-USD move fluctuate in the opposite direction for example if the USD-CHF move up then EUR-USD will move down and vice versa. This is called negatively correlated pairs. See correlation table at Mataf.net

Traders utilize these correlations by playing almost like a zero sum game where it cancel profit and of course at the same cancelling losses as well. For example if you buy/long EUR-USD and sell/short GBP-USD and both of the pairs is going up, so you will make profits from the EUR-USD and losses on GBP-USD. This will cancel each other so you will end up zero profit.

The same theory applies when you buy/long both EUR-USD and USD-CHF. As these pairs are negatively correlated so EUR-USD will go up and USD-CHF will go down. Therefore you are profiting from the EUR-USD and losing on the USD-CHF resulting in zero profit.

The explanation about zero profit/losses is only a theoretical assumptions considering if only the pair always perfectly moving in the same amount of volumes and constantly in its correlated direction. However this is not the case in real life trading as there are times that one of pair will move in different volumes to its correlated pairs. And certain occasion there are times that the correlated pairs may switch direction for example EUR-USD move up and GBP-USD move down (negatively correlated) or EUR-USD move up and USD-CHF also move up (positively correlated). It is because of these factors that make profit for traders.

The above candlestick charts show that USD-CHF and EUR-USD move in different amount of volume. Therefore if you are buying/long for both pairs you will end up profiting from the excess pips on the EUR-USD and losing some from the USD-CHF.

Trading Strategy

In order to make the best setup, it would be better if the trade execution is using automated trading software. You can find this only from those who are good in Meta trader programming languages as they used to create automated indicators and trading execution templates. The idea of using automated trading software is to make automatic execution that will simultaneously open position for two pairs at the same time. This will avoid wider gap of discrepancies between the two pairs when executed. As if you are using manual execution you might get wider gaps of pips differences which can result in losses.

Secondly you need to find identify pairs which are smaller pips spread such as EUR-USD and GBP-USD or USD-CHF and EUR-USD or EUR-USD and EUR-GBP. This will help you to avoid wider gaps of pips difference that can make substantial losses.

Advantages of Hedging

1. You don't have to find any strategic place to open position. As long as you can execute simultaneously at any place for two pairs at the same time just leave the market alone decide. Even thought in the first place you make losses eventually there will be times when it will make profit.
   
2. Losses are reduced as the correlation works.
   
3. You don't to sit down and wait for your profits as you can leave the system work itself and eventually at certain time it will make profit
   
4. You don't have to analyze the market thoroughly including fundamentals or technical whatsoever.
   

Disadvantages of Hedging

1. Profits are relatively small due to the cancellation process from the correlation pairs as one profits will be cancel out by another losses.
   
2. There are still possible losses even though it is small.
   

In conclusion many professional traders have made successful trading from hedging especially those who play big money and fear substantial amount of losses. They hedge the market to harvest small profits consistently without fear of big losses. This is one of the most important strategies in forex, as in case you are getting tired of analyzing the market with all the complexities of technical and fundamental involve. Therefore hedging is one solution to save your day in trading. Try it on demo account for example buy/long both EUR-USD and USD-CHF and see later you will make profit at least 2 or 5 pips lol ;). There is no question about it that this system work very well.

More about currency correlation: by Kathy Lien Chief Strategist at FXCM Using Currency Correlations To Your Advantage