With daily ATR's falling on average 15% across most of the majors and the crosses, along with several inside days, the price action chop fest has begun as the markets digest the Himalayan sell-offs, we have witnessed over the last few months.

This was intimated by how the intraday Ichimoku Clouds have gotten very finicky, like college students on triple espressos waiting to take their final exams.

Taking a look at the chart below, we can see how the Clouds or 'Kumo' have started the flipping contrast. Notice how the white portion of the cloud goes from top to bottom to top Mexican jumping bean style all over the charts for the last several days.



Remember according to Ichimoku theory, the cloud represents support and resistance levels. The thicker the cloud, the thicker the support/resistance it should offer. If its constantly flipping from thick to thin, then that basically is communicating an opportunity is right around the corner for the pair to reverse instead of continuing on in any particular direction.

Thus, if you are looking to catch any substantial move, the floor might drop right out from under you at any moment. This requires a more nimble trading approach as the flipping of the cloud results from the price action being direction less or zombie like bouncing from pillar to post looking for fresh meat. When I see this kind of chart formation, I generally result to the following tactical methods:

1) Drill down to smaller time frames (i.e. 1 or 5 minute charts) *we only suggest doing this if you've had practice/success at these levels and are choosing pairs with smaller spreads.

2) Super-size the time frames up to the larger parameters, aka the 4-hour or daily charts. This will create a pseudo-smoothing method and help one to see the larger ranges in play and play for rejections off the Bollinger Bands or 20EMA's with correlating flat Momentum readings (12 period.)

3) The last option is to stay out which has been my more enjoyable method besides the 1min time frames. Sometimes, there just are not too many ladies for me to dance with on the dance floor. When that happens, I usually re-evaluate whether I am in the right environment or or whether I want to dance at all. I do Tango dancing so if there are no ladies around, then I'm generally not dancing. There will always be another Tango Milonga to go to and there will always be another trade in the markets.

Remember the markets have a close relative called Las Vegas, and you want to make sure you are not always playing hands just because you have time and money to play. In the same fashion, you want to pick your games, tables and times to play where you are most likely to succeed. Based upon the current price action, this trader suggests smaller targets, trading pairs with tighter spreads, perhaps using Bollinger Bands and pivots if you are looking for a rejection play, and being more selective.

The chart below gives an example of such plays using the Bollinger Bands on the 1hr charts.



Chris Capre is the Founder of Second Skies LLC which specializes in Trading Systems, Private Mentoring and Advisory services. He has worked for one of the largest retail brokers in the FX market (FXCM) and is now the Fund Manager for White Knight Investments (www.whiteknightfxi.com/index.html). For more information about his services or his company, visit www.2ndskies.com.

Tuesday, September 8, 2009

How To Trade Forex The Right Way - Do You Really Need Forex Scalping?

by Daniel Su

You can look at many different types of forex trading strategies when trying to increase your profits. Some people may choose the forex scalping method because they think it is a fast and easy way to reap the wealth from the market. But I will say that it is one of the most inaccurate and risky way of trading. Having the idea that you need to break down every aspect of the market and constantly be in action is the wrong way to go.
When you look at the most successful traders, and each depend upon the forex trading guide that has proven time and time again to be profitable for them. That being the case, many people will argue that learning how to trade forex is an extremely tedious business.

Some newer traders will look at the market and try to use too many methods to evaluate their trends. This is a great way to overcomplicate things and become extremely disorganized. If you are just coming into the market, you need to realize that you need to develop some forex trading techniques that will consistently produce your profits in the market.

Another pratfall when looking for your forex trading system is that people think they have to discover the next new super forex trend system or holy grail that will produce a hundred pips a day for them. It is quite impossible and absolutely not necessary as you can have a good living with the system that will produce just a few hundreds pips per month.

If you are looking for a system that is the be-all end-all where a forex trading guide is concerned, I need to tell you that it simply does not exist. Your goal is to find a simple system that will put money in your pocket on a steady basis and stick with it.

You should be looking for quality instead of quantity trades. One of the common forex trading strategies is to follow the trend or using breakouts. There are some forex indicators that will allow you to use those strategies effectively, the only challenge is choosing the right forex trading strategies in different market conditions. Bottomline is you should identify how you're going to focus your trading, make it profitable and stick with it.

The knock on this that forex trading can be boring and that you will lose interest. If you really struggle in forex trading, then you may want to consider some of the automated forex trading systems that will make you some profits in the long run. But of course, it is not advisable to use that if you have no idea on currency trading at all.

So if you find a good forex tradin guide that will allow you to identify trends and make the long-term moves, why would still you mess around with forex scalping? The most profitable traders find their niche and stick with it.

If you are still not making consistent profits from the market, you can get my free forex trading guide that will provide all the information you need on how to trade forex successfully. You will also find a simple and proven forex trading strategy that can get you started to make some profits - consistently.



About the Author
To learn how to trade forex successfully, click here to download my FREE 56-page ebook Forex Trading To Riches.
The author, Daniel Su, is the founder of ForexTradingPower.com where you can get free premium forex trading tips and resources.
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)