Combination of Technical Indicators

Many traders say that simplicity is important, and using a single indicator is adequate as long as you are very good at it. It maybe true that simplicity is important but I don't believe that using one indicator for any trading is adequate, and in fact you can become potential victims of unreliability of that indicator.

Why multiple indicators can be more reliable than using a single indicator? In order to tackle this question, let us evaluate drawbacks of each indicator.

Moving average convergence divergence (MACD) is a lagging indicator which means that the movement of the indicator is always behind the current movement of the chart. Therefore traders who are heavily relying on MACD tend to wait longer time to find their setup position. Thus each moment of the day there are too many good opportunities are wasted because of the MACD move too slow than the current movement of the chart. In some cases Moving Average Convergence Divergence can also create certain degree of frustration for waiting the chart to move base on the indicator's guidance.

Relative Strength Index (RSI) is a leading indicator, which means that it predict the future ahead of the current movement of the chart. Despite of its credibility so called "leading indicator", the effectiveness of its application is not as good as MACD. And in fact RSI can bring more fatal mistakes than any of the lagging indicators. Let's take an example of each trading day, oversold and overbought positions are frequently happening and furthermore these conditions may be permanent and not coming back as expected. Therefore if you are heavily rely on RSI, then you are going to lose your money fast. This is because RSI signal the movement is too early, when the reality is the chart may not move back to its current position. Better to be lagging then leading it is less risky.

The Bollinger bands indictor work very similar to pivot point/Fibonacci retracement, where it predicts the boundary of fluctuation using the band. It consist of three bands which is the upper, middle (moving average), and the lower band. I am not going to explain further the application of it because I already did some of them in the past. Instead I am going to elaborate more of the potential drawbacks of the Bollinger bands. Even though the Bollinger bands can show where is the boundary of fluctuation, but the reality is, the chart frequently penetrated the bands boundary either temporary or permanently. Whatever the conditions are whether it is temporary or permanent, it will trigger certain doubts over your decision to make buy or sell. And when doubts start growing more and more, you will probably losing your guts and exit the market with at least certain amount of losses.

Now I am not going to explain all of the technical indicators because there are too many of them. Just to sum up everything, all technical indicators simply have their own drawbacks which can sometimes overwrite their advantages. So by combining technical indicators which has the ability to complement each other's advantage, is essential to reduce the gap of its drawbacks. An example is MACD can possibly combine with the Bollinger bands where the first will determine the direction of the trend and the second help you to determine the stopping point. Or maybe you can add up another indicator call slow stochastic in order to cope with the most current direction of the trade. Now with these three indicators you are solving your problems by moving in the right direction (MACD) with the most current (slow stochastic) movement and at the expected distance of stopping point (bollinger band).

Indicators Setting

Indicators setting actually not as significant as understanding the behavior of its movement. This is simply because indicators are merely interpretation of price, which means it follows where ever the price goes to. However the behavior of the indicators moving within support and resistance level is very important. As the lower time frame for example 5 minutes and 15 minutes indicators most often providing tricky sign of direction, you will still be able to figure out the overall picture of the movement using support and resistance level.

There are three ways you can measure the support and resistance level which are the bollinger bands, fibonacci retracement, and pivot point measure. Since the forex market is very dynamic therefore i prefer to use the bollinger bands to measure support and resistance level. Fibonacci retracement and pivot point are as good too, the only different they are usually calculate fixed point of support and resistance.

Anyway if you really have no idea what setting you need for your indicators, maybe you can set them base on the following setting;

Slow Stochastic: 5-5-3
FastK Period : 5
SlowK Period : 5
SlowD Period : 3

Moving Average Convergence/Divergence (MACD): 12-26-9 (Default)
Fast EMA Period: 12
Slow EMA Period: 26
MACD SMA Period: 9

Bollinger Bands: 20-2
Moving Average Type: Exponential
Period : 20
Multiple : 2.0

Take note that on different chart platform there should be slight differences even though the indicators using the same setting. Therefore the most important is the understand the behavior of the indicators within support and resistance level which is more value able than the setting itself. And different setting require different mindset to look at it, so if you are frequently changing your setting without adjusting your mindset you are heading to absolute failure.

Currency Correlations

Positive correlation between the EUR-USD and GBP-USD as usual moving this pair identically the same direction. Therefore where ever the one or the other goes it will eventually follow one another.

However there are certain time of the cycle where one or the other will take turn to leads. For example previous week the EUR-USD was in front where as currently GBP-USD is leading. This because of both are closely correlated to the EUR-GBP pair. As a result whenever the EUR-GBP going up making the EUR is stronger than Pound therefore the EUR-USD will leads over GBP-USD. On the other hands when the EUR-GBP is going down the Pound sterling is stronger than EURO therefore the GBP-USD will move ahead of the EUR-USD pair.

This is also affect the GBP-JPY and EUR-JPY the same way. The only difference is that both of this pair is correlated with USD-JPY which also provide great effect on them. It can be seen in the current trading trend, despite of the upward movement for GBP-USD and EUR-USD pairs, GBP-JPY and EUR-JPY are heading downwards following USD-JPY movement. There are other times where GBP-JPY and EUR-JPY will move identically with the GBP-USD and EUR-USD.

So my point is that, the correlation between currency pairs are relatively dynamic. You may not know when will it move in the same direction or opposites, because it changes over time. It is therefore because of inter-correlation of the currency pairs among one another in the currency market,making it unpredictable in short-term trading. However in certain degree of certainty most they are actually have limited correlation boundary therefore overall there are predictable.

Check This Site to learn more about currency correlation and how you can make use of it to apply it on the hedging technigue.





Mataf Currency Corretlation Table

Investopedia - Using Currency Correlations To Your Advantage

Investopedia - A Beginner's Guide To Hedging

Freedom Rocks

Aussie dollar jumps on decisive election outcome

The Australian dollar jumped nearly one percent in early trade on Monday, boosted by a strong performance on Wall Street and following a decisive outcome at the weekend's general elections. Analysts said while a victory by the opposition Labor Party was not a surprise and was unlikely to prompt significant changes to the country's economic policies, the clear outcome of the election had relieved investors. "Because the result was very convincing, that does remove a bit of uncertainty and that does suggest the Labor party will be able to get their new policies through," said Bank of New Zealand currency strategist Danica Hampton.

The Aussie shot up over half a U.S. cent to around $0.8840 in early New Zealand trade before settling at around $0.8825/28 at 1945 GMT. On Friday, it stood at around $0.8775 in late U.S. trade on Friday and $0.8735/38 in late Sydney session.

The strong Aussie also lifted the neighbouring New Zealand dollar by around a quarter of a cent to $0.7611/13.

New Australian Prime Minister Kevin Rudd said he would name a cabinet later this week after his party was set to hold up to 86 seats in the 150-seat parliament.

The surge in voter support to Labor left John Howard's Liberal Party in disarray, with up to six conservative ministers, including Howard, likely to lose their seats in only the sixth change of government since World War Two

Oil prices rose to near $99 due to temperature fall

Oil prices rose to near $99 a barrel Monday with temperatures falling in the United States and Europe and continued weakness for the U.S. dollar.

The Thanksgiving holiday on Thursday marked the unofficial start of winter in the United States. Among other areas, southeastern New Mexico got up to 9 inches of snow and experienced colder than normal temperatures over the holiday weekend. Snow also fell in Germany over the weekend.

"The onset of cold U.S. weather is going to boost fuel demand," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Light, sweet crude for January delivery added 75 cents to $98.93 a barrel in electronic trading on the New York Mercantile Exchange, midday in Europe.

On Friday, the contract rose 89 cents to settle at $98.18 a barrel, besting the previous settlement record by 15 cents.

January Brent crude added 68 cents to $96.44 a barrel on the ICE Futures exchange.

Meanwhile, the dollar hit a new low against the euro Friday as speculation continued that the American credit crisis will lead to another cut in U.S. interest rates.

"The weakened U.S. dollar remains at record low levels and so we've got pricing trying to test $100 again," Shum said.

Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the U.S. currency is falling.

Nymex crude prices reached a trading record of $99.29 a barrel on Wednesday, and are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

"Almost anything could push prices higher from here and we have to expect to see a move to" $100 per barrel this week, said Peter Beutel, president of U.S. energy risk management firm Cameron Hanover, in a research note, listing a U.S. Federal Reserve interest rate cut, a weaker U.S. dollar, colder weather forecasts or "any petro-political problem" among the factors which could push oil prices to three digits.

"We have reached the point, though, where the inability to touch or break $100 this week would be seen as rather a spectacular failure," Beutel wrote. "There is no reason for prices not to hit $100 this week."

Shum said that data suggesting OPEC is increasing production more quickly than expected is likely to keep a temporary cap on oil prices.

Oil Movements, an oil tanker tracking firm based in Britain, reported that Organization of Petroleum Exporting Countries oil exports are likely to jump by an average of 720,000 barrels a day in the four weeks ended Dec. 8, more than the expected 500,000 barrels per day.

Oil prices rose 43 percent between August and early November on falling domestic inventories, concerns about supply disruptions overseas and, many analysts argue, speculative buying. But recent forecasts have suggested high prices are cutting demand.

Nymex heating oil rose 1.94 cents to $2.7236 a gallon (3.8 liters) while gasoline prices gained 1.70 cents to $2.484 a gallon. Natural gas futures rose 19.6 cents to $7.896 per 1,000 cubic feet.

Forex Tips

Tip 1. Gamblers go to casino. All unproved, spontaneous actions in Forex trading — are a part of pure gambling.
Any attempt to trade without analysis and studying the market is equal to a game. Game is fun except when you are losing real money...

Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account!
Allow at least 2 month for demo trading. Consider this: 90% of beginners fail to succeed in the real money market only because of lack of knowledge, practice and discipline. Those remaining 10% of successful traders had been sharpening and shaping their skills on demo accounts for years before entering the real market.
A good demo account to start practicing with could be, for example, FXGame from Oanda.

Tip 3. Go with the trend!
Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won't "kill" a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals.

Tip 4. Always take a look at the time frame bigger than the one you've chosen to trade in.
It gives the bigger picture of market price movements and so helps to clearly define the trend. For example, when trading in 15 minute time frame, take a look at 1 hour chart; trading hourly would require obtaining a picture of daily, weekly price movements.

If a trend is hard to spot — choose a bigger time frame. Up and down market patterns are always present. Always make sure you know the dominant trend, unless you are a scalper. Scalpers have no need to spend their time studying big trends, what's happening in the market here and now (during 5-10 minute time frame) should be of only importance to a Forex scalper.

Tip 5. Never risk more than 2-3% of the total trading account.
One important difference between a successful and an unsuccessful trader is that the first is able to survive under unfavorable conditions on the market, while an unsuccessful trader will blow up his account after 5-10 unprofitable trades in the row.

Even with the same trading system 2 traders can get opposite results in the long run. The difference will be again in money management approach. To introduce you to money management, let's get one fact: losing 50% of total account requires making 100% return from the rest of money just to restore the original balance.

Tip 6. Put emotions down. Trade calm.
Don't try to revenge after losing the trade. Don't be greedy by adding lots of positions when winning.
Overreaction blocks clear thinking and as a result will cost you money. Overtrading can shake your money management and dramatically increase trading risks.

Tip 7. Choose the time frame that is right for you.
Choosing wise means that you are comfortable and have time enough to analyze the market, place and close orders etc. Some people can't wait for hours for the price to make a move, they like action and therefore prefer smaller time frames. On the contrary, for others 10-15 minutes is a hustle to be able to make the right decision.

Tip 8. Not trading or standing aside is a position.
When in doubt — stay out. If it is not clear where the market will move — don't trade. In this case saving present capital is and absolutely better choice than risking and losing money.

Tip 9. Learn to use protective stops. Respect them and don't move.
Hoping that market will turn in your direction is a very delusive hope. By moving a stop loss further a trader increases his chances to end up with much bigger loss.

When holding to a losing trade too long, and even if funds permit, traders as a rule are very reluctant to accept big losses, thus often continue "hoping for best". In the mean time invested money is stuck in the open trade for unknown period of time (weeks and even months) and cannot be used for opening new positions. Not working money — dead money. Also this will result in constant interest payments for holding open positions.

Tip 10. "Keep it simple, stupid" — applies to indicators, signals and trading strategies.
Too much information will create a controversial picture of where to trade and when not to. To avoid lots of confusion create a simple but working method of trading Forex.

Tip 11. Think about risk/reward ratio before entering each trade.
How much money can you lose in this trade? How much can you gain? Now, make a decision if the trade is worth entering.
Example: if trader is looking for possible 35 pips gain and possible 25 pips of loss, such conditions are not worth trading. Compare it with the situation when a trader has 100-120 pips of potential gain and only 10-20 pips of possible loss. This is the trade to open!

Tip 12. Never add positions to a losing trade. Do add positions when the trade has proven to be profitable.
Don't allow a couple of losing trades in a row become a snowball of losing trades. When it is obviously not a good day, turn the monitor off. Often not trading for one day can help to break a chain of consecutive losses. Trying to get revenge can often make things worse.

Tip 13. Let your profits run.
Let your position be open for as long as the market wishes to reward you. Of course, for this traders need a good exit strategy, otherwise they risk to give all profits back...
Running two or more open trades gives an option to close some positions earlier and keep others running for higher profits.

Tip 14. Cut your losses short.
It's better to finish unprofitable trade quickly than wait for the situation to get worse. Don't put a stop loss too far — it's your money you risk. Better calculate the best spot to enter when a potential loss would be minimized. Again: respect your stop and don't move it "cherishing hopes".

Tip 15. Trade currency pairs in respect to their active market hours.
Learn about overlapping market hours: when two markets are open and highest volume of trades is conducted.
For example, Australian and Japanese trading sessions are overlapped from 8pm to 1 am EST. At that time trader can successfully trade AUD/JPY currency pair.

Tip 16. Choose the right day to trade.
This recomendation is often wrongly taken as an optional thing, because everyone knows that Forex market is open 24 hours a day 7 days a week. Yet, choosing the time to trade can make a difference between successful and hopeless trading.

It's proved and highly recommended not to trade on Mondays, when the market has recently awaken and is making first "probation steps" to form a new or confirm a current trend; and on Fridays afternoon, during the huge volume of closing trades. The best days to trade are Tuesdays, Wednesdays and Thursdays.

Tip 17. Learn about Fibonacci levels and how to use them for trading.
Fibonacci can be very helpful in trading, even partially using the study, for example, to determine the best exit, can bring traders to a new edge of trading.

Tip 18. Always ensure that a signaling bar/candle on the chart is fully formed and closed before you enter a trade.
A golden rule of trading: "Always trade what you see, not what you would like to see" is the best explanation here.

Tip 19. If you ask for someone else's advice as about how and when to trade
in other words, choose to rely on live trading signals from other traders, make sure you do it for your benefit, not for disaster. If you use such signals to discover how other traders do analysis and study on the price — you are on the right track and soon you'll be able to do analysis yourself.
But if you're just blindly following recommendations and your only task is to push the correct button... think again.

Tip 20. Using a highly leveraged account comes at a cost.
It will, of course, give a trader more financial gear to trade, and also trader's broker will be happy as it will mean higher spread income for him. On the other side a trader signs up for additional risks that multiply with higher leverage in a "friendly tight" proportion.

Tip 21. Learn to measure trading success by the end of the day, week and then month and year.
Do not judge about your trading success on a single trade. To be successful traders don't need to win every trade, they also don't become rich in one trade — they need to be profitable in a long run.

Tip 22. There is no such thing as a secret approach to understanding the market.
Take the time to develop a solid trading system and find out that the secret to trading success lies in hard work and constant learning.

Foreign investment funds in India

India has attracted the highest private equity (PE) investments at $10 billion in 2007 so far in the emerging economies including China. According to an India-focused cross-border advisory firm IndusView, China attracted $8.3 billion during the same period.

China received $13 billion in PE investments in 2006 compared to $7 billion in India. The equation has changed since then, with India taking the lead this year, said the firm. In 2005, India had attracted only $2 billion as private equity.

The Indian real estate and infrastructure sectors have been a key contributor to this rising inflows. Out of $10 billion PE fund that India attracted so far, $5 billion came in these sectors.

Real estate emerged as the favourite segment with 26% share in all private equity investments in value terms, receiving $2.6 billion in 32 deals, closely followed by telecom with 21% share, investment touching $2.1 billion.




Globally also, real estate and infrastructure have emerged as the most attractive sectors to invest. In 2006, global real estate private equity funds have raised $72 billion in 2006 and $50 billion in 2007 so far, said the report. A large portion of these funds will be invested in emerging markets such as India and China.

"India's private equity market can expand four-fold, using deal value as a percentage of the gross domestic product and maintain the top slot ahead of China, its nearest competing economy, and the infrastructure sector will provide the necessary edge." says Bundeep Singh Rangar, chairman of IndusView.

India's trajectory in attracting PE fund has grown sharply by 51% since 1998. Private equity investments in the country as a percentage of GDP at 1% is however, when compared to developed countries like the US at 2.3%, and UK at 3.3%.

According to government estimates, India will require around $ 500 billion investments in infrastructure sectors like road, energy, ports and airports. This will create a huge opportunity for foreign investors. "Indian infrastructure's favourable flavour is its predictable investment climate and a strong entrepreneurial culture," added Rangar.

Some of the major PE funds, which are active in Indian market, are Temasek Holdings, investment arm of Singapore government, Blackstone Group, a global private equity and investment management firm, Warburg Pincus, Carlyle Group, Washington and Actis Capital. Warburg Pincus is managing around $14 billion fund. Carlyle has more than $75 billion of capital under management.

Elliott wave principle

The Elliott wave principle (1871–1948), a professional , or wave principle, is a form of technical analysis that investors use to forecast trends in the financial markets and other collective activities. Ralph Nelson Elliottaccountant, developed the concept in the 1930s, proposing that market prices unfold in specific patterns, which practitioners today call Elliott waves, or simply waves. He published his views of market behavior in the book The Wave Principle (1938), in a series of articles in Financial World magazine in 1939, and most fully in his final major work, Nature’s Laws – The Secret of the Universe (1946). Elliott said that "because man is subject to rhythmical procedure, calculations having to do with his activities can be projected far into the future with a justification and certainty heretofore unattainable."

lliott Wave analysts (or "Elliotticians") say that they may not even need to look at a price chart to determine where a market lies in its wave pattern. Each wave has its own "signature," which often reflects the psychology of the moment. Understanding how and why the waves develop is the key to applying the Wave Principle; that understanding includes recognizing the characteristics described below.
These wave characteristics assume a bull market in equities. The characteristics apply in reverse in bear markets.

Wave 1: First waves are rarely recognized at their inception. When the first wave of a new bull market begins, the fundamental news is just about universally negative. The previous trend is considered still strongly in force. Fundamental analysts continue to revise their earnings estimates lower; most likely, the economy does not look strong either. Sentiment surveys are decidedly bearish, put options are in vogue, and implied volatility in the options market is high. Volume might increase a bit as prices rise, but not by enough to alert many technical analysts.

Wave 2: Wave two corrects wave one, but can never extend beyond the starting point of wave one. Typically, the news is still bad. As the markets retest the prior low, bearish sentiment quickly builds, and "the crowd" haughtily reminds all that the bear market is still deeply ensconced. Still, some positive signs appear for those who are looking: volume should be lower during wave two than during wave one, prices usually do not retrace more than 61.8% (see Fibonacci section below) of the wave one gains, and prices should fall in a three wave pattern.

Wave 3: Wave three is usually the largest and most powerful wave in a trend (although some research suggests that in commodity markets, wave five is the largest). The news is now positive and fundamental analysts start to raise earnings estimates. Prices rise quickly, and corrects are short-lived and shallow. Anybody looking to "get in on a pull-back" is likely going to miss the boat. As wave three starts, news is probably still bearish, and most market players remain negative. But, by the midpoint of wave three, "the crowd" will often now be on board with the new bullish trend. Wave three often extends wave one by a ratio of 1.618 : 1.

Wave 4: Fourth waves are typically clearly corrective. Prices may meander in a sideways pattern for an extended period, with wave four typically retracing less than 38.2% of wave three. Volume is well below than that of wave three. This is a good place to buy a pull back, if you understand the potential for wave 5 ahead. However, possibly the single most distinguishing feature of fourth waves is that they are often very difficult to count.

Wave 5: The fifth wave is the final leg of a five wave move. The news is now almost universally positive and everybody is bullish. Unfortunately, this is the point when many "average investors" finally buy in, right before the top. Volume is lower in wave five than in wave three, and many technical momentum indicators will start showing divergences (prices reach a new high, the indicator does not reach a new peak). At the end of a major bull market, bears may very well be ridiculed (recall how those calling for a top in the stock market during 2000 were received).

Wave A: Corrections are typically harder to identify than impulse moves. During wave A of a bear market, the fundamental news is usually still positive. Most analysts see the drop as a correction in a still-active bull market. Some technical indicators that suggest a wave A include increased volume, rising implied volatility in the options markets and possibly a turn higher in open interest in related futures markets.

Wave B: Prices move back higher, and is seen as a resumption of the now long gone bull market by many. For those familiar with classical technical analysis, the peak would be the right shoulder of a head and shoulders reversal pattern. Volume during a wave B should be lower than seen in wave A. By this point, fundamentals are probably no longer improving, but they most likely have not yet turned negative.

Wave C: Prices move impulsively lower in five waves. Volume picks up, and by the third leg of wave C, almost everybody realizes that a bear market is firmly entrenched. Wave C is typically at least as large as wave A and often extends to 1.618 times wave A or larger.

Forex chart patterns

In order to effectively spot those patterns the Zig Zag indicator is highly recommended, along with MetaTrader Platform which allows the most complex charts.

Symmetrical triangle pattern

A symmetrical triangle pattern is considered to be a continuation pattern. They are formed by trend lines connecting higher lows, and lower highs which eventually meet to form the apex of the triangle.




Ascending triangle patern

The ascending triangle pattern is a variation of the symmetrical triangle. They are generally considered to be bullish patterns, and have higher forecasting abilities when formed in an up-trend. The top of the triangle is flat, while the bottom section has an upward slant.




Parabolic curve pattern

The parabolic curve pattern is probably one of the most sought after patterns, and often produces quick returns in a relatively short period of time. Most of the time this pattern will appear near the end of a major market move or advance, and often looks like a stair case which eventually ends and dives downwards.




Wedge pattern


The wedge formation looks very similar to a symmetrical triangle pattern. Wedge patterns are distinguished by their apparent slant either up or down (rising & falling wedges).




Falling wedges are generally considered to be a bullish signal often found in up-trends. They are formed with a series of lower highs and lower bottoms.





Descending triangle pattern


The Descending Triangle, also a variation of the symmetrical triangle, is generally considered to be bearish and is usually found in downtrends. The descending triangle pattern is characterized by a flat bottom with the top part having a downward slant.





Channel pattern

Channel patterns are most of the time considered as a continuation pattern, and usually continue in the direction of the main trend. Channels are formed by two trend lines running parallel to each other forming a rectangle shape, where prices bounce up and down between often forming double tops and bottoms.



Head Shoulders pattern


The Head and Shoulders pattern is considered as a reversal pattern, and is most often and most reliable up-trends. Head and shoulder patterns are formed when prices are pushed upwards then fall back down to what starts the neckline. Prices are then pushed back up forming a new high then once again are pushed back down. Prices then go higher but not quite reaching the previous high point. They are then pushed back down to the neckline, and the pattern is completed once the neckline is broken. The neckline is formed with a trend line connecting the two low points of the pattern.






Cup and Handle pattern


As its name suggests, the cup and handle pattern is made up of two parts: the cup and the handle. The cup is formed after a strong market advance and has a rounded bottom. After the cup has been formed, the handle develops in the form of a trading range. Most consider duration of 2-4 months a good time frame for the cup to form and around 1 month for the handle. The handle section that is formed is generally around 5% below the old high point, and any lower than that is in most cases considered not to be a cup and handle pattern.

Scalping trading style

Scalping is a trading style specializing in taking profits on small price changes, generally soon after a trade has been entered and has become profitable. It requires a trader to have a strict exit strategy because one large loss could eliminate the many small gains that the trader has worked to obtain. Having the right tools such as a live feed, a direct-access broker and the stamina to place many trades is required for this strategy to be successful.

Scalping is based on an assumption that most stocks will complete the first stage of a movement (a stock will move in the desired direction for a brief time but where it goes from there is uncertain); some of the stocks will cease to advance and others will continue. A scalper intends to take as many small profits as possible, not allowing them to evaporate. Such an approach is the opposite of the "let your profits run" mindset, which attempts to optimize positive trading results by increasing the size of winning trades while letting others reverse. Scalping achieves results by increasing the number of winners and sacrificing the size of the wins. It's not uncommon for a trader of a longer time frame to achieve positive results by winning only half or even less of his or her trades - it's just that the wins are much bigger than the losses. A successful scalper, however, will have a much higher ratio of winning trades versus losing ones while keeping profits roughly equal or slightly bigger than losses.

The main premises of scalping are:

* Lessened exposure limits risk - A brief exposure to the market diminishes the probability of running into an adverse event.
* Smaller moves are easier to obtain - A bigger imbalance of supply and demand is needed to warrant bigger price changes. It is easier for a stock to make a 10 cent move than it is to make a $1 move.
* Smaller moves are more frequent than larger ones - Even during relatively quiet markets there are many small movements that a scalper can exploit.

Scalping can be adopted as a primary or supplementary style of trading.

Primary Style
A pure scalper will make a number of trades a day, between five and 10 to hundreds. A scalper will mostly utilize one-minute charts since the time frame is small and he or she needs to see the setups as they shape up as close to real time as possible. Quote systems Nasdaq Level II, TotalView and/or Times and Sales are essential tools for this type of trading. Automatic instant execution of orders is crucial to a scalper, so a direct-access broker is the favored weapon of choice.

Supplementary Style
Traders of other time frames can use scalping as a supplementary approach in several ways. The most obvious way is to use it when the market is choppy or locked in a narrow range. When there are no trends in a longer time frame, going to a shorter time frame can reveal visible and exploitable trends, which can lead a trader to scalp.

Another way to add scalping to longer time-frame trades is through the so-called "umbrella" concept. This approach allows a trader to improve his or her cost basis and maximize a profit. Umbrella trades are done in the following way:

* A trader initiates a position for a longer time-frame trade.
* While the main trade develops, a trader identifies new setups in a shorter time frame in the direction of the main trade, entering and exiting them by the principles of scalping.

Practically any trading system, based on particular setups, can be used for the purposes of scalping. In this regard, scalping can be seen as a kind of method of risk management. Basically any trade can be turned into a scalp by taking a profit near the 1:1 risk/reward ratio. This means that the size of profit taken equals the size of a stop dictated by the setup. If, for instance, a trader enters his or her position for a scalp trade at $20 with an initial stop at $19.90, then the risk is 10 cents; this means a 1:1 risk/reward ratio will be reached at $20.10.

Scalp trades can be executed on both long and short sides. They can be done on breakouts or in range-bound trading. Many traditional chart formations, such as a cup and handle or triangle, can be used for scalping. The same can be said about technical indicators if a trader bases decisions on them.

Three Types of Scalping
The first type of scalping is referred as "market making", whereby a scalper tries to capitalize on the spread by simultaneously posting a bid and an offer for a specific stock. Obviously, this strategy can succeed only on mostly immobile stocks that trade big volume without any real price change. This kind of scalping is immensely hard to do successfully as a trader must compete with market makers for the shares on both bids and offers. Also, the profit is so small that any stock's movement against the trader's position warrants a loss exceeding his or her original profit target.

The other two styles are based on a more traditional approach and require a moving stock where prices change rapidly. These two styles also require a sound strategy and method of reading the movement.

The second type of scalping is done by purchasing a large number of shares that are sold for a gain on a very small price movement. A trader of this style will enter into positions for several thousand shares and wait for a small move, which is usually measured in cents. Such an approach requires highly liquid stock to allow for entering and exiting 3,000 to 10,000 shares easily.

The third type of scalping is the closest to traditional methods of trading. A trader enters an amount of shares on any setup or signal from his or her system, and closes the position as soon as the first exit signal is generated near the 1:1 risk/reward ratio, calculated as described earlier.

Scalping can be very profitable for traders who decide to use it as a primary strategy or even those who use it to supplement other types of trading. Adhering to the strict exit strategy is the key to making small profits compound into large gains. The brief amount of market exposure and the frequency of small moves are key attributes that are the reasons why this strategy is popular among many types of traders.

Forex indicator

There are hundreds forex indicator in Forex. these indicator basically is a script or program writen using program language here are some good forex indicator :


Simple Moving Average (SMA) - The average price of a given time period, (5 minutes, 10 minutes, 1 day, etc.) where each of the chosen periods carries the same weight for the average. Example using the closing prices of the USD/JPY currency pair: Day 1 close = 124.00, Day 2 close = 126.00, Day 3 close = 124.00, Day 4 close = 126.00; The 4-day SMA is 125.00 (the average of the prior four closes).

Exponential Moving Average (EMA) - Here, the averages are calculated with the recent forex rates carrying more weight in the overall average; for example: In a 10-day exponential moving average, the last 5 days will have more effect on the average than the first 5 days. The idea is to use the most recent data as a better indication of trend direction.

Bollinger Bands - The basic interpretation of Bollinger Bands is that prices tend to stay within the upper and lower bands. The distinctive characteristic of Bollinger Bands is that the spacing between the bands varies based on the volatility of the prices. During periods of extreme currency price changes (i.e., high volatility), the bands widen to become more forgiving. During periods of low volatility, the bands narrow to contain currency prices. The bands are plotted two standard deviations above and below a simple moving average. They indicate a "sell" when above the moving average (or close to the upper band) and a "buy" when below it (or close to the lower band). The bands are used by some forex traders in conjunction with other analyses, including RSI, MACD, CCI, and Rate of Change.

Parabolic SAR - The Parabolic SAR (stop-and-reversal) is a time/price trend following system used to set trailing price stops. The Parabolic SAR provides excellent exit points. Forex traders using this technical indicator should close long positions when the price falls below the SAR and close short positions when the price rises above the SAR. If you are long (i.e., the price is above the SAR), the SAR will move up every day, regardless of the direction the price is moving. The amount the SAR moves up depends on the amount that currency rates move.

Rate of Change - The oldest closing price divided into the most recent one.

RSI (Relative Strength Index) - The RSI is a price-following oscillator that ranges between 0 and 100. A popular method of analyzing the RSI is to look for a divergence in which the currency price is making a new high, but the RSI is failing to surpass its previous high. This divergence is an indication of an impending reversal. When the RSI then turns down and falls below its most recent trough, it is said to have completed a "failure swing." The failure swing is considered a confirmation of the impending reversal in the price of the currency.

Stochastics - Stochastic studies are based on the premise that as prices rise, closing prices tend to be near the high value. Conversely, as prices fall, closing prices are near the low for the period. Stochastic studies are made of two lines, %D and %K, that move between a scale of 0 and 100. The %D line is the moving average over a specified period of time of the %K line. The %K line measures where the closing price of a currency is compared to the price range for a given number of periods.

Momentum - Designed to measure the rate of price change, not the actual price level. Consists of the net difference between the current closing price and the oldest closing price from a predetermined period. The Momentum indicator can be used as either a trend-following oscillator similar to the MACD or as a leading indicator.

MACD - Moving Average Convergence/Divergence - Consists of two exponential moving averages that are plotted against the zero line. The zero line represents the times the values of the two moving averages are identical. The MACD is calculated by subtracting a 26-day moving average of a currency's price from a 12-day moving average of its price. The result is an indicator that oscillates above and below zero. When the MACD is above zero, it means the 12-day moving average is higher than the 26-day moving average. This is bullish as it shows that current expectations (i.e., the 12-day moving average) are more bullish than previous expectations (i.e., the 26-day average). This implies a bullish, or upward, shift in the forex rate. When the MACD falls below zero, it means that the 12-day moving average is less than the 26-day moving average, implying a bearish shift in the currency.

ADX - Measures the strength of a prevailing currency trend and whether or not there is direction in the currency market. Plotted from zero on up, usually a reading above 25 can be considered directional.

William's %R - A momentum indicator that measures overbought/oversold levels in the price of a currency. The interpretation of Williams' %R is very similar to that of the Stochastic Oscillator, except that %R is plotted upside-down and the Stochastic Oscillator has internal smoothing. Readings in the range of 80 to 100% indicate oversold, while readings in the 0 to 20% range suggest overbought.

Volatility - Measures the overall volatility of a currency in a given time period.

forex trading facts

Forex trading, or foreign exchange current exchange trading, is a global phenomenon. This is the single largest market in the world. There are many different market sectors that are involved with Forex trading. These include, but are not limited to; " Banks" Corporations" Governments" Individuals

What is Forex trading you ask? At its simplest, Forex trading is currency being traded for another currency. However, Forex trading is anything but simple. The market has massive trade volume and is very fluid. Not to mention the hundreds of different currencies being traded and their ever changing value.

Forex trading is a very focused area of trading, but the amount of time and energy most people and companies spend getting trained and educated on Forex trading and its inner workings and pitfalls, is at least as much time as it takes to learn the stock market.

Because of the complexity, Forex Trading is not your typical overnight success operation. There are many large corporations, such as GCI Financial which is a market leader in this space.

Forex trading is unique in that everyone does not have access to all of the same information and prices at the same time, as they do with the stock market. I won't get into specifics here, but basically there is a tiered level whereby different levels of access are given to the Forex traders and Forex firms.

The other main thing to remember about Forex trading is, until such time that the world adopts a single currency, Forex Trading will be around for a very long time.

Benefits of Trading Forex

Foreign Exchange (FOREX) is an arena where a nation's currency is exchanged for that of another. The foreign exchange market concurrently is the largest financial market in the world, with over $1.5 trillion dollars changing hands daily. Unlike other financial markets, the Forex market has no physical location and no central exchange. It operates through an electronic network of banks, corporations, institutional investors and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another across the major financial center of the globe.

Benefits of Trading Forex

Leverage - FOREX investors are permitted to trade foreign currencies on a highly leveraged basis - up to 100 times their investment. For example, an investment of US $1,000 would permit a trade up to US $100,000 of any particular currency.


Liquidity - a powerful attraction to any investor as it suggests the freedom to open or close a position at will anytime during the 24-hour trading sessions.


Utilizing only a small portion of initial investment (anywhere from 10-30% of total investment) for margin deposit, no predetermined cost is assessed.


Currencies are traded in pairs, for example USD/JPY or USD/CHF. Every position involves the selling of one currency and the buying of another. Added to the fact that gains can be made when the market is to the upside as well to the downside.


"Past performance is not indicative of future results. Forex Trading involves substantial risk of loss and it is not suitable for all investors. Levaraged trading magnifies profits and losses"

what is forex

The international currency market Forex is a special kind of the world financial market. Trader’s purpose on the Forex to get profit as the result of foreign currencies purchase and sale. The exchange rates of all currencies being in the market turnover are permanently changing under the action of the demand and supply alteration. The latter is a strong subject to the influence of any important for the human society event in the sphere of economy, politics and nature. Consequently current prices of foreign currencies evaluated for instance in the US dollars fluctuate towards its higher and lower meanings. Using these fluctuations in accordance with a known principle “buy cheaper – sell higher” traders obtain gains. Forex is different in compare to all other sectors of the world financial system thanks to his heightened sensibility to a large and continuously changing number of factors, accessibility to all individual and corporative traders, exclusively high trade turnover which creates an ensured liquidity of traded currencies and the round - the clock business hours which enable traders to deal after normal hours or during national holidays in their country finding markets abroad open.

Just as on any other market the trading on Forex, along with an exclusively high potential profitability, is essentially risk - bearing one. It is possible to gain a success on it only after a certain training including a familiarization with the structure and kinds of Forex, the principles of currencies price formation, the factors affecting prices alterations and trading risks levels, sources of the information necessary to account all those factors, techniques of the analysis and prediction of the market movements as well as with the trading tools and rules. An important role in the process of the preparation for the trading on Forex belongs to the demotrading (that is to trade using a demo-account with some virtual money), which allows to testify all the theoretical knowledge and to obtain a required minimum of the trade experience not being subjected to a material damage.