Try to imagine the ideal situation for a new, fledgling investor seeking to get started day trading and swing trading the currency market. The perfect scenario would be to spend a few weeks or even months with a successful, expert currency trader. Learning at the feet of the master, so to speak, is the traditional way to learn anything and few things can be as challenging as currency day trading. The Internet has opened many doors. It is now possible to receive an entire college education without having leave home, or ask questions of experts on any subject you can imagine.
Following a Winner
There are notable people in every field. In currency day trading, th
ere are those that have a proven history of being able to predict the market or leverage capital and generate profit with consistency. They exist in the field of currency trading as well and they are available to the public.
Once such expert in day trading the currency market, Kathy Lien, has published a popular book and has a website, on which she maintains a blog (from the word “Web Log,” a kind of online journal) as well as articles on day trading the currency market. Kathy Lien is very active in this market and publishes one of the few advisory letters focusing strictly on the day trading currency market.
Each day, approximately 3 Trillion Dollars worth of currency are traded around the world. This is an enormously challenging and complex profession. Any investment in the wisdom of a proven expert in such a field is, therefore, a smart move. Following a winner is the best learning strategy and with professionals offering access to their knowledge, it has never been easier to accomplish.
The Path to Riches
To follow the same trail that someone else has trodden to get to the same goal is a wise move, but only if you are committed and willing to learn. Experts like Kathy Lien and others make their knowledge available but it is up to you to be willing to take the time and put in the effort to learn and apply that expertise into day trading the currency market.
You can only imagine what it would cost to follow someone like that around all day and ask questions. The Internet allows them to publish books, articles, software and other services to allow anyone to follow the path they have laid out.
Currency Day Trading System
We will use currency day trading as meaning trading in the Forex spot market for currencies as opposed to day trading in the currency futures market – two completely different animals. After learning all you can from the experts, its time to decide upon a currency day trading system to test using a Forex broker’s practice account. The best place to begin is probably to visit forums, such as ForexPeaceArmy.com and Forex-TSD.com, and look for reviews and discussions of free systems on those sites. The 4HR MACD and James 16 are free systems that many use, and here are a couple more free systems similar to what you can find at the Forex forums (if you don’t know all the terms discussed below, you need to go to BabyPips.com and other sites to learn the basics):
EdNineBall’s Trading Method
One of our regular room contributors (Ed, aka EdNineBall) has been successfully trading Forex for several years now. He is consistently making 100-200 pips per day, and has banked as many as 991 pips in a single trading session.
With a record like that, he is constantly being asked “what’s your secret?”
Instead of keeping this to himself, or letting it out one or two people at a time, he decided to put together this brief tutorial so that anyone who is motivated to find a method of trading that is almost “never-fail” can start duplicating his results.
It’s not a complicated method, and Ed has provided some notes on the two charts below to lay out the rules he follows.
This is a system from EdNineBall placed at a popular Forex forum: “This was the key to my short trades this morning. Once it broke the 15 minute trendline, it retraced and bounced back short off the trendline I had drawn. I have been trading price action and trendlines successfully for a couple of years now. When I added the Hercules, AO and Waddah, my trading success shot up tremendously.”
This is the one minute chart Ed places his scalp trades from. Again he has drawn in some trendlines, and when the price breaks below those lines (in keeping with the Down Trend on the 15 minute chart) he Sells the pair. This chart shows two trades taken in about one hour, one for +120 and the other for +75. In both cases, the Waddah and the AO were Red, indicating a Sell. And although he doesn’t mention it, his Hercules Indicator showed that the GBP was very weak and the USD was very strong when he placed both Sell orders. Finally, he shows on his charts a third Sell opportunity which he missed because we were talking in the room and not paying attention to the charts. That Sell would have been worth about 40+ pips.
To duplicate Ed’s charts, you need to use the MT-4 platform, since two of his indicators ONLY work with MT-4. The AO (Awesome Oscillator) is found on every MT-4 platform that I am aware of. The “Waddah” is the Waddah Attar Explosion Indicator, which you can download for free from the forum on www.ForexFactory.com. Just search for the words “Attar Explosion” using the search box on the forum, and look for the post which has the Waddah Attar Explosion Indicator as an attachment. In both cases, install using the Default settings.
You also want to start using Heiken-Ashii candlesticks (another indicator found in the MT-4 platform) as they will help you stay in good trades longer, and get you out of bad trades (or reversing price action) sooner.
The Hercules indicator may be a problem for most people. It is an indicator developed and marketed by some Forex gurus. Ed got his copy when he purchased a package of material from those guys a few years back. He has since returned everything for a refund, but was allowed to keep the Hercules indicator. I am going to shop it out to some software people to see if they can reverse-engineer it and create something for us that is identical, but without violating any copyright laws.
And to sum up the method quickly, Ed focuses on the pair(s) that have the strongest currency paired with the weakest, according to Hercules. He draws in his trendlines, and waits for a break of those lines in the direction of the 15 minute chart trend. When the Waddah, AO and Heiken-Ashii candlestick color are all in agreement, he executes his trade. As long as the candlesticks remain the same color, he will stay in the trade. When the candle turns the opposite color, he exits. He also sets a 10 pip stop-loss, so any false breakouts that turn quickly on him do not cost him a lot of pips.
UPDATE TO EDNINEBALL’S SCALPING METHOD
Since putting together that brief tutorial, Ed made a couple of tweaks that has improved the method considerably. We have also packaged together the various Indicators that do not appear as a standard part of the MT-4 platform. Just below, you can get the email sent to you that has all the indicators and templates attached to it, so you can add them to your platform and we can all finally be on the same page when we are discussing possible trades in the room.
What Ed did was add the Zig-Zag indicator to his chart. The Zig-Zag is a part of every MT-4 platform (as far as I know) and can be added by clcicking on Insert/Indicators/Custom/Zig-Zag. Leave the settings at default, but make sure you choose a color that stands out on your charts.
Here is a picture of Ed’s charts now:
If you cannot read the notes Ed has on his chart, use the “Zoom” feature on your browser to increase the size of the page 150% to 200% and you should be able to read everything just fine. What Ed added by way of notes was that he now uses the Peaks and Valleys on the Zig-Zag as his stop loss when the price reverses near the top or bottom of the runs. In no event will his stop loss be more than 1-2 pips past the very top or very bottom of the Zig-Zag.
The best way to duplicate the chart is to use a template Ed put together. Load it into your MT-4 platform, placing it into the “template ” folder. Then you open a chart and drag the template onto the chart. This will automatically load all the indicators Ed uses, and your charts will now look like his.
Then, as he noted above, determine the current trend on the 15 minute chart, and watch for a break of the trensdlines (which you have to draw in yourself) on the 1 minute charts. Buy or Sell in the direction of the Trend on the 15 minute chart. You can remain in the trade as long as the Heiken-Ashii candles remain the same color (red for Sell, Blue for Buys). Let the Heiken-Ashii candles tell you when to exit the trade. Use a small stop-loss (the peak/valley of the Zig-Zag for the trades that develop near the tops or bottom, or the end of the wick of the peak candle from the trend line just broken).
If you want to further refine your trades and eliminate more losers, wait until both the Waddah Attar indicator and the Awesome Oscillator indicator both turn in favor of the trade (red for Sells, Green for Buys). You will get into trades later and make fewer pips per trade, but you will all but eliminate losing trades.
If you follow this method, and only trade during times of high volume (3 a.m. to 11 a.m., eastern time) you are putting yourself in a position to win 80-90% of your trades. Your losers should be in the 102-0 pip range, and many of your winners will be in the 40-60 pip range, making this a very profitable way to scalp the forex markets.
To get the Smoothed Heiken-Ashii Indicator, the Waddah Attar Indicator and Ed’s Template, fill in the form below, and click on the confirmation email you’ll receive shortly. This will trigger my email system to send you an email with all three items attached. Download both Hieken-Ashii and Waddah indicators into the Indicator File in your MT-4 platform, and download the Template file into the Template folder.
That’s all there is to it. Happy Trading.