Month: May 2012

Scalping tips

Scalping tips

You have decided you adopt a scalping trading style. Here are scalping tips to keep in mind.

Before starting to scalp:

1) Close down all programs running in the background. If your press ctr+alt+del the task monitor open up and it will tell you what programs are running. You can kill these from this window.

2) Ensure your connection is stable and fast. For those using wireless, it would be even better if you are connected with your cable directly into the router.

3) Ensure you are using a broker that does not delay the execution, as execution is fundamental in scalping. At times you will need to get in and out of a price in less than 30 seconds.

 

Scalping Tips:

1) Execution

Get used to your spread betting brokers trading platform. There are platforms you can customize so that you can organize your charts, your current profit and loss and your order execution buttons so that you have quick access to entering and exiting an order.

Practice a little before trading Big. Most of scalpers loose money in the first month due to execution errors.

 

here is an example of enlarging the trading buttons in :

image

 

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2)  Controlling Your Costs

First of all when Scalping, it is important that you keep costs under control. Scalping is all about taking or giving small profits. If you start letting your costs run these could eat up your profits. What I mean by costs, is not being decisive or convinced on a certain about a trade and you enter a trade to quickly close it. In this situation you have paid the spread. These little costs can add up.

3) Know the market sentiment and trend

You must be prepared when entering your trade. Do your homework before trading; know the general sentiment of the market. Know the direction of the main trend and of the medium term trend. At the beginning it is advisable to stick to the trend. Once you get the necessary experience you can also counter trend.

Below are Forex Spread betting examples of an hourly graph and a 5 minute graph. As you can see in the hourly, you can see the big picture.

Scalping Chart 1hr

Scalping Chart 5min

*if you want to read more on

4) Emotions – Controlling your urge to overtrade

This is the hardest part in scalping but also applies to all styles of trading. Do not over trade. Many traders that start off and maybe never make it, is because they overtrade in the beginning and they start making a lot of little losses to soon find their account so low or in the red that they cannot be impartial in their trading. Therefore it is essential that from the beginning you take control of your trading urges. When you start off scalping you can also play it safe, that is, even if you miss a couple of trades do not feel you are missing out, but see it as market experience. You are currently learning. The market won’t go anywhere.

5) Emotions – Discipline to be patient and stick to your trading Plan

Choose a strategy that suites you and your trading hours. Write it on paper and stick to it. With time you will perfect it but at the beginning this will help you be disciplined to stick to rules. Ensure that the trading strategy you adopt at the beginning of your scalping or spread betting career has a high probability and positive expectancy. Even if at the beginning this means more sitting on the side lines, well being more patient and taking fewer trades. If you trade in the evening you might end up trading only 3 to 4 times.

6) Study or have an understanding of basic technical analysis

It is also important to have a basic knowledge or understanding of technical analysis. The pros and cons of using various indicators; what are their strengths and weaknesses. This will give you a good understanding of your trading system and when it will and will not work.

7) Adjust to market conditions/ Volatility

If volatility increases you need to adjust the size of your trades to cater more for these volatile moves. This is why it is important you know well the of the markets you are trading in that time frame. So in case the market starts moving twice as much as the usual you can halve your sizes.

When scalping, volatility is also necessary. Trading a market that is very quiet or dead will not give you much opportunity.  Many spread betters resort to Forex as there is movement in the Forex market. Scalping is about trading little and lots. Taking lots of profits.

8 ) Last rule – Don’t hang onto losers – Stick to your trading style.

If you are scalping you must have no open positions overnight. Don’t hang onto loosing trades waiting for them to recover.  Learn to take a loss. This is a numbers game. It is fundamental that your winning odds are greater than your loosing odds.

 

I hope these scalping tips have helped. click here to go back to the top Scalping Tips

 

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Royal Bank of Scotland Spread betting example

Royal Bank of Scotland Spread betting example

After the recent news we have had in the banking sector, here is an example of spread betting RBS (Royal Bank of Scotland).

Three days ago the news came out JPMorgan Chase acknowledges $ 2 billion trading loss. You strongly feel that this is a big story that will affect the banks, as JPMorgan Chase is the largest bank in the United States, and this would be a big loss of its own money. The news came out on the 10th May after hours, you decide to take a short trade the following Morning.

Royal Bank of Scotland spread betting example

The Night before RBS was trading at 23.20. You wait for the market to open the next morning. RBS opened at 22.90 and starts moving lower:

Royal Bank of Scotland spread betting example_2

You decide you would like to risk 150 pounds and look to take profit of 300 pounds. You look at the charts and you want to place your stoploss above Thursday’s high of 23.30. And you would like to take 300 Pounds profit.  You calculate that the distance from the current price of 22.80 to the stoploss level of 23.50 is 0.7. You divide 150 GBP by 0.7, and you get your stake of 215 Pounds a point. Then you are looking for a ration of 1:2, you would like a limit (Profit) of 300 GBP with a distance of 1.4 points. You place your limit at 21.40.

As you can see from the Spread betting examples of Royal Bank of Scotland the trade went in your favour, You took a profit of 300 Pounds. If Instead it had gone against you, you would had lost 300 GBP

If you want to read a bit more on risk, you can see the section on Money Management

Summary:

Royal Bank of Scotland spread betting example_3

Royal Bank of Scotland spread betting example_5

Other examples of trading the banking sector:

Return to the Spread Betting Example section.

Scalping with Bollinger Bands

 

Scalping with Bollinger Bands

In this Spread betting strategy we I will show you how to scalp using the Bollinger Bands. You will need a bit of practice before you master the art of scalping and master one of the strategies that you pick.  To Learn to scalp takes time and discipline, and lets not forget a lot of patience. This is one of the biggest errors traders do, they become in patient when there are no trades. Well Lets get started. I have picked the EURUSD as it is one of my favourite pairs, but you can choose a pair that you know and like.

Before we move on, here are tips on How to Scalp: Learn one strategy and dominate the technique. Learn one or two pairs and know every characteristic movement of your pair.  Know what affects your market

Below I have used the EURUSD in our example as I like it as the average movement it does in a 15 minute time range is about 15 to 20 points, which is well within my risk tolerance. If you want a more volatile Forex spread betting pair, you can choose the GPBJPY or the EURJPY. they have more volatility, more action and at the same time more risk.

Bollinger Band Scalping Strategy:

Pair:  EURUSD
Time Frame: 5 Minutes
Indicator Bollinger Bands: 20 moving average with 2 standard deviation (Default settings)
Time: Evening

This strategy can be applied in both sideways markets and trending markets:

1) Scalping with bollinger bands in a Sideway Markets (Mean Reverting):

The very first thing is to Identify if you are in a trending market or a sideways market. If you master one currency pair you will know when the move is over and you are in a sideways market or a certain times most markets repeat their behaviours. I have taken the EURUSD after market hours, as to accommodate people that work. This strategy is a simple concept: When the moving average is at a flat angle, and the bands are getting smaller (squeezing), this is the ideal moment to trade. Trade in the direction of the previous trend. When the price reaches the top of the band sell it and wait for it to return (mean revert) to the middle of the band. When the prices reach the bottom of the band buy the instrument and wait for it to return to the middle of the Band.

Stop loss is 10- 15 points above or below the bands:

 

BollingerBand Scalping_Mean Reversion

Below is the same spread betting strategy applied to Rio Tinto. This to show how the same strategy can be traded in different markets

BollingerBand Scalping_Mean Reversion_Rio-Tinto

 

2) Scalping with bollinger bands in a trending Markets – Scalping the Pull Back:

On the other hand there has been strong news in the market you are trading it has started trending, (Note the trend is under way already), In this scalping strategy you trade the pull back. When the EURUSD moves up or down in the direction of the trend. You wait for the price to pull back to the centre line, the 20 day moving average, then you buy or sell in the direction of the trend.  In the spread betting example below when the prices pull back to the centre line, you buy with stoploss below the bottom band / line and with the take profit or target when the prices reach the top band again.

BollingerBand Scalping_Scalping the Pull Back

 

Below is the same spread betting strategy applied to Rio Tinto. This to show how the same strategy can be traded in different markets.

BollingerBand Scalping_Rio_Tinto

 

I hope You have enjoyed this . If you would like more ideas you can go to the scalping strategy section. Or you can return to the .

Gold Pivot Point Strategy

Gold Pivot Point Strategy

Pivot points are a very old way of calculating support and resistance points in a chart. The calculations is very simple as it was widely used in the commodity pits and these calculations were done mentally while traders were deciding to or not take trades.

This is the Pivot point Formula: P = (H + L + C) / 3. (P= Pivot Point, H = High L = Low). Then you have your resistance R1 = P + (P − L) = 2×P − L and Support S1 = P − (H − P) = 2×P − H levels. To learn more about pivot points you can read further in the technical analysis section: Pivot Points.

Getting back to the strategy. As we said this is a strategy to adopt not when you expect very strong news but on quiet or normal (Non news rich) days, or at least adopt with caution. During high volatility is when this strategy can stop you out.

As you can see from the graph above, there are various support and resistance levels. Normally you have R1, R2, R3 and S1, S2, S3. The further out the support and resistance the less likely you will be filled. But you can trade the various support and resistance levels according to the volatility.

I prefer to trader S2 and R2 and I have less risk tolerance and more patience. If you trade R1 and S2 you will get more trades and be stopped out more often, and on the other hand, S3 and R3 you might not get a trade.

Well let me explain How to trade this . This is a mean reversion strategy, that means you place your order to buy and sell on the support and resistance levels and when your order is filled you want the price to return to the pivot, or the middle. The pivot is also considered the average level. At this point is where you close out your trade, and take profit. A Practical Example 1. You believe that the trend is going up, so Ideally you would place your order to buy on the support 2 level(the green line), with your stoploss just below S3. You wait for an unexpected change in trend (temporary in nature) to drop to the support then bounce off this level and move back up in the direction of the trend. Once it reaches the pivot you take profit.

A Practical Example 2. Another example would be, you believe that the trend is moving up, and News has just come out that has pushed the trend further up. You believe that R3 is far over done and therefore your decide to place your order to sell at at R3, looking to take profit on the retracement down to R2 level. This is a riskier trade as you are going against the trend, but it is important that you manage your risk.

Another tip on pivot point trading: If the support and resistance levels coincide with another strong technical indicator, example a 50 day moving average, this level become even stronger.

Now these are very simple strategies to execute what you got to know or have the feel is of the actual Gold market and the fundamental news that is coming out that day.

 

if you have any questions email me, or if you believe I have left something out. Click here to return to the main menu simple spread betting strategies or if you you want to go back to Gold trading strategies