Scalping the Right Markets in Online Forex Trading

Online forex trading becomes almost directionless when one is doing scalping. The methods used in scalping are more about preparation than actual live trading.

Why Scalpers Work Outside Online Forex Trading Active Hours

Online forex trading tends to be most active, in terms of volume, during particular time zones. And this is when most breakouts typically occur. But scalpers being directionless in their view of the markets. They only want to see flat trading action, where the market seems to be going nowhere. This ensures that the risk of a breakout is significantly reduced. Most wise scalpers use an online forex trading platform which offers maximum possible efficiency. And for wise traders this is always a CFD trading platform. Because only that can offer maximum possible liquidity, best filling prices, and linearity. Leverage helps magnify tiny market moves, of anything between 5 and 30 pips. And this turns tiny market moves into significant trades. But it is the linearity of CFDs that actually makes efficient scalping possible. Because CFDs follow the actual market very closely. So closely, that other trading instruments never can.

Online Forex Trading Becomes Profitable through Scalping

Online currency trading is very difficult for most beginners. Because they tend to get stuck on the losing side of the market for too long at a time. Resulting in heavy losses, and uncertainty about market direction. Moreover, beginners don’t know how to handle risk and properly assess their losing trades. Scalping is better in that regard, since the trader only has to trade small moves either in one or in both directions. But over the span of several hours, they are totally directionless. One hardly needs to fully learn forex basics when they engage in scalping. All the preparation for the scalping session is very basic to slightly complicated. So anyone can at least understand it fast. Basically, it’s all about identifying the few hours when a currency pair will be most inactive, and least volatile. This will be the out of hours trading time zone. So, someone wishing to scalp the EURUSD pair for example, can do so during the late US and early Asian trading session. Especially the Asian session best suits EURUSD scalping. But the same logic can be applied to many more pairs. The potential profitability of scalping is enormous, and in the case of CFD trading accounts, as much as $300 per scalping session. This figure is based on medium size, accounts of around $2,000 to $3,000, moderate leverage and careful day selection. The risk of a breakout is still there, but traders use stops to limit this risk. The losses from bad trades can be recovered very fast too. In actual trading tests conducted by average traders, it was possible to have 30 winning trades in a row. These were small winning trades, but they amounted to a very good monthly sum.

Online Forex Trading
Profitable scalping trading is similar to the supermarket bill phenomenon, where you keep on buying small price items, you then have to face a surprising high bill at the checkout. Scalping trades bring small profits too, but they can amount to a surprisingly high amount in your CFD trading account. Most importantly though, you no longer have an opinion about market direction and this helps, especially new traders, avoid getting stuck on the wrong side, for too long. Which is what blows many trading accounts. What’s more, it is even possible to fully recover a losing trading account, one that has lost 80% of its balance in directional trading, all through meticulously prepared scalping! Whereas it is much more difficult, and  it requires much more time, to recover the same account using the same directional strategies that caused the losses.

The Trickiest Part in Scalping is Determining the Price Baseline

Scalpers don’t have to worry abut market direction, that’s for swing traders and position traders to worry about. Scalpers only need to identify the most quiet days, and specific time zones. And to also determine the price baseline in any given scalping session. All losing trades in scalping arise from poor judgment of the baseline and overall expected volatility. As the market may seem to trade flat at a given level. But then it may jump higher, and trade the rest of the scalping session, flat at the new higher level. Believe it or not, it is possible to dig deeper into market data and assess both volatility and price baseline a lot better. Once the price baseline has been determined. The scalper then simply repeatedly sells rallies above the baseline, and buys dips below the baseline.

How to Avoid the Scams in Online Forex Trading

Online forex trading can be carried out in very safe ways. But as with all things in life, some scammers get involved and sell all kinds of snake oil nonsense.

Online Forex Trading is Honestly Presented Only through Full Risk Disclosure

Snake oil salesmen use all kinds of tricks and techniques, based on false consumer expectations. This is why misleading marketing works, for the most part. Scammers are involved in all kinds of businesses. Anything from the fine art market to real estate. And even car mechanics and doctors can sometimes be dishonest, so as to charge you the maximum amount of money possible. Luckily, in online forex trading, there are many seasoned traders capable of judging. And of impartially rating any forex product or service. Just by getting in online forex forums and getting into discussions with such traders, the truth is revealed in no time. Savvy traders are very hard to fool, that’s why their advice is priceless. Even in the far superior CFD trading forex liquidity pool, which is much better than anything else out there. Traders tend to mistrust the markets. Not that the markets are wrong. The markets are right and honest. But by their very nature, market moves can be deceptive to naive traders. Savvy traders trust reputable CFD brokers like they trust their wallets and bank accounts. But the markets themselves and the information going around, can all lead to the wrong trade. So suspicion on market moves and stories told in the media is always there. It’s the nature of traders to be suspicious. Especially when a market trend looks very convenient to follow. Savvy traders handle trades with extreme caution.

Robots and Automation Cannot Master Online Forex Trading

Robots are the biggest scam in online forex trading today. Because they are being sold under false or poor back-testing data. Moreover the buyers of these forex robots fail to realize that all forex robots fail miserably after a matter of several weeks of trading. And no such trading can really beat the market. And even if a commercially available forex robot is ever this good. The very act of making it commercially available would lead to the profit margins evaporating. Hence the trading edge would be lost very soon. All sales tactics that the vendors of these products use, are based on consumer psychology. And consumers do make unwise decisions all the time. But committed forex traders are not typical consumers. They are by nature becoming more and more street-wise and suspicious as they learn more about trading. Only manual, risk-embracing forex strategies can lead to long term profitability. And the street-wise traders know this very well.

Online Forex Trading
Binary options are regulated and meet all legal requirments (so are casinos and slot machines!). They have however nothing to do with classic commodity and stock options! They are extremely difficult to use profitably, because the trader has to be sharply right on market direction and the timing. Moreover, there seem to be hidden unfair asymmetries in the way that a binary option trade gains and loses in value. They are a very easy trap to fall into, but despite all the regulation, all savvy veteran traders advice staying away from the binary options market! And to use instead DMA, ECN, or CFD forex brokers, where pricing is linear and you as a trader get to win or lose the exact market price move you trade. Especially CFDs offer this linearity very safely, even to small retail traders, and for many years now.  Binary options come with a great deal of misleading marketing, due to their exponential factors in their pricing. That’s why veteran forex traders advise against using them. But you can actually confirm all this in actual online forums, with real, savvy, large size traders.

Avoiding Scams and Gambling-Like Market Products

Apart from forex robots, traders are strongly advised not to buy training courses that lack sufficient ratings. And not to invest in 3rd party forex funds. Traders are much better off trading their own funds, through their own retail size CFD forex accounts. Or through DMA accounts if they are very large size traders. Trusting investment money to 3rd parties is very risky, because there is no way of validating their motives and accuracy of information, certainly never 100%. A forex fund may have faked trading history. Or even real trading history which is no longer relevant, as the strategy may have started to falter. Anything that fails to disclose risks to the full, or makes unrealistic claims, is likely to be a scam. Or even possibly a case of honest but delusional trader having unrealistic faith in themselves. Another big scam, for the most part at least, are binary options. Binary options are not well understoof by traders. And even though they are not a scam by legal definition (neither are casinos and slot machines).There’s a lot of misrepresentation, which ultimately makes them equivalent to a scam.

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What is the US Dollar Index and How Can it Benefit My Online Forex Trading?

Traders can use indices such as the US dollar index, to improve their online forex trading. It’s about chart patterns, high probability setups and geopolitics.

Wiser Online Forex Trading through Index Analysis

Online forex trading, especially on EURUSD, can be dramatically enhanced. Simply by taking into account the US dollar index, which is a measure of the US dollar against 6 other currencies. The US dollar index does provide chart patterns and technical setups from time to time. But when geopolitical factors are in control, they override all other signals. Even economic reports and fundamental analysis. The US dollar index can defy all popular methods of market forecasting, and do the impossible. Especially at times where it has been weak. It can rally sharply without any economic data supporting that rally. Traders who learn forex basics hardly ever learn anything about geopolitics. Since it’s an entire science on its own. But to EURUSD traders, the US dollar index is important, every single week. Just by learning the inner workings of the US dollar index, traders can do so much more. The US dollar index impacts many more currencies, not just the EURUSD pair. But by trading volume EURUSD is the biggest one out there.

Enhancing Online Forex Trading through the Use of the US Dollar Index

The US dollar index can be used to assess the validity of signals observed on EURUSD charts. Online forex trading becomes better when false signals are detected and avoided. And the US dollar index does provide valuable clues from time to time. Its actual daily trend however can be quite deceiving to new traders. It is possible for the US dollar to exhibit apparent weakness, and yet still be strong internally. In such cases, traders need to pay attention to uncertainty. As well as geopolitical factors causing such uncertainty. As always, markets go down when there is increased uncertainty. And markets go up when excessive uncertainty is removed. More often than not, the actual way of interpreting such data is counter intuitive. The market sees even bad news, as good news, as long as the negative impact is quantified. The moment an expected negative impact becomes known in magnitude, from previously being unknown. Markets regard the transition as good news, since uncertainty is actually removed.

Online Forex Trading
The powerful US dollar index…  Day to day minor movements don’t matter as much, because they might be caused by a single currency out of the 6 the index is based on. But big and profound fluctuations show that the dollar itself is moving. Always remember that the US dollar can defy its technical trend from time to time, especially at times where it appears to be in a downtrend. Downtrends are caused by some kind of uncertainty, expected to bring a negative impact of unknown magnitude. But when the magnitude of that negative impact is finally fully known, it can easily turn into a positive impact. This is what many investment analysts miss time after time. So basically Risk = Uncertainty, and uncertainty is risk only when we don’t know its magnitude. If the magnitude is known, then it is no longer an uncertainty, and the risk goes away.

Profiting from EURUSD and Other Dollar Crosses

EURUSD is quite interesting to trade, and the patterns observed on the US dollar index are also interesting. Both obvious ones, as well as less obvious ones. If for example the US dollar index is expected to remain flat for a week. And there are good reasons for this to happen. Then EURUSD will have limited upside potential. And depending on the exact chart patterns at the time, the day to day movements may become much easier to predict. For scalpers, it may also make it possible to get better, safer periods of time to scalp a particular pair, such as EURUSD. On the contrary, when the US dollar index is set to make a move, and there are no geopolitical risks counter to the movement. Then, EURUSD will move in the opposite direction, and conflicting signals will be overridden. This is why trading can be sop confusing. And this is why CFD trading forex strategies focus so much on avoiding or hedging false signals. Because if one approaches the markets with a naive mindset, they won’t be able to detect these false signals. In the case of the EURUSD, we have seen time after time, all experts appearing in the media, fail to predict it. Even investment bank analysts fail. Simply because they focus too much on economics, and not enough on geopolitics.

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How to Compare Online CFD Trading Providers

Serious online CFD trading is what all devoted traders want. Because they embrace market risk and profit from it, at times when others don’t even dare to trade.

Online CFD Trading Offers Security and Efficiency

Online CFD trading offers all the security and peace of mind traders need. But also the efficiency that serious traders demand to have. Serious traders are wise enough to know that it takes preparation, patience and selectivity to trade profitably. And trading is not to be compared to a 9 to 5 job. So choosing a CFD broker is just as important to them, as the actual strategy itself. Luckily one doesn’t have to go too far to find out how each broker is rated. All brokers, of all kinds, DMA, ECN, CFD and other types, are rated in online forums, by unbiased traders. DMA and ECN types are used by large size institutional traders. Whereas small to medium size retail traders prefer CFD brokers. Each one of these CFD brokers is impartially rated by real traders. So the trader can look and decide. Different CFD brokers will typically have good ratings, but provide different trading platforms and tools. It is up to the individual trader to decide which trading platforms best suits their needs. A peculiar CFD trading system for example, may in fact require a more advanced CFD trading platform. One that offers more options on contingent orders and so on.

Online CFD Trading Makes the Difference

Online CFD trading has filled the gap that existed in financial trading some 15-20 years ago. Now the small retail trader is actually at an even playing field with large traders, or even has an advantage. More or less, all CFD brokers make this possible through the way they facilitate trading to their clients. Even the worst rated CFD broker is bound to be superior to the average non CFD broker. Exactly because of the trade execution process and efficiency achieved by the CFD infrastructure. Traders will notice that CFD brokers offer all the popular tools, such as CFD trading news. Generally, you don’t need to trade on news, except in the case of specialized commodity or stock trading. Especially in forex, traders are better off ignoring all the day’s news in terms of market direction. And only possibly use them as a way to anticipate and gauge volatility.

Online CFD Trading
ECN brokers are very good for extremely large size forex and commodity trading, at $100 per pip or more. CFD brokers offer the same trading efficiency and actually lower dealing costs, for trading forex, stocks, and commodities. CFDs make sense to use when trading at less than $100 per pip, and most retail traders do trade lower than that size. In extreme market conditions, the CFD trader will have an advantage over an ECN trader, because even ECN liquidity is larger but still finite, and it will run into problems before the CFD market makers do. For the day to day trading of all kinds, CFD forex traders have the efficiency of ECN, but not the high dealing costs of ECN, which is why all wise retail forex traders trade through CFD brokers. CFD trading can facilitate scalping, day trading, swing trading, hedging and just about anything else, at maximum possible linear movement relative to the market, and at affordable dealing costs.

Profitability of Actual Trading through Various CFD Brokers

Wise traders are able to profit normally through CFD brokers. Except that dealing costs are much lower, and they get a better filling price on every single trade. So ultimately, their profitability is increased significantly, when compared with non CFD legacy brokers. Profitable CFD trading can be implemented through all brokers, but CFD brokers can enhance profitability by as much as 80%! This is the case in day trading, and is not an exaggeration but actual fact. With legacy brokers, all it takes is few bad fills, or delays, and the profitability for the entire week is 80% reduced! Among all types of brokers, futures and spread betting brokers are the ones where it is most difficult to track the market linearly. Resulting in a poor filling price in every single trade! ECN brokers are the best, but are too costly in terms of spreads and commissions charged. Way too costly for fast trading and even for holding trades too long. CFD brokers provide a perfect alternative to ECN trading. There is absolutely no difference in filling price efficiency, as long as you trade at less than $100 per point / pip. But the dealing and trade holding costs are much lower. That’s why all small to medium size retail traders prefer CFD brokers. Plus, in extreme market conditions CFD liquidity is actually better than even ECN. Moreover, ECN is for forex and commodities only. A good CFD broker offers forex, commodities and also stocks. As many wise traders actually trade few selected markets from each asset category.

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World Events and Online Forex Trading

Online forex trading is much more interesting when one takes into account global events and geopolitics. Rather than just the usual, popular analysis methods.

New, Exciting Online Forex Trading

Online forex trading is much more interesting when using the unique, not repeating impacts of global events. Traders can think like large foreign investors, and look at various forex pairs. It is easier to start with precious metals and energy commodities. As these directly impact some related currency pairs. Other currency pairs are sensitive to smaller and more specific economic zones. And traders can infer a lot of useful information out of global events and geopolitics. So as to make directional trades on all these pairs. It is better to rely on this sort of in-depth fundamental analysis. So that politics and investor sentiment are first taken into account. Followed by objective economic analysis. And this economic analysis looks at more data than just GDP, inflation and trade balance. Traders can learn forex trading this way. And hence they can avoid many false signals that classic analysis methods give.

Online Forex Trading with Confidence

Global events drive online forex trading in various ways. Some of which can be predicted well in advance. Another big advantage of this methodology is that unlike technical signals. And unlike even classic economic analysis, where traders often have to be quick to trade. With global events, a market may be trading in the opposite direction that the one a global event hints to. Thereby giving the trader plenty of time and margin for profit. The trader still needs technical analysis or some kind of clues to be able to specifically time the trend reversal. A wise forex trading strategy is one where a commodity and a related currency pair are used. For example, global impact on gold and crude oil are relatively easy to figure out. Geopolitics, decisions taken by producers and states, as well as technological trends. Can all be used to assess medium term trends in the market. A new invention for example, which makes gold mining and extraction more cost effective, is bound to increase production. And therefore increase supply as well, which means less potential for gold to rally. Which means that AUSUSD will be less strong. So due to all these events, it doesn’t even make sense to compare today’s markets with the markets of 30 years ago.

Online Forex Trading
Mines are evolving, just like crude oil drills. New inventions in mining can make the impossible happen. So that gold and silver reserves that were previously uneconomical to tap, become attractive and economically viable, overnight! These inventions and innovations will prevent precious metal prices from rising too much. Hence when these events happen,  it’s news that concerns forex traders.

 Other Events

Other events that may impact the forex market are events such as natural disasters. These cannot be predicted. But typically, investors panic during such events, local economies are temporarily ruined, and markets go down. But sooner or later, things start to recover, and investors are back. Natural disasters may cause all kinds of false technical signals. That’s why traders need to know the story behind such market movements. Sometimes it’s local accidents, such as floodings etc. If either a gold mine, or the entire area is flooded, gold production will be suspended for quite some time. And gold may react to that. But it doesn’t mean that gold has started a solid rally…

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How Does Oil Affect the Market and Online Forex Trading?

Crude oil directly impacts the Canadian dollar. So entire online forex trading strategies can be based on Canadian dollar crosses, and especially on USDCAD.

Online Forex Trading of USDCAD

USDCAD is a nice pair to trade. All wise traders who trade this pair, pay close attention to crude oil trends. And to some extend, to the US dollar. However, crude oil itself is the main driving force. And because it’s a highly technical market. USDCAD being strongly and inversely correlated to crude oil, it tends to also exhibit strong adherence to technical analysis. Technical analysis doesn’t make it easy to predict either one of these markets. But basic tools such as LSS support and resistance levels seem to work quite well. Trading USDCAD is different to other forex strategies, in that the trader cannot afford to ignore the related commodity. There are pairs out there that are not strongly correlated to anything else. And even gold, is not as strongly correlated to AUDUSD in the near term. But USDCAD and crude oil are strongly correlated. And is a very useful idea in online forex trading. As commodity pairs produce more solid price moves than other pairs.

Online Forex Trading
Crude oil price impacts not just currencies, but also stocks, to a less direct way. Because many, even non-energy products are made from crude oil. Car tire manufacturing for example requires both a lot of energy and a lot of crude oil in raw materials. That’s why industrialized countries’ economies are hit hard when crude oil prices rise too much. The impact of crude oil on the world economy is however not linear, but rather complicated. As there are different trigger levels, where the price of crude oil damages one industry but at the same time it helps another industry grow. Wise forex traders however are able to trade it all through CFDs, both through crude oil and through USDCAD. And in some longer term cases, through individual stock prices.

How Crude Oil Impacts the Entire Market Across Online Forex Trading?

Other currency pairs are impacted to some degree by the Canadian dollar, or crude oil itself. But fundamentally, all oil importing and exporting countries are impacted. Russia and Canada are only two of these countries. Crude oil also impacts the US dollar through complicated, indirect ways, since the stock market itself is impacted. Generally, crude oil prices of around $40 are regarded as cheap by the market and the economy. And stock market movements tend to correlate with crude oil price, all the way up to around $60- $70. Then, at levels of $100 or more, the stock market regards crude oil as becoming or already being too expensive. And a negative correlation develops. This peculiar reaction of the stock market affects different currency pairs, in different ways. But the market as a whole also matters. When stocks are cheaper than some particular currencies, they are bound to attract more foreign investor money. And the reverse is also true. Online forex trading is really a global game, part of the greater financial markets. And the goal is to detect the next discount. Where some investor or country gets a better deal. Crude oil does impact stocks, and stocks impact some currencies. Traders can learn forex trading this way, and focus on the week to week and month to month trends.

Crude Oil is Slowly Becoming Redundant

Unlike gold, which is impossible to make synthetically, and has unique applications. Crude oil is not unique, and is slowly becoming redundant. Therefore its impact on the stock market, is expected to weaken over the coming decades. The correlation to the Canadian dollar is expected to last for many years. Unless other oil reserves around the world become cheaper to tap. For now however, things are unlikely to change overnight. So traders can safely trade upon these concepts.

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