___Forex Scalping
“Tiny Trades For Terrific Profits”
eBook By Robert Borowski
© 2005 Evergreen Forex Inc.
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I dedicate this eBook to Brian. Little did I expect when small coincidences introduced us that you would become such a huge part of my life. You are far more than my business partner and best friend – you are a kindred spirit. You have enriched my life and exponentially added to my own boundless enthusiasm. I cannot express my immense gratitude for getting to know you, and can’t fathom the marvelous journey yet ahead of us.
Prerequisite Reading
Introduction
Welcome
What is “Scalping”?
The Joy of Scalping
Use with “Forex Freedom”?
Warning
Basic Considerations
Practice Makes Wisdom
Tools of the Trade
Your Computer
Serious Trading Computer
Broker
Charts
Practice Account
Broker Spreads & Tradable Currencies
Pip Padding
Overview of the Techniques
Stop Frequency
Equity Management
Kamikaze Scalpers
Currency Pair Choice
The Techniques
Safer Stops
Fibonacci Guidance
Specialized Fibonacci Observances
Adding S.E.X. Lines
Picking Tops & Bottoms (Part B)
Compounding Gains
Watching Multiple Charts
Bigger Perspectives
The Opportunities
Modified Slanted Channel Surf Zones
Day Running Scalp
FA Considerations
Wine & Cheese
Extra Examples
The Beginning
PREREQUISITE READING
· Explosive Profits (revised edition)
The above are prerequisites as this eBook assumes that you already understand a lot of the concepts originally taught there and those concepts will be referenced but not repeated here.
INTRODUCTION
Is it possible to score hundreds or even thousands of dollars (euro, pounds, yen, whatever) of profits in just a few minutes in the Forex markets? Yes it is! In this eBook we explore the fun & wildly profitable technique of “scalping” in the Forex markets. It is amazingly simple to learn and you’ll probably be able to proficiently start using these ideas today!
Here we shall look at a few variations of how to accomplish “scalps”. We’ll discuss the pros and cons of this style of trading, and how to be well on your way to success with these techniques.
“Scalping” can have various descriptions depending on whom you ask. Some folks would say that some “Forex Surfing” techniques are considered “scalps” due to the small size and duration of the trades. Different traders have different techniques for scalping, but one thing that can be universally agreed upon is that scalping involves tiny trades (both in amplitude and duration).
Typically, “scalping” is a specialized technique that involves making a tiny trade to capture a very small movement in the market. Whereas a “position trader” may engage in trades that are intended to last for multiple days to months (aiming for targets of hundreds to thousands of pips), and a “day trader” typically engages in trades that are intended to last for less than a day (aiming for targets ranging from 20 to 100 pips), a “scalper” engages in trades that might only last a few minutes aiming for targets of 5+ pips.
A scalper typically trades multiple Forex lots (mini or regular lots depending on the size of the account and risk tolerance), often more lots than one would normally trade if trading as either a “day trader” or a “position trader” (simply due to the fact that those styles typically require larger stops thus shrinking the amount of lots one can safely trade according to equity management principles). By trading more lots a scalper can achieve significant gains comparable to the gains expected by day & position traders in the same time span even though the scalper engages in much smaller individual trades. For example, a scalper that succeeds in capturing just 5 pips could have made $500 in under a minute if he traded 10 regular lots. In some circumstances (that you’ll learn later in this eBook) the scalper could successfully capture 10, 20, 30 or even more pips that (assuming he traded 10 regular lots) would result in profits of $1,000, $2,000, or even $3,000 in a very short amount of time. Some scalp attempts can occasionally yield over 100 pips (over $10,000 trading 10 lots) – and YES, set ups like that happen several times each month!
Scalping is often considered to be an advanced trading style. Though scalping is quite simple in concept many consider it to be advanced because it requires very quick decision making, very quick reflexes to react when set ups are spotted, and the scalper must be skilled at quickly executing a trade. The keyword for the scalper is “speed”. What makes “scalping” an advanced skill isn’t that it’s complicated; it is just that one must be both skillful and fast. Drinking coffee or energy drinks while scalping is a good idea. This style of trading certainly isn’t for slow minded or slow moving people (please don’t interpret this comment as being insulting for certain groups of people).
Scalpers often engage in multiple trades a day. Some scalpers execute dozens and dozens of trades each day, but don’t worry; I’ll teach you to do fewer. Scalps are executed in the direction of the current trend, usually taking little bites of the market movement, but can also be an entry technique into longer day trades to capture even larger profits. Skillfully scalping one can literally buy very close to the actual low and sell very close to the actual top of market movements; much closer than day traders, and certainly position traders, would normally accomplish.
Scalping is suited for some people & personalities better than others. Some traders love it, making it their primary trading style, whereas some traders hate it for their own personal reasons. Scalping is best reserved for traders after they are already familiar with other trading styles, but if this is your first exposure to trading Forex don’t worry about it – you can easily learn everything you need to know to make some HUGE profits by scalping just by reading this eBook (however I strongly suggest you first read my other eBook “Forex Surfing” as there you’ll learn many basics that I won’t be covering here in this eBook).
“Scalping” seems to me to have a slightly negative perception in the minds of traders in general. I believe it is simply due to the name of the technique, as “ticket scalpers”, people selling over priced tickets for concerts or sporting events, are commonly thought of as being sleazy. It seams to me that some “advanced / experienced” traders look down upon “scalping” techniques as being beneath them, or even unethical (perhaps this is from the days when floor traders at stock exchanges would sometimes scalp stocks). It’s funny that even FXCM clearly doesn’t like scalping for whatever reason (at the time of this writing FXCM has been hosting a mini trading contest called “King of the Mini”. If you read the contest rules it is stated as rule #8, “NO SCALPING – At FXCM’s discretion, entrants may be removed from the contest for employing trading techniques resembling ‘scalping’ or ‘picking’”. This doesn’t make logical sense to me since they profit for the pip spreads of each executed trade, so while writing this eBook I decided to ask FXCM why this is a rule. They responded saying that scalping is generally “frowned upon”, and though they permit traders to employ such techniques (since they profit from each trade entered) they simply disallow it for the contest because they feel it is an unacceptable practice for their trading contest. ). I don’t really know why there appears to be some kind of negative stigma to scalping, and I don’t think it is justified. As far as I am concerned a profit is a profit regardless of what trading technique used, and as a trader all that matters is the profits.
Here is a link to an article on the web titled “Scalping: Small Quick Profits Can Add Up”. I have included it here for your reference to be able to read a third party’s definition of scalping. (Note: This is an external link. You need to be connected to the Internet to view this page. As I have no control over the content of their website this link may become inactive at some point in the future.)
Why be a Forex Scalper? Simply put, it is both fun AND profitable! The concepts are easy to learn, easy to do (once you’re skilled at it), provides you with an adrenaline rush, and can fatten your bank account.
Personally, I think that of all Forex trading methods that scalping is simply the most fun. The trading style is mentally stimulating, and it’s exciting to watch your profits grow.
If you are a chronic trader, someone who enjoys doing frequent trades, you’ll find that here you’ll have the chance to be “trigger-happy”. Day traders often have to wait for hours before a good trading opportunity comes along (sometimes they don’t even trade that day if nothing seems to happen), position traders often have to wait for days or even weeks before a suitable trading opportunity presents itself, but a scalper can be joyfully raking in fantastic profits while the other traders are bored out of their minds! For these reasons experienced Forex traders can also add scalping to their trading toolbox; so that they have another tool to work with.
I’ll elaborate upon when traders employing other styles of trading might switch to scalping. Generally speaking when a currency pair goes into a tight range or consolidation in the time frame view one is normally looking at, if you were to zoom in even closer it would be apparent that there is plenty of market move on a tiny scale. A trader could then scalp the tiny movements when otherwise they couldn’t trade at all.
Often times it is generally best for most Forex traders to restrict trading activity to only the times when two markets overlap (typically 2am to 6am and 8am to 12noon EST (New York time)), however even outside of those times a trader can engage in scalping, thus a scalper can trade virtually at any time 24 hours a day. Because many people are simply part-time traders, trading as a hobby, due to having to go to work at some job, scalping is a method that may allow those people to trade who might not be able to otherwise participate in trading during the optimum times mentioned above.
Scalping professionally sure beats going to work at some J.O.B. (Just Over Broke – ever notice that you’re still broke soon after getting paid?) that you hate everyday. As a scalper you can hang around your computer for a few hours, make say 5+ trades, and profit as much or more than you might earn all week going to a job working for a grueling 40 hours. If you have a job then don’t despair… after some time your “hobby” of Forex Scalping can possibly save you from a lifetime of being a slave working to make some company rich.
All hype aside, I think that scalping is a useful skill for all traders to have for various reasons. As mentioned above, it allows a trader to trade during times when other styles of trading would make you sit on the sidelines (not trading), so you can engage in profit making activities when you otherwise couldn’t. Scalping is best used in conjunction with, as a supplement, to other styles of trading – so keep trading your primary methods and add scalping to your trading toolbox.
The downside of scalping is that it is the most labor-intensive style of trading. Whereas longer-term styles of trading might only require minimal “work” each day (as some of the techniques presented in the eBook “Forex Sailing”), and some kinds of day trading (as taught in the eBook “Forex Surfing”) may only require periodic checking of charts during a trading session, scalping however requires that you spend more time paying attention to charts throughout a trading session, and active concentration while engaged in a trade (you can’t leave your computer to grab a coffee as easily). Despite the fact that it is the style of trading that most resembles “work” you should still take the time to learn this style regardless of whether you intend to trade it often or sparingly as it is a useful skill that can help improve your other trading methods in a variety of ways.
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