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How To Be A Successful Forex Scalper

Being a successful scalper is about precision. As turbulent as it may seem to a new trader, scalping is a systematic method of trading on short time frames by taking a position and liquidating it in a rather short time span.

SCALPING AS A TRADING METHOD
First question you should ask yourself is whether or not scalping is the right method for you. To answer that question you need to know what is required to be a successful scalper. To begin with, scalping is for someone who trades part time and finds it difficult to dedicate a lot of time to extensive market analysis. One of the most significant benefits of scalping is that a scalper’s market exposure is much shorter than that of a position or even an intraday trader, scalpers usually maintain their position for as little as one minute and 3-5 minutes at most, this keeps a scalper safe from large fluctuations in the price movement. As with any form of forex trading, it is of utmost importance that you possess the ability to stay committed to a specific strategy.

Ideal Conditions For Scalping
There are three important factor a scalper must take into consideration for using scalping as a successful trading method. These three factors are:

  1. Liquidity: You need to make sure that you trade securities with high liquidity. A stagnant market will make it hard for you to exit a position easily with a nice profit.
  2. Volatility: As a scalper you do not want to be in a situation where you may have to face sudden strong movements. As a scalper you must avoid highly volatile markets. A volatile market may seem an easy opportunity to trade fast but it is equally easy to pile up losing trades in a volatile market.
  3. Time: Each currency pair or a commodity has specific high liquidity time. For instance, the ideal time to trade EUR/USD pair would be when both New York and London markets are in session simultaneously.

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Basics Of Elliott Wave Analysis

Elliott Wave is a technical analysis technique based on the principle that market tends to trade in rhythmic patterns. Elliott Wave analysis makes it easy to identify patterns which in turn help you produce more accurate forecasts.

Do you often find yourself in a position where you are uncertain whether to let a trade run longer or exit it because you do not know where exactly the price is within a trend cycle? This happens to many traders because most technical analysis tools we use are based on market behavior (i.e. lagging indicators) and for obvious reasons these tools lack the ability to identify the position of current price point within a trend cycle.

Imagine being able to tell how far a trend could follow in a certain direction, it can make a whole lot of difference to your trading performance and this is what differentiates Elliott Wave from most other commonly used technical indicators.

Contrary to popular belief you do not have to be an expert in order to efficiently incorporate Elliott Wave with your market analysis techniques. A little time spent in learning the basics of Elliott Wave can reap you huge rewards and it will enable you to trade with more confidence.

Understanding Elliott Wave Principles
Elliott Wave Theory states that each trend cycle consists of two parts called Impulsive wave and Correction wave. Impulsive wave is driven in the direction of a larger trend and is composed of 5 waves numbered 1, 2, 3, 4, 5. Three of these waves (i.e. wave 1, 3 & 5) move strongly in the trend direction and two waves (i.e. wave 2 & 4) are retracements. The other part of the cycle, correction wave, is the retracement of a larger trend and is composed of 3 waves labeled with the letters a, b, c.

Each wave is a part of a larger cycle and is consists of a very similar cycle of which it is part of. This means that Elliott Wave analysis is equally significant for all timescales and its application to your charts can be expected to yield same results whether you are an intraday trader or a position trader.

Applying wave principle to your charts can be the most challenging task. However, there are few rules that must never be overlooked in order to indentify a valid pattern. Some of the most important rules are:

  1. Wave 3 is never the shortest wave.
  2. Wave 2 never moves beyond the point where wave 1 started.
  3. Wave 3 is never the shortest of 3 impulse waves (i.e. wave 1, 3 & 5).
  4. Wave 4 never moves into the wave 1 area.

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Reasons Why You Must Have A Trading Strategy

Forex trading is mostly about method and discipline, if you do not have a strategy or discipline to follow it strictly, you are exposing yourself to potential heavy losses that can wipe out your account sooner than you may think. Consistent profits without having a trading strategy in place are almost impossible. A very important thing to remember here is that no matter what strategy you use, you are bound to see losses every now and again, not even the most successful traders have 100% success rate. The key is to find a strategy that has a higher winning ratio and use it together with effective money management.

A trading strategy is a system designed with the help of a variety of technical analysis tools to determine your entry and exit points. Having a trading strategy means setting rules and parameters for executing a trade, following that strategy; you only execute a trade when the price movement adheres to the rules and parameters of your strategy.

A Good Trading Strategy
A good strategy is one that can produce clear signals without relying on outside factors to determine the validity of those signals. A good trading strategy would also insure that you have a risk-reward ratio that can keep you in profit zone even if you lose a significant percentage of your trades. Minimum acceptable risk-reward ratio is 1:2, which means risking $100 for a target of $200. This way, you’ll still be in profit even if you lose one trade after each winning trade. While 1:2 is acceptable, a good risk-reward ratio would be 1:3 at least, which is easily attainable with a good trading strategy.

Benefits Of Having A Trading System
Coping with a series of losses is the most difficult aspect of forex trading and this is where many traders are vulnerable to letting emotions into their trading decision. When you refuse to exit a losing trade, it’s your emotions that are keeping you from dealing with a loss; this may incur losses that would require a substantially long duration to revive from. This is why a trader must have a trading strategy that would dictate their trading decision in order to keep the emotions out.

Another benefit of having a trading system is that since a system is already optimized you do not need a lot of time to analyze the market before you could initiate a trade. Major trading platforms also allow you to automate the system to generate signals further simplifying your job and reducing the time required to execute a trade.

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How To Learn Forex Trading The Right Way

When you start forex trading most people would talk about why you should trade forex, they will tell you how you can benefit from leverage and compounding starting with such a small investment and how forex trading can ensure stable profit and accumulate huge wealth in the long run. Few people out there would emphasis the dire need to learn the art of trading.

In this article we will explore some of the learning factors that would guarantee a successful trading career if you understand them properly.

Discipline
You probably have heard this before, discipline alone can ascertain success, just as the lack of it can guarantee a horrible trading experience. In trading discipline means following your methods and strategies strictly without any exceptions.

Keep The Emotions Out
This one is a killer. Everyone knows how emotions can devour your profits faster than you can imagine, yet it takes a good long while for most traders to finally learn this fact. Many beginners give up on the idea of trading simply because they couldn’t keep their emotions out. It is of utter importance that a trader learns how emotions can be kept out of trading.

Positive Attitude
When I say positive attitude I don’t mean it as in “law of attraction”. What I mean by positive attitude is that you must be willing to learn and adhere to whatever is necessary to achieve success in forex trading. For example, a right trading strategy would guarantee a good trading performance, but it is positive attitude that would enable you to do the necessary to learn and establish the right strategy.

Developing A Trading System/Strategy
Developing a good trading system is crucial for long term success in forex trading. It can be complicated to devise a consistent trading system, to insure that a trading system works the same under different market conditions it needs to be tested for a long period of time. Back-testing can give you a good idea whether a system is workable or not, but simulated trading results are not always reliable, that is why you need to use a system with live trading in order to test its consistency.

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