Forum on trading, automated trading systems and testing trading strategies
Indicators: Simple Scalping System
newdigital, 2014.05.22 08:45
The Scalpers Checklist (based on dailyfx article)
Traders should have a checklist to consult prior to making any major
trading decisions. These steps are critical for Forex scalpers as they
often have to make these choices on a moment’s notice. To help with the
process it can be helpful to keep a checklist and determine your options
prior to approaching the market. Today we will review the scalper’s
checklist. Let’s get started!
Identify Market Conditions
The first task assigned to day traders and scalpers is to identify
market conditions. Is the market trending or ranging? Is the volatility
of an asset low or high? These are both important questions that should
be answered prior to entering into a new trade idea. Not only will this
help Forex traders which currency pair to trade, but also help determine
their strategy. Every scalper and day trader should check this off
their list, prior to considering any market entries!
Choose a Strategy
Once market conditions are found, traders need to identify a strategy
that is congruent with the market. If you are trading a trend, you will
need to not only find market direction but also decide if you are going
to trade a retracement, momentum or breakout strategy. In lack of a
trend, traders again need to decide how to approach pricing patterns,
support & resistance values, as well as potential breakouts. With so
many strategies to choose from, it is worth taking your time and doing
your due diligence prior to checking this off your scalping list.
Plan Your Entry
Next traders need to select how they are going to enter into the market.
Typically traders need to first determine if they will trade with
market orders or entry orders. Market orders allow you to trade
immediately if conditions are met and you are immediately in front of
your trading terminal. Entry orders can be used and will execute at a
designated price even if you aren’t watching the market.
Once this is decided, traders need to evaluate which indicators if any
will be used for trading. In the event an indicator is added to the
graph, prior to execution, plan on its use and know its strengths as
well as limitations. When you are 100% certain on your entry triggers
then you can proceed to the next portion of the checklist.
This point of our check list goes beyond the simple placement of stop
and limit orders. Scalpers must carefully consider how much they should
risk on each trade. At this point specific questions should arise. How
many pips are you risking per trade? What is your average profit target
per trade? How does a stop order being executed equate to a loss on my
While no trader wants to take a loss it is paramount to determine these
values prior to scalping. Once these values are set, you can mark this
point off your checklist. Now all you have left is to hold yourself
accountable to your trading decisions.
Log the Results
Traders, especially short term scalpers, have a tendency to always be
looking for the next trade. While looking for trading opportunities
isn’t a bad thing, we should also remember to go back and review past
events. Keeping a trading log can help us establish market patterns and
reflect if your strategy is working in current conditions.
To help with this process, traders should note, why, when and how they
entered into a trade. If your strategy is working, stick with it and
keep your original strategy rules. If you’re trading is not working out
as planned, with a log you can identify what must be changed and make
While this checklist may seem daunting at first, these are all important steps to consider before scalping.
2014-05-22 07:00 GMT (or 09:00 MQ MT5 time) | [EUR - French PMI]
if actual > forecast = good for currency (for EUR in our case)
EUR French PMI = Level of a diffusion index based on surveyed purchasing managers in the manufacturing/services industry
French Private Sector Slips Into Contraction In May
The French private sector contracted for the first time in three
months in May, flash survey data from Markit Economics showed Thursday.
flash composite output index fell to 49.3 in May from 50.6 in April.
The score below 50 indicates contraction in the sector.
Purchasing Managers' Index for manufacturing declined more-than-expected
to a 4-month low of 49.3 in May from 51.2 in April. The expected
reading was 51.
Likewise, the services PMI dropped to 49.2 from 50.4 a month ago. Economists had forecast the score to remain at 50.4.
Lower output was recorded across the service and manufacturing sectors. New business received by French private sector firms decreased for the second month running in May.
in the French private sector fell for a seventh consecutive month and
the rate of job shedding was the sharpest since February.
price trends were signaled in May. Input price inflation across the
French private sector accelerated to a four-month high, driven by a
sharper increase in service providers' costs.
On the other hand,
private sector output prices continued to fall, with the rate of decline
accelerating to the sharpest in ten months.
"With GDP having
stagnated in Q1, the PMI data so far suggest another disappointing
performance in the second quarter," said Jack Kennedy, senior economist
at Markit said.
2014-05-22 01:45 GMT (or 03:45 MQ MT5 time) | [CNY - HSBC Manufacturing PMI]
if actual > forecast = good for currency (for CNY in our case)
CNY - HSBC Manufacturing PMI = Level of a diffusion index based on surveyed purchasing managers in the manufacturing industry
China Manufacturing PMI Jumps To 49.7 - HSBC
An index monitoring manufacturing activity in China came in with a
score of 49.7 in May, the latest flash estimate from HSBC and Markit
Economics revealed on Thursday.
That topped forecasts for a score
of 48.3 and was up sharply from 48.1 in April - and while it does remain
below the line of 50 that separates expansion from contraction, the May
reading represents a five-month high.
"The improvement was
broad-based with both new orders and new export orders back in
expansionary territory. Disinflationary pressures also eased over the
month and output prices increased for the first time since November
2013," said HSBC Chief Economist, China & Co- Head of Asian Economic
Research Hongbin Qu.
Among the individual components of the
survey, the index for manufacturing output came in at 50.3 - up from
47.9 in April to a four-month high.
The index for new orders swung
to expansion from contraction a month earlier - as did new export
orders, output prices, stocks of purchases and quantity of purchases.
of work continued to contract, but at a slower pace - as did input
prices. The employment index declined at a faster pace, while stocks of
finished goods turned to contraction after expanding last month.
Suppliers' delivery times lengthened in May after showing no change in the previous month.
employment index fell further to 47.3, which implies that this month's
uptick in sentiment has not yet filtered through to the labor market.
Some tentative signs of stabilization are emerging, partly as a result
of the recent mini-stimulus measures and lower borrowing costs. But
downside risks to growth remain, particularly as the property market
continues to cool. We think more policy easing is needed to put a floor
under growth in the coming months," Hongbin said. ==========
Copper Climbs As China PMI Eases Demand Concerns (adapted from dailyfx article)
The strongest reading in 5 months for a key gauge of economic activity in the Chinese economy has given copper prices a lift in Asian trading. The HSBC Flash Manufacturing PMI for Aprilreflected
a rise to 49.7, beating economist’s expectations for a reading of 48.1.
While the improvement is an encouraging sign for the Chinese economy, a
figure below 50 signals the manufacturing sector remains in
On balance Chinese economic data has been soft of-late, which includes the drop in Retail Sales and Industrial Production
figures for April to multi-year lows. This suggests that that we’re far
from seeing a re-acceleration of growth for the Asian giant, and if
data fails to improve further, renewed concerns over the country’s
appetite for commodities could reinvigorate the copper bears.
2014-05-22 08:30 GMT (or 10:30 MQ MT5 time) | [GBP - GDP]
if actual > forecast = good for currency (for GBP in our case)
GBP - GDP = Change in the inflation-adjusted value of all goods and services produced by the economy
U.K. Consumers Drive Recovery as Growth Accelerates to 0.8%
U.K. consumers were the driving force behind Britain’s economic growth
at the start of the year, continuing a trend after they led the recovery
Consumer spending rose 0.8 percent in the first quarter, a 10th straight
increase, adding 0.5 percentage point to gross domestic product. The
economy grew 0.8 percent in the period, unrevised from an initial
estimate, the Office for National Statistics said.
Britain’s recovery over the past year has left GDP just 0.6 percent
below where it was at its peak in the first quarter of 2008. The
improving economy was underscored by data yesterday showing a faster
than forecast increase in retail sales in April.
The brighter outlook is also having an impact within the Bank of
England, where some policy makers are moving closer to calling for an
interest-rate increase. Minutes of the Monetary Policy Committee’s most
recent meeting, published yesterday, showed the argument for higher
rates is becoming “more balanced” for some of the panel.
While the outlook is improving and data indicates a squeeze on consumers
is easing, Prime Minister David Cameron’s Conservative Party trails the
opposition Labour party in polls. The Tories are expected to come third
behind Labour and UKIP in European elections being held today.
Exports fell 1 percent in the quarter and imports dropped 1.1 percent,
leaving net trade to have zero impact on GDP, today’s report showed.
Government spending rose 0.1 percent and business investment increased
2.7 percent. Gross fixed capital formation added 0.3 percentage point to
First-quarter production growth was revised down to 0.7 percent from 0.8
percent in the initial GDP release. Growth in services, the largest
part of the economy, was unchanged at 0.9 percent, and construction
growth was raised to 0.6 percent from 0.3 percent. From a year earlier,
the economy grew 3.1 percent, the ONS said, unrevised from the initial
estimate. That’s the biggest annual increase since the fourth quarter of
Germany's financial watchdog finds evidence of forex price manipulation (based on theguardian article)
financial watchdog has discovered clear evidence that market
participants attempted to manipulate reference currency rates, widening
the probe to include many more banks and saying international
investigations into the matter were far from over.
Regulators globally are looking at traders' behaviour on key
benchmarks, spanning interest rates, foreign exchange and commodities.
Eight financial firms have been fined billions of dollars for
manipulating reference interest rates, and the probe into the largely
unregulated $5.3 tn-a-day foreign exchange market could prove even
The head of banking supervision at German
watchdog Bafin, Raimund Roeseler, said the latest discoveries in the
forex probe were worrying and it was "much, much bigger" than the
investigation into benchmark interest rates, such as Libor.
were clearly attempts to manipulate prices, that's what was
disturbing," Roeseler said on Tuesday at the regulator's annual news
conference. Market participants had attempted to manipulate daily fixing
rates for a number of different currencies, he said without specifying what evidence had been gleaned.
Deutsche Bank AG, Germany's largest bank and the world's largest
forex trader, is the country's only bank known so far to be involved in
the currency probe. The bank has said it is conducting its own internal
probe and is cooperating with authorities.
Roeseler said he
expected to conclude an investigation into the manipulation of reference
interest rates during the summer. Bafin will hand over responsibilities
for supervising Germany's top 24 banks to the European Central Bank
(ECB) in November.
The regulator had clear evidence that there
were efforts to manipulate reference interest rates, but it remained
unclear whether those efforts were successful.
"We have some
evidence of people trying to move the market in one direction and they
succeeded in doing precisely the opposite," he said. "They shot
themselves in the foot."
The probe into the largely unregulated $5.3 tn-a-day foreign exchange
market is expanding.
2014-05-22 07:30 GMT (or 09:30 MQ MT5 time) | [EUR - German PMI]
EUR - German PMI = level of a diffusion index based on surveyed purchasing managers in the manufacturing industry. It's a leading indicator of economic health - above 50.0 indicates industry expansion, below indicates contraction.
German manufacturing PMI falls to 6-month low of 52.9 in May
Manufacturing activity in Germany expanded at
the slowest rate in six months in May, dampening optimism over the
health of the euro zone's largest economy, preliminary data showed
In a report, market research group Markit said that its
preliminary German manufacturing purchasing managers' index fell to
a seasonally adjusted 52.9 this month, down from a final reading of
54.1 in April. Analysts had expected the index to inch down to 54.0
Meanwhile, the preliminary services purchasing managers' index
improved to a 35-month high of 56.4 this month, up from a reading
of 54.7 in April. Analysts had expected the index to ease down to
54.5 in May.
A reading above 50.0 on the index indicates industry expansion,
below indicates contraction.
Commenting on the report, Ollver Kolodselke, Economist at Markit
said, "Survey data for the second quarter so far suggest that we
should expect another period of solid growth of GDP."
Following the release of the data, the euro trimmed losses
against the U.S. dollar, with EUR/USD shedding 0.07% to trade at
1.3676, compared to 1.3665 ahead of the data.
Meanwhile, European stock markets were higher after the open.
Germany's DAX picked up 0.3%, the Euro Stoxx 50 rose 0.2%, France's
CAC 40 eased up 0.1%, while London's FTSE 100 added 0.3%.
Price & Time: Approaching Key Levels, But EUR/USD Remains Vulnerable
Since reversing from the important cycle turn window that we highlighted
at the start of the month the euro has come under steady downside
pressure. On Wednesday, EUR/USD touched its lowest level in over three
months before rebounding off the 3rd square root relationship of the
year’s high at 1.3640 - which is also just above the widely watched
200-day moving average. Was this an important low in the euro? We don’t
think so. With the next important turn window eyed around the end of the
month/first week of June we suspect general weakness will persist at
least until then before a meaningful recovery in the euro is seen
(though some minor strength looks possible early next week). The bottom
of the1-year standard deviation channel coincides with the 4th square
root relationship of the year’s high near 1.3550 and this still looks
like a reasonable downside objective. Unexpected aggressive strength
over 1.3820 would suggest that the euro has bottomed ahead of schedule.
USD/JPY rebounds sharply from just above YTD low
USD/JPY Strategy: Like the short side while below 102.35
Australian Dollar Declines as Chinese Report Momentum Fizzles Out
The Australian dollar declined in early morning trading in Sydney as its
earlier momentum fuelled by favorable Chinese manufacturing data faded.
The Aussie was trading at 92.27 US cents at 7:00 a.m. in Friday local
time, down from Thursday’s high of 92.35 cents.
The currency touched a high of 92.75 US cents after a joint survey of
Chinese purchasing managers by Markit Economics and HSBC showed that
Chinese factory activity rose to the highest level in five months in
The Aussie roes on the news, but started fizzling out after the US
dollar started rising against its major peers, Kymberly Martin, a
markets strategist at Bank of New Zealand told The Sydney Morning Herald.
"I think the weakness overnight was reflective of broad US dollar
strength as opposed to anything specific to the Australian dollar," she
said."When you look across most of the major currencies the US dollar
has strengthened pretty much across the board."
Martins revealed that she forecasts the Aussie to hover between 92.10
US cents and 92.70 US cents today. She also said that the market is
waiting for May’s data on German IFO business sentiment, which will be
released in the evening, local time.
However, analysts were unable to closely attribute any factor for the
US dollar’s rally on Thursday, as US data was mixed. In the US, fresh
applications for unemployment benefits grew more than forecasted while
sales of pre-owned homes surged in April, the first time to do so this
2014-05-23 06:00 GMT (or 08:00 MQ MT5 time) | [EUR - German GDP]
EUR - German GDP = Change in the inflation-adjusted value of all goods and services produced by the economy
German GDP Growth Accelerates As Estimated
Germany's economic growth rebounded as previously estimated in the
first quarter driven by domestic demand, the detailed report from
Destatis showed Friday.
Gross domestic product grew 0.8 percent
sequentially in the first quarter, up from 0.4 percent in the fourth
quarter. The quarterly rate came in line with the provisional estimate
published on May 15.
On a calendar-adjusted basis, GDP grew 2.3
percent year-on-year, faster than the 1.4 percent rise seen in the
fourth quarter. This was the largest increase in over two years.
price-adjusted GDP gained 2.5 percent, also faster than the 1.3 percent
growth seen in the fourth quarter. The statistical office confirmed the
The expenditure side breakdown of GDP showed that positive contributions were made by domestic demand only.
fixed capital formation advanced at a faster pace of 3.2 percent on the
previous quarter. Household final consumption expenditure climbed 0.7
percent on the fourth quarter. At the same time, general government
expenditure grew only 0.4 percent.
However, the balance of exports
and imports had a downward effect on the GDP growth. The increase in
exports slowed to 0.2 percent from 2.5 percent, while the increase in
imports accelerated to 2.2 percent.