I want to share my own experience and observations of the market. I have been trading in the Forex market since 2010, combining trade with basic labor activity. At the beginning of my journey, I, like many traders, stubbornly studied the literature and reread all sorts of articles about the Forex market in order to gain knowledge and apply them as soon as possible in practice. Having started real trading, at the first stage I used the intraday kind of trade – scalping. This strategy consists of short-term trading, usually within a day, using a large number of transactions and obtaining a minimum profit of 5 to 15 points. This type of trade with proper use gives a good % increase in the deposit for a short period of time. This strategy is most effective at the moment when the market is flat – the absence of a certain direction of price movement within the trading day, when the price moves from the support level to the resistance level. As a rule, with such wave movement, the price often passes 15-25 points from level to level, giving a good earning opportunity. But, as a rule, this strategy is less effective on 1-3 month intervals. I want to elaborate on the pros and cons of this type of trade.
The main advantage is the high dynamism of the trading process, which helps to get the first practical experience of opening, closing and planning deals.
I could find out more for myself. This and the need to constantly be at the computer monitor, and, in the absence of protective Stop Loss, huge losses, not commensurate with the profit obtained when trading a large number of lots with a profit of 5-10 points. Very high psychological stress.
So draining a large number of deposits, I clearly realized that it is necessary to plan transactions for a longer period using fewer lots. Analyzing the historical data, I came to the conclusion that to plan the transaction it is necessary to use H1, H4 and D1 timeframes to exclude random price fluctuations. This works as follows. The price always has its own trend on segments of 6, 12 or more months. At certain points in time, the price makes a correction and, as a rule, such correction reaches 100-150 basis points from the previously reached minimum-maximum trend, and inevitably returns to this level after an average of 2 to 5 trading days, updating the minimum- maximum of prices. It often happens that the price of an asset makes a sharp move in the direction opposite to the main trend due to the news background, but after 2-5 trading days, everything returns to “its own” after the abatement of emotions and noise in the market. It’s very easy to check my theory – build a chart on pairs EUR \ USD, GBR \ USD, USD \ JPY and other pairs using timeframes H1, H4, D1 and W1, and you will see for yourself. Having built a graph, you will immediately see trends and patterns of movement, this is the trend. And as one of the basic rules in trading says: the trend is your friend!
Trading in this way, you will make an average of 5-10 transactions per month. The quality of trade will increase at times due to more careful planning of transactions, and you will have much more free time. The psychological load will also decrease. When planning trade on this strategy, it is necessary to pay special attention to the price levels and the calendar of events for the upcoming trading week in order to allocate for themselves those pairs of currencies that are able to fully work on this strategy.