I will first talk about scalping, forex brokers and the “others”
My definition of scalping is a trading strategy in which the trader enters a trade with the intention of closing that trade soon. It is possible to reap rewards by scalping but most of the time you are lucky if you are breaking even at the end of a month.
The Forex Brokers: Nothing against them, at all, but they are there to make money. They make their money every time you make a trade on the pip spread, so they want you to make as many trades as possible. As a result, most of the educational tools they offer you are geared towards scalping. Some brokers will even use reverse psychology by listing “Scalping Allowed” like it’s a special feature, when in reality they all allow it. They all want you to do it.
Now, the “Others”. The others are the people who say they have the best trading strategy out there and want to sell it to you. Where they get their trading strategies from are the technical indicators that the brokers offer to help analyze the market. In my early days of trading I was sucked in and am warning you not to be. I know that I could make up a scalping strategy based on one technical indicator or I could relate ten to each other and sell it as a package, but I don’t. I’m honest, and any indicator package only tells you the past.
None of the technical indicators that I have seen offer a predictive feature; if they did you wouldn’t be reading this. They can only tell you what is happening in the last bar and every one before it. An indicator in the current bar hasn’t even decided what it is going to do yet. Also, it is my belief that technical indicators make things more complicated than they need to be. They are made for scalping, successfully scalping is complicated, and therefore the indicators are complicated. Look up the math that determines where that indicator is going to go, then tell me otherwise.
Usually, when I was using indicators on hour charts and saw a potential trade opening up with ten minutes left in the hour, I would jump on it only to have that position reverse along with the indicator resulting in a loss. My first mistake was trading on hour charts (scalping) and my second mistake was not waiting for the current bar to close. If you watch the forex market long enough you will see, that in hour charts, in the last few minutes of the hour the position will re-trace. This happens when scalpers cut their losses or the winners close out the trade at the end of the hour because they are afraid of what the next hour could potentially bring, mostly the latter.
What you should have taken from the above scenario about my trading strategy. I don’t scalp anymore, I don’t trade on hour timeframes anymore and I don’t use technical indicators anymore. So how do I trade?
I like to keep it simple. I trade with the current trends on the weekly timeframe on the daily chart with no indicators. I look for about 5 week up or down trend on a weekly chart. When I find one I might look at the daily chart to decide where to put my entry point, program it into the platform and move on to the next pair. Usually, if I find strong trending on the weekly timeframe I don’t even bother with the daily, and just enter the trade right then. If that scenario is not available, I don’t trade. At the same time though, I may already have 3 trades open from two days ago, 2 from a week ago, and 9 from a few months ago. As long as the trend is obviously going to continue on the weekly charts, I leave the position open. What do I get out of it? That is best explained by a couple examples.
This is the current EUR/USD weekly chart. The yellow lines are the oh so obvious trends. Then from left to right: The upward arrow is where I entered. The blue box is where I hesitated and thought about closing out the position because I dislike it when trending is flat, but I stayed in. The next down red arrow is where I exited for a profit of about 1520 pips and was open for 30 weeks. The next red arrow is where I entered a short and exited on the next up red arrow for about 1670 pips and was open for 17 weeks. The blue oval is what I like to avoid at all costs. I don't like spikes. It is most likely that the market will correct itself and re-trace that bull spike, but at the time I don't know that, so I stay away from EUR/USD for that many weeks. The next up red arrow is a buy that at this time is in an unrealized profit of about 1490 pips and has been open for 27 weeks.
This is the current USD/CHF weekly chart. The color and shpe coding for this chart is the same as the previous chart. The first trade took about 900 pips and was open 14 weeks, and the second trade took about 1155 pips and was open 20 weeks. The current trade has an unrealized profit of 1060 pips and has been open 27 weeks.
It is slow, but it produces some major profits. For you people who seek action on the forex market out there think of it this way. I’ve showed you two charts. Those are only two of a possible 60 that I could have showed you. If you want action…open 60 positions, which should get your heart going. (I’ve never done that before and probably never will, would call it over-diversification.)
That is my main trading strategy, but I still do scalp, with a robot, that can crunch numbers a million times a second. The only robot that I have ever really liked is Megadroid, and it is the only one that I currently use. I have used IvyBot and liked it, but I just like Megadroid better.
That’s it. A long term trading strategy and a robot is what I live off of. Pretty nice.
Cas always liked that avatar and movie.Stephen Chow should have come out with a sequel before he gets to old.