I copied this off somewhere else and i want to add in something else. I know that some brokers allow hedging on the same pair so it would work even better.
Most ppl play long term trades like they aim to make say 200 pips in a week or say 40 pips in a day lets assume they put in a buy. Throughout the day or the week price will move upwards 20 pips then move down 5 then move up 7 then down and so on. It’s the same with the weekly chart, in short if you just put in one trade with a large tp it’s going to take a long time to reach it and not to mention the different feelings you will get.
Why not play off the retracements too? I know oanda doesn’t allow heding on the same pair but what about brokers that allow it?
You put in your big trade for the week say on the bullish move then you put in smaller trades aka selling on the bearish retracements. Would this work?
I don’t know if you can call this scalping. Let’s take the hourly chart for example. It’s very typical for retracments to occur in one day and will happen. So you see a string of say 3 bullish candles move up then 1 or 2 bearish candle down then it goes back up again and on the 4hr chart it would look like a doji. Since this is on the hourly chart you can easily react fast enough to the moves. Let’s take the average of each hourly candle on this pair moves around 20 pips so to play it pretty safe you try to set your TP from 10-15 pips away. so 3 hourly candles move downwards(while moving upwards obviously but it’s hard to catch those moves) You set your tp say 30 pips away. You hit the 30 pips now as this is usually the case the next hourly candle would be bullish so you put in a buy with a 10-15 pip tp. It hits and then the bears move in again and since on the bigger daily chart this is overall a bearish trend it continues to move downwards.
What do you think about this method? It does involve some risk cos you cannot predict if it will move upwards and by how much if it is a bearish trend and vice versa. The only thing you can be guranteed is that it will definitely move up and down a couple of pips probably 10 pips in either direction before resuming the trend.
Is this gambling? I think this is good in that rather than waiting for say on a day close to hit say a 40 pip tp and that would take say a 12 hour-24 hour waiting period. Why not set the tp to say 20 pips. Put in a trade in the opposite direction for the retracement for around 10 pips then follow the trend again for the day. What say you?
I guess some traders do it. It could work. I though about it a few times but I didn’t go deep with it. Sometime I would like to edge to defend a bad trade but with Oanda is a bit uncomfortable. But you can do it! In fact you can open more than 1 account with Oanda and go long with one and short with the other. Just go to your main account and go under create subaccount.
Yes guys it does really sound like a good idea on paper but to put it into practice probably wouldn’t work out in the long run and somehow luck would factor into the picture i suppose.
Take the euraud is now retracing hard right now after a few bearish bars earlier could use candlestick patterns to aid too.
Oh yes i hope ppl that trade these retracements could come in to share if they are profitable.
Either you follow the weekly or monthly trend and play shorter retracement like daily movement or if what you mean it is doing this daily as scalper or day trader that try to guess and follow the market not stop in all its movement I guess you would need hours and hours of charting and also you need to learn very well what move the market. (Technical, sentimental, fundamentals, news, order flow) I don’t think anyone can really explain you that. You need to study the market and stare the charts not stop for the rest of your life. Hope you enjoy it! I do!
Of course you don’t need to do this to be able to make money. Neither you need to stare at charts all the time.
Mathematically speaking, every trade you place on the same pair in the opposite direction will lose money for the duration of that move. Period.
If you are long the EUR/USD, for example, for whatever long term trade, and then place a short term trade in the opposite direction to catch a retracement then you now have a null position. The trades cancel each other out pip for pip. Your account balance doesn’t move.
Then you pay spread on each counter-trade you take. You have now lost money. Always.
If you KNOW a retracement is taking place then you may as well exit the original position and trade in the opposite direction. You now have the potential to make money in both directions which is essentially what trading is – attempting to make money through speculating on small term price movements.
The U.S. banned forex “hedging” to save people from themselves (none of their business if you ask me) but they at least have math on their side. Taking positions in opposite directions on the same pair leads to mathematical certainty of loss.
Its a very difficult task to do for a non newb as well? Trying to accurately pick out tops and bottoms is fraught with uncertainty. My suggestion would be, trade the trend and exit on the retraces. Re-entering on resumption of the direction of the trend (if still viable/ intact). There’s absolutely no point in taking a counter position on the same instrument as has been pointed out… just exit the position and wait/ re-evaluate. If you think about it logically, if we could accurately predict minor retraces of trends we’d enter the retrace as a trade.