I have had this last few weeks some new traders ask me how I trade and too explain my scalping techniques in more detail.
I don't mind briefly explaining more of my concept - but even if I gave a new trader every single chart setting / indicators / times / what to look for etc etc - the vital ingredient would still be missing - ie experience and knowledge gained over years of trading.
Ideally to become a good forex trader and make decent ( or obscene amounts of money) you need to have served your 10k hours watching live charts and trading. This means several years 2- 5+ under your belt.
Think about it - when you pass your driving test to drive a car - after 2 weeks and 100 miles under your belt you are not going to be as competent as someone who''d driven for say 10 yrs and as say a quarter of a million miles under their belt. Same with trading - the more experience you gain - the better you should become.
OK so lets have a look at the EU as of Sunday November 11th 2012 - before the markets open and price at approximately 1.2709 ( ish)
So what will I be doing when I start trading either later tonight or for the European Open
More than likely - I will be buying and selling - looking for 5-25+ pips with small stops and then looking at the trades I leave on as "free trades" to catch a larger direction - ideally 40-70 or 100 pip +
Trading is not easy - unless you guess and gamble - then it is dead easy ;-)
I prefer to micro manage and get down into minute detail. I am not so hot on forecasting - but scalping - yes I am very experience with thousands of live trades behind me.
As an analogy - if I was going to say a foreign country I have not been to - lets say South Africa - i would get my world map out to see where it was ( monthly / weekly / daily charts) and then drill down to the countries maps ( 1 hr and 4 hr charts) when i arrived at the airport or port if by sea.
Once I decided which City or town to visit - I would get my ordnance survey map or town map to go to the places i wanted to visit ( ie all charts under 15 minutes). My world map would be a waste of time now - i need detail ;-)
My real detail on the EU after I have looked at my normal charts will start with a 10 second tick or 1min chart. That's the first step on all these very small moves.
I then need to know where all the supports and resistance are placed - as they are very important.
PS - I don't just mean the Monthly / daily / 4 hrs ones - which are major S & R'S - but the ones on a small frame charts that might be only 10 -25 pip apart - because believe it or not they can play a major part in any moves,
This chart is a 10 minute on daily frames. First point to notice on Friday we broke both the high and the low of the day before. So for normal chart analysis traders they might say over 2790 - more buys - and under 2688 - sell. - There's a rough first guide - but what about the 100 pips in between ?
Ok - well first hurdle for me buying is 2728 - then if we break that - 2740 and 50 would be key .
Failing to break 50 - then we might try 27 again as now it would be support. If we get through 50 then next hurdle 2780 and 88. Failing to crack those resistances - then back down to 2750 or 40 - or even 2727 again. Over 2790 then its more than a small retrace and the EU might be trying to turn up with supports then holding between 2727 and 2750.
Now what happens if we fall from 2709?
2702 and 2689 - should hold as supports - and we try then up again.
If 2689 lets go - don't worry 2680 or 2660 might hold for a try up. However if they don't and any retrace does not go back over 2727 - then we will fall more to 2640 area.
In between all this I will be watching for highs and lows on a tick charts and OB / OS on the 1 hr and under frames - to assist me in my next buy or sell.
It would be great if we just went over say 2750 and then up say 100 -150 pips with no retrace under 10 pips ;-)
To bears it would be great if we went under 2688 and fell 100 -150 pips etc.
That could happen - but then the market makers would miss out on catching more bulls and bear stops out .
Tomorrow they will probably catch one or a few of mine out - but I never really mind losing 5 or 8 pips - as i believe I can make that amount up again within an hr or less.
It is a Monday - so it might be slow - I might only get 5- 12 trades in - if its an average day I should net 40-70 pips and ifs a busy great day 100 -200 pips
That's how I will be tackling it - and in between I would hope to try and get a few trades on some other pairs as well
Have a great week and Good Luck how ever you approach it