There is a lot of confusion regarding pivot points, some people find they work very well others do not. Quite simply, many people understand pivot points incorrectly. Many traders think pivot points are trading signals. For example price broke through R1 is a buy signal or broke S1 is a sell signal. Other traders think pivot points show price direction – for example price broke through R1 so it is moving upwards etc. The reality of the situation is pivot points are used to in

In a previous post we looked at why scalping on 1 hour timeframes is preferable to lower timeframes. We also looked at how a 20 pip target per day is extremely profitable when considered over monthly or yearly periods. Forex scalping is traditionally based on making rapid trades generally within 2-5 minutes and mostly on low timeframes. As a result huge amounts of trades are normally placed using this method. Here we will consider how trading on the 1 hour timeframe, using th

In a previous post we looked at why a 1:1 risk reward ratio makes the most sense for trading. Here we will look at how to apply it in real life trading. When looking at a 1:1 risk reward ratio theoretically such as the example on the left above we do not take into account spreads or commissions. Let us take an example of a 1:1 risk reward ratio with a target of 10 pips. Let us assume that commission and spread is 2 pips, so there is a 2 pip cost to place trades. If we placed

There is an English expression "Take care of the pennies and the pounds will take care of themselves" meaning if you concentrate on making small amounts of money, you will soon amass a large amount. This expression applies perfectly to forex scalping, hitting a small number of consistent pips daily is by far the best way to be profitable as a scalper. In the hypothetical diagram above we can see that trading at: 1 standard lot at 20 pips/day = $1000/week = $52k/year 0.5

Although trading with a 1:2 risk reward ratio or higher is common, it is a hard way to make consistent profit as it results in a higher chance of hitting stop loss than take profit. The diagram above shows a hypothetical 1:2 Risk Reward Ratio with Take Profit at +20 Pips, Stop loss at -10 Pips. We will assume there are no spreads and no commissions and that twenty BUY trades have been placed randomly. Of the twenty trades placed, 50% of them will hit stop loss, resulti

It is probably the most common adage in forex, "the trend is your friend". Most of the prominent and respected authors and teachers promote the concept of trend trading, following the trend, buying when the price grows and selling when it falls. Many traders however, find it frustrating when applying this concept in practice. They enter the market on a percieved trend and find it reverses and hits their stop loss, only to then restablish itself soon after. So what causes this