Moving Average Channels
One of the methods described earlier in this book, the MAC (moving average channel) lends itself readily to use by scalpers. My recommended parameters for the MAC are 10 units of the high and 8 units of the low. |
Suggested Methods of Forex Scalping
To scalp a market effectively, you must first isolate a specific trading range which is clearly defined in terms of support and resistance or in terms of bid offer. |
Rules for Scalping
In order to scalp the markets effectively, you must apply certain rules which do not necessarily apply to other forms of day trading. You will need to know and observe these rules carefully and consistently if you plan to become a successful scalper: |
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What is Scalping?
Although the term scalping most likely originated in the heritage of the wild, wild American West, the contemporary trend for outrage at the mere mention of ethnic issues prompts me to side-step the derivation of this term. Simply stated, the scalper attempts to trade futures markets for only several ticks, taking advantage of fairly narrow trading ranges in order to "buy the bid and sell the offer". |
Opens versus Closes
Although there is no such thing as a 5-minute open or a 5-minute close, the concept is a simple one to understand. The first price tick of a 5-minute period is arbitrarily defined as the open, and the last tick of the 5-minute time segment is arbitrarily defined as the 5-minute close. |
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Trend Line Applications-Chart Formations
As Ive indicated above, I feel that the use of trend lines, although seen by many as too simple, can, in fact, be a very effective day-trading method. Many very large intraday price moves have given trend line signals. I recommend the use of trend line analysis as both an effective as well as time-tested method. While there is clearly some art to the science of trend line analysis, it is a technique which few traders use during these days of high-tech trading. |
Trend Line Analysis
A trend line is a straight line which connects significant tops or bottoms on a chart in order to illustrate support or resistance points. |
Traditional Methods of Technical Analysis and Day Trading
Since traditional technical analysis has been so popular for so many years, many futures traders are very familiar with the application of such principles as chart formations, trend line penetrations, price patterns, and the many different methods of interpretation associated with these formations. Many of these patterns have been used with great success by traders over the years |
Intraday Channel Breakout
One of the successful techniques used by day traders is based on breaking out on a price break out above resistance or below support. The expectation here is that once a market penetrates above a previous resistance level, the probability is high that the new trend will continue, at least long enough for traders to generate profit. |
Rate of Change in Day Trading
The last chapter discussed momentum as a day trader indicator. This chapter will explain how to use rate of change (ROC) as an intraday timing indicator. While momentum is calculated by subtracting 1 days price from another, rate of change is determined by dividing 1 days price by another. |
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