An insight into a Forex trader

Any long time readers will probably know I’m forever looking for new, profitable strategies within the thousands that are out there. Am I unhappy with what I’m trading right now? Absolutely not and whilst a lot of people say ‘don’t fix what isn’t broken’, I like to challenge myself and find useful strategies that I can monitor and maybe implement in the future on sub primary accounts. I’m going to use this page as an area for putting ideas that I think hold some strength and deserve some closer attention. With that thought in mind, one aspect that has been getting my attention is scalping. The way the price can just ‘bounce’ off a level is amazing and time after time it does just this. It can be down support/resistance, daily high/lows, pivots, MA’s etc.

The idea of scalping appeals to me a lot, I like the motto ‘get in, get off, get out’. Taking short bursts of pips sounds like fun and keeps levels of concentration high. Whilst doing some researching I found what looks to be an incredibly useful and most importantly, profitable strategy. I’ve never used bollinger bands before and I’ve read numerous times that they can burn you very easily so I’ve tended to stay away from them. However, from eyeballing some charts and watching this method live, it does seem pretty good. With the addition of two indicators, it seems to help define entries.

So onto the method… I found this method here which is a very useful site within itself. This particular strategy is an adaptation of one very similar except with the help of the two indicators. The author uses it on 1M and 5M charts. Such a low timeframe puts a lot of people off but I’m more than willing to take a longer like at this.

To setup your chart you’ll need:

Bollinger Bands Period 50 Deviation 2 (Blue)

Bollinger Bands Period 50 Deviation 3(Yellow)

Bollinger Bands Period 50 Deviation 4 (Red)

R.S.I Period 8 Levels at 70 and 30

Full Stochastics 14,3,3. Levels at 80 and 20.

Short entries: Candles are between the upper yellow and blue bollinger bands and the RSI and Stochs are above 70 and 80 respectively.

Target: 5 pips or middle red bollinger band (MA50).

Stop: The author doesn’t use stops and doubles his lots when he hits a loser which to me is nuts, he is in effect using Martingale staking which is the quick road to ruin. From further reading, a couple of people have suggested a tight stop of 10 pips or just outside the red bollinger band. See below for a short example:

The red arrow above the outer red bollinger band indicates the stop and the red arrow in the middle indicates 5 pips after spread. Stochs and RSI are above their levels and heading down. One important thing to remember is to try and wait for the stochs and RSI to start heading down, just because they are above 70 and 80 doesn’t mean they can’t punch higher.

Long entry example:

 Hopefully you get the idea. The author recommends this between the asian session and the beginning of London. Obviously you’re going to need two things from your broker; a decent low spread and a quick execution. Execution is crucial as prices can move 3/4/5 pips within seconds.

A few very important notes:

• Avoid trending markets (i.e After London open, NY open.) Check 15M chart to see if market is moving particularly well in one direction.
• Avoid high impact news items.
• Best in Asian session or very early morning before 7.30 AM or so.

I’m going to watch this one very closely and see how it does, I’ll report back in a few weeks with thoughts.