A common question I tend to get from people about our forex scalping strategy is this : Why scalping? Why not day trading, swing trading or long term trading? Exactly how does forex scalping work and does it really work?
Well, to help you understand deeply why scalping is a really good way of trading and earning money, I will have to explain how the forex market works in a more in-depth way so that you completely understand the concept of trading and scalping for a living.
Price in the forex market moves based on demand and supply, meaning people buying and selling. That is at the core of how the forex market works. When price is rising, it is because there are more people buying than selling at that moment (more demand than supply). So, there are many reasons why people buy or sell : it could be because of news releases, or perhaps when price has touched a 200 Moving Average level? Or perhaps when price has hit a 10 year low? It could be for a hundred and one different reasons, some even being completely nonsensical like “Oh! Obama has sneezed! That means the US market is doomed to fail! Sell sell!” For whatever the reasons, there will always be key areas in the forex market where people would buy and sell.
Well, now we go on to WHEN people buy/sell, and that leads us to the concept of lagging and leading indicators. Almost 99% of the current indicators in the market are LAGGING indicators, that means, they are always one step behind the current price. A moving average can only be “drawn” when price has completed a move. Same goes for the Bollinger Bands, Envelopes, Candlesticks, etc. etc. The problem with these lagging indicators is that when you enter the market, you tend to be one step too slow and the opportunity has passed you by. Most importantly, you leave yourself vulnerable to manipulation from the few who are one step “ahead” of you. It’s simple, if you’re the first person to enter an empty room, you know it’s definitely safe. But if you’re the second person, you never know what the first person might have done to booby trap that place. Same as for forex, when you’re one step behind, you never know what the people one step ahead of you are planning.
There are only 2 leading indicators in the market currently.
1) Volume : You cannot get this data accurately in the forex market. This is because each volume data is only for a specific broker and does not represent the entire forex market.
2) Fibonacci : The magical mathematical formulas that have its roots since the beginning of time. You’ve heard about it, and some of you may have even seen the way it works quite fantastically, but most people have never fully grasped the full concept behind how the art of fibonacci calculations work. Basically, fibonacci levels tell you when price might bounce or react off, giving you future signals on levels to buy or sell.
Scenario 1 :
Now, imagine this : You are looking at your 5 minute chart and you see a very strong fibonacci level above you (resistance). When price reaches it, what would you do? Well, most people would hesitate a bit then sell and probably come out 50/50 winners – no big deal.
Scenario 2 :
Okay how about this : you are looking at your 5 minute chart and a person suddenly tells you that the fibonacci resistance level above you is also a key fibonacci resistance level for the 1 minute chart, the 15 minute chart, the 30 minute chart, the 1 hour chart, the 4 hour chart, 1 day chart, 1 week chart and 1 month chart (that’s 9 time frames by the way!). All of them have lined up perfectly at that level across 7 time frames – what would you do? Well, most traders here in The Forex Army would go crazy over that trade as it would have over a 90% winning chance since everyone who is trading the 1 minute, 5 minute, 15 minute, 30 minutes, 1 hour, 4 hour,1 day, 1 week and 1 month charts are looking to enter at that exact same level to sell. So remember I mentioned earlier that the forex market movement is made out of buying and selling? What happens when almost everyone looks to sell all together? It’s simple! Price reacts strongly and goes down! This same concept is used when you’re looking to buy.
Great that you asked that! Well, the concept is simple and I’ll explain it in a funny story : Imagine you are given the crazy task of pushing a bus over and you have the help of 100 people. You are all standing on one side of the bus. The special thing is : because you are using a “leading” indicator like the fibonacci, you are given a 1 minute headstart before 1,000 people come from the other side and start pushing the bus against you. You win if you manage to push the bus over, or else, you’ll be crushed by the 1,000 people who come in the opposite direction and push the bus over onto you.
Now, what would you do?
Well, if you’re like most people, you would gather your 100 men and in the 1st minute, all combine your strength and push the bus over. Once you’re done, you win. You won’t even wait for the other 1,000 “lagging” people who are coming. You complete the task quickly, you win and you get out of there.
Scalping in forex The Forex Army way is the same as that. You are using a leading indicator so that already puts you ahead of 99% of the market who are using their own form of funny lagging indicators. Because you have managed to combine the power of 7 time frames (a strong group of people), you’re able to enter the market with a strong group of people, push over the bus (taking your profit), and getting out (before the other 1,000 lagging people come). The best part is we don’t have to worry about all the news, all the havoc and all the funny indicators out there. We just focus on one key advanced system, use it well, and profit well.
There’s a perfectly good reason why our scalping system is called the TFA Sniper. A sniper waits patiently for hours for the perfect opportunity to take a shot, and when the opportunity arises, he hits his target with one single shot. That’s what we are trained to do here in The Forex Army : We wait patiently for the best time to take a trade and when it comes, we take the shot, bag the pips and call it a day. We’re not here to trade, we’re here to make money and if making three to five simple trades a day (we had users who even made their profits with one trade a day) got us there, there’s no reason for us to compromise on our rules and enter 50 trades a day.
That’s true, and when there are news releases, we stay out of the market. Our live forex trading room has a market calendar that shows all the news releases throughout the day and if there are news releases which are really volatile, we stay out of the market. The reason for this is because once the market reacts to news, it becomes unpredictable. Imagine it being a stampede. You are a sniper, watching for your key opportunity and waiting patiently. When the news release comes, suddenly a million people run together all chasing some funny predictions which they inferred. Some run left, some run right, and it is all chaos. During those situations, we know it’s dangerous and unpredictable, so we stay out of the market and wait for at least 10 minutes when the area has calmed down. Once the chaos is calming down and the millions of herd-followers are figuring out what mess they’re in, we zoom in on the opportunity that always arises and take our shot. Most of the time, we have an 85% success rate during such situations. Summarizing, we stay out of the market 10 minutes before and after news announcements and once the craziness has died down, we zoom in for the sniping opportunity.
Of course! Many people have tried their hands at scalping the forex market and have failed because they use “lagging” indicators which get you into the trade usually only when it’s too late. We at The Forex Army use an advanced system built on not 1, not 2, but 7 time frames of advanced fibonacci levels (leading indicators) that allow us to pick up with an unbelievably high degree of accuracy where the market might move and bounce/react so we can take advantage of those situations to earn some pips. We do not jump into every trade, instead, we wait for the best opportunity which is alerted to us through our notification and push notification system that alerts our computers and handphones when there is a potential trade coming up. We avoid trading when there are big news events, staying out of the market 10 minutes before and after a news event.