By Jeremy Wagner,

25 January 2011 20:46 GMT

25 January 2011 20:46 GMT

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Since the time that the position is exposed to the market is shorter, small profits are taken more frequently in Forex scalping methods. Therefore, it has less chance of facing the market events that may cause the price to go against the trade.

Forex scalping method of trading is different from other traditional forex trading methods where the profits are allowed to run and losses are cut shorter.

When somebody is scalping the market he/she is not looking for the big move of the markets; instead he is looking for the small moves in his favour that will result in significant gain without any risk or insecurities involved in waiting for big move.

Forex scalping is nothing but playing with spreads. In the Forex scalping method a currency is bought at the Bid price and sold at the Ask price to gain the bid ask difference.

This procedure is profitable in the case even when the Bid and Ask prices dont even move. Traders even pay market price for any currency because they can make profit by doing that as well. The Forex scalping method normally involves establishing and liquidating a position quickly, usually within minutes.

People who are expert in forex scalping methods of trading are the markets makers or specialists who are into maintaining the liquidity and order flow of a product of a market. These forex market makers can have superior execution speed as an insider. They also have a greater knowledge of trading and actual market situation due to their information gathering capacity.

Scalpers are only exposed in a relatively short period. They do not hold overnights. So, the exposure they get is lower than other trades while the risk is also less in this type of trading. Here are some of the factors that affect Forex scalping:

1. Liquidity: Scalpers like to trade in more liquid market since they can make thousands of trades a day to add up their small profits offered on each trade.

2. Volatility: Stable forex market attracts forex scalpers. If the prices dont move throughout the day, the scalpers can still make profits by placing their orders on same Bid and Ask and can make thousands of trades. They do well in trade, as they dont have to think about sudden price changes.

3. Time frame: The scalping method of Forex trading is done on a very short time frame. People even make profit from the market waves that are too small to be seen even on the one-minute chart. Therefore, the more the number of moves during the day the scalper can make more profits.

Flag Pattern Charting Example

Flag Chart Pattern

Fibonacci Time Zones,

Arcs,

Fans,

Retracements,

Fibo Channel

Fibo Expansion

All of these studies are based on an interesting discovering made by an Italian mathematician Leonardo Fibonacci, who lived in a 12th century.
While studying the Egyptian pyramids he established a numerical pattern.

Fibonacci Numbers are a numerical sequence, in which subsequent number is equal to the sum of the previous two.

Here is a sample:
1,1,2,3,5,8,13,21,34,55,89,144,233,377 etc.

The Fibonacci numbers have a lot of mysterious properties.

For example, any Fibonacci Number approximates the product of the previous number multiplied by 1.618, or the product of the subsequent number multiplied by 0.618.

The Fibonacci studies allow us to create on a price chart several lines that stand apart from each other, a distance equal to the Fibonacci numbers.

For instance, Fibonacci Times Zones represent vertical lines spaced at intervals of 1,2,3,5,8,13 etc.
The interpretation of Fibonacci Studies in technical analysis is based on two assumptions.

One. The changes in trend occur regularly on the borders of a Fibonacci lines.

Two. The Fibonacci lines also serve as levels of support and resistance.

We have maintained a bullish USDJPY bias since prices broke out of a falling channel established in early 2010. While a rally has failed to materialize so far, with prices edging sideways in choppy consolidation, a well-defined Bullish Engulfing candlestick pattern hints that an advance may finally begin to gain momentum. Positioning remains indecisive however and we will look for confirmation on a break above the recent range top in the 84.00-85.00 region before entering long.

To discuss these strategies with other traders, please visit the Candlestick Forum

To receive future articles by email, please contact Ilya at ispivak@dailyfx.com

The settings of the indicator is pretty straight-forward. It allows you to turn alert On(true) or Off(false). When Alert is set to TRUE, each time the indicator finds a new pattern, it will sound an alarm. As with any indicator, you cannot use these signals for themselves alone, you can add it with other indicators, for example trend indicators and mixed together, you can come up with a good trading system.

Candlesticks are pretty accurate though and if you develop yourself into this, it might prove to be a worthwhile investment.

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