EUR GBP 10 Minute Chart - 27th March 2009

This particular chart, which I have taken from this morning’s trading session on the euro pound currency pair, provides a classic example of how to make money scalping in short term currency pairs. The chart is based on ten minutes, and as we can see, at 9.30 this morning, three consecutive shooting star candles arrived, one after the other, indicating weakness in the market and a possible trading opportunity. I took a chance at this point and placed a wide stop loss above my short position, but had I been more patient I would have waited until 11 am for the confirming bearish engulfing candle to arrive, at which point I would have gone short, yielding a nice return. Now the key thing to note, is that it is very easy to take the first signal that arrives and to enter the market too early – in this case I waited for the third shooting star, a clear sign that the market is weak, before entering. The key to success in scalping is to be patient and to wait for the opportunities to come to you, and not to try to force the trades. Just be patient. Scalping is an excellent way to improve you technical analysis skills, and also forces you to be disciplined with your stop loss placement and management. Even if you only practice in a demo account, it is well worth the effort as these signals arrive every day across all the pairs, and if one is not providing anything of interest, simply change to another time frame or another currency pair, and it is an excellent way to ‘paper trade’ by honing your skills – yes I know it is always harder when real money is at stake, but practice, practice, and more practice will make you a better trader!

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EUR/USD 5 minute Candle Chart - 3rd March 2009

I just thought I would pop this chart up for you, which is from this afternoon’s trading on the 3rd March 2009, and is on the five minute chart for the euro dollar which was a great signal and an excellent trading opportunity. As you can see on the chart, we had a two hour rally from 12 until around 2 pm, and at this point we get a great signal, an up candle, followed by a gapped up ‘evening star’ sometimes called a spinning top, followed by a wide spread down bar – a classic reversal signal. At this point we are paying full attention, and waiting for any confirming signals which duly arrive on the next two bars with two consecutive shooting stars, signalling weakness, and confirming the earlier signal. Note also that both are contained within the body of the down bar. At this point we enter our short position and close out on the bullish engulfing candle at 16.30! They don’t come any better than that I can assure you, and a classic example of how candle patterns provide the clues to the market direction, but you always have to wait for the confirmation. I just wanted to share this one with you, as it is almost ‘text book’ analysis.

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