This article would deal with sideways moving market and how investors can trade these market directions and make money off it.

• Range Trading: Range Trading is one of the most suitable ways of trading a sideways market. You are expected to map out major resistance and support level that price is expected to move within, this would make up what is known as a trend wall or a trend channel.

A good knowledge of where price is moving towards (sideways direction), can help you take a BUY decision when price hits the support level and a SELL when price hits the resistance. Well as a matter of fact, it is necessary for you not to forecast the market based on the support &resistance levels alone as the use of oscillators should be vital in your exit and entry.

As a matter of fact, I employ the use of stochastic and sometimes I use the RSI in a situation like this. You can SELL when the RSI and stochastic are in the overbought regions and BUY when they are align in the oversold region.

• Scalping: Scalping is a method of trading that entails the investor taking a position and exiting within a short timeframe. When scalping it is important that you make use of resistance and support levels (Fibonacci or Pivot Point) in a bid to better utilize your open and close.

To be comfortable with this type or trading style, you’ll be required to spot out the range of price actions before triggering a buy or sell position. Spotting out entry point is very vital as it helps investors plot out the various pivot points or Fibo levels once they have successfully established the range.

It is wise to take a position when the pivot level or Fibonacci level coincides with the support and resistance channel and exit the position when it touches the level.

Let’s say we have a BUY order at the S1 level, it is okay for you close your position when it touches the next pivot level. If you got into a trade at the 0.382 level you can exit your position when it reaches 0.236 levels.
The above mentioned methods are a viable way for investors to trade sideways markets and make gains off it if duly applied.

Applying the Pivot Points

As a seasoned trader, I employ the pivot points for some few purposes;

Entry levels

We know that these points are strong levels of support and resistance and they can predict future price action. If you find yourself in a bullish trend, and you notice the price breaking above a pivot level, a bullish entry is advised with a stop loss below the pivot level.

Alternatively, when in an uptrend and price bounces off the pivot level, a SELL position should be entered and you can place your stop loss above the pivot level.

This system can be more effective if we blend in indicators like CCI, RSI or MACD in a view to fine tune our entry decision.

Exit levels

These levels can also be employed in deciding when to exit positions. It is important for traders to know how to exit trades using these levels. Duuring a BUY position, after the price breaks above the pivot points, my projected profit is placed around 10-15 pips below the next higher pivot point.

If a SELL order is initiated, after seeing price bounce off the pivot levels, an exit is advised once price action goes bearish midway the length of the pivot level.

Conclusion

Investors and market markers alike have continued to use the pivot points as critical support and/or resistance levels. Pivot points are very vital tools in the currency trading market; we find a lot currency pairs fluctuate along these levels. During range trading, traders can decide on entering a long position near an identified point of support and a short position when the financial instrument nears the resistance levels. It should be noted that these technical indicators can come handy during market opens.

Trading the 2-3% Stop Loss Technique

The 2-3% Stop Loss technique is applicable to trading on all time frames; it doesn’t matter whether you are on a 1-Hour chart or a 1-Day chart. Let’s look at an example to enable us fully grasp this awesome Fibonacci trading technique;

If you have an account size of $10,000, this would translate into a $200-$300 per trader (2-3%). It clear that if a trade opening shows up, and price touches the Fibonacci retracement support level of 0.500 and you ultimately plan on entering a BUY and placing a Stop Loss at the 0.382 level. It is worth note taking the pips difference between the levels.

What essentially matters is the time frame that’s been traded. We’ll assume two conditions, one on a 1-Hour time frame and the other a 1-Day chart.

1-Hour (H1) Chart

The pips difference between the 0.500 and 0.382 levels (Stop Loss level) is assumed to be around 30. On a standard account for a EUR/USD pair, 1 pip is equal $10 and this implies:

$10*30 = $300
$300/$300 = 1 standard lot

1-Day (D1) Chart

We would assume the pips difference here to be 80 pips. For standard account where a pip is equals $10 for the EUR/USD pair. It is clear from Fig 5.1 that between the 0.500 and 0.382 Fibbonacci levels, the red horizontal lines maps out the price at those points. 0.500 was mapped to 1.45979 and 0.382 to 1.45170. If you compute the difference, you’ll get a result that’s around 80 pips.

$10*80 = $800
$300/$800 = 0.38 standard lot

I should state here that the lot size is determined by your stop loss and at the same time it should be noted that the entire loss in a position entered is $300 on both sides not minding the time frame of choice.

The most basic way of using MAs is to identify trend at market, so let’s look at the example:
As you can see it’s eur/usd pair at H1 time frame.

Moving averages as resistance

Let’s say you are open few sell position and you follow bearish trend at chart above. After some time price comes to moving averages and try to break it, but moving averages looks like great resistance, after few hours price continue in bearish direction which gives you great confident.

If you follow bullish trend moving averages will help you to detect support too.

Moving averages as support

Moving Averages Range Market

At the image above you can see range market. You should avoid using moving averages in range market.

Using a house terminology, support is the floor of the house and resistance is the ceiling. Unless you are Invisible Man, you can’t get through the floor of a room without taking the stairs or elevator and you cannot get through the ceiling of a house without some power tools or a sunroof.

In other words, support and resistance, while being formidable barriers, can and are often breached.  Many times though, they do hold. The dilemma for the trader is to determine what is strong resistance and support and what is a weak one.

In this article, I will show you how to use support and resistance for day trading the forex market.

When I day trade, I use the 15 minute chart. Knowing that price has a memory, I will look for the previous day’s support and resistance to show me where price might stall for the next day.

To do this, I pull up a 30minute chart to look for the previous day’s support and resistance. I use the the 30 minute chart because I get a clearer look at the SR levels better than on the 15 minute chart on which I trade.

SR Levels with MA Crossover

Marking your chart this way helps you to see in advance where price might be going. In this chart, the levels were identified on the 30 minute chart, then I switched to the 15 minute chart to get entries. You can see where one level held for a few hours, but once tested and breached, we are on to the next levels.

SR levels work really well with MA Crossovers which we already discussed in the Trade Like A Professional Series.

Once you have built your MAC, and you have marked your chart as described, you then have a very powerful trading system. To determine a weak SR from a strong one, observe the following:

• The Support is strong if it appears above an MA crossover
• The Resistance stands a good chance of being breached if it appears above an MA crossover
• The Resistance is strong if it appears below an MA crossover
• The Support is weak if it appears below an MA crossover

The reason is that the trend packs the power punch of a power tool going through the floor or ceiling of a room. When the trend is strong, the support and resistance in its way should be considered suspect.

SR levels can be used as entry or profit taking levels based on these observations. So, give it a shot and see how it works for you.

So, what made the trader choose a reversal trade. Certain held beliefs about where price ought to go maybe? I will give you a little piece of hard-earned wisdom that I have gained over the years. ‘ ‘The  market will do what you think it cannot do’

Prices will blow through your support and resistance zones like hot knife to butter and go to unforseen price levels and it will do it as you watch, so climb on the train or get out of the way.

To jump on the trend train, we need a good trend detecting system and a timing indicator. In my earlier articles, we built some good trend detectors. Moving Average crosses do this well. Once you have built your MA cross system, you need to add a timer, in this case the RSI.

I use RSI 43 which mimics price very closely. You need an RSI that is not too sensitive but one that looks like the price itself. Smaller periods will not work.

To ride the trend, make sure you know when the trend is up or down, then wait for the RSI to read 55 in an up trend and  45 in a down trend, then jump on the train to profits. See Chart below:

The brokers know this too. Its the biggest get rich quick scheme on the planet; for the brokers.

They entice you with $50 micro accounts and 1:400 leverage and you are hooked. Afterall, what is $50 0r $500 to you. May be not much, but to the brokers, $50 from a million traders is $50 million. That, is significant money!

To beat them at their own game you have to come in smarter, better prepared and well capitalized. You might not want to hear this, but $500 accounts won’t allow you to quit your day job any time soon.

I will give you a money management technique that I use to help you stay in the game and avoid blowing up your account again and again.

So, I implore you to stop over-leveraging your account. If you have a $1000 account and you are buying 1 mini-lot, you are over-leveraging.You should be buying at most .20 lots each time. This way, if you are good, you can make about 10-20% on your money a month. Not bad at all.

In fact, you should not buy a full mini-lot on a US 1:50 leverage unless you have at least a $5000 account. On an account of this size if you win often, you can make 20-25% a month. Not bad either.

So, let’s see how you can keep yourself in the game to make this kind of returns.

Firstly, you have to understand how the forex market works. Tight stops will kill your account faster than you can say ‘for’.

Your stops will be run often and regularly. If you use stops all the time, find an EA that allows you to keep your stops on your computer, unexposed to the brokers, or just keep it in your head.

I know you have been told mental stops are bad but believe me, advertising your stops to the world is worse. Work on your self-discipline to honor your mental stops once you decide what they are.

Secondly, MT4 provides you with a wealth of information to help you manage your account. Here is how.

Click on the Terminal tab and your account information will be revealed. See Picture:

The most important information to watch for is your Margin Level. Never allow your ML to fall below 1000%. By doing this, you are assured of being able to withstand big swings in the market when you are wrong. When you are right, your equity curve will be stable and smooth. Here is the equity curve for the account above and I trade this account monthly, manually.

Steady As She Goes

Look at the maximal drawdown. This account is in no danger of being blown up ever with my money management techniques. Also, look at the smooth equity curve. I can bump up leverage 10% and the account will still be safe.

So, what you have to do is get good at trading, then buy less contracts and watch your margin level. If it is under 1000%, you might be trading too many lots.

Give this a try and leave comments.

The forex market starts in Asia, then Europe, then the Americas. These are then called the Asian, European and US sessions respectively.

My research has uncovered the fact that the Asian session is best left alone. In other words, DO NOT TRADE during the Asian session. The only time to do anything in the Asian session is to exit trades. No new trades should be initiated at this time.

My reasoning are as follows:

Unless there is news, the Asian session is merely a set up session for the European and US sessions.
The Asian session is mainly used by syndicate traders to lie in wait and set up unsuspecting retail traders.

They are just waiting for you to put in your order so that they can jerk you around emotionally. And, if you are one of those traders that like to use tight stops, they are just waiting for you so that they can run your stops!

Take any of the major currencies and see what happens in the Asian session. After the syndicate traders have accumulated orders on both sides-buy and sell orders, they will move the price about 20-30 pips against the sellers, run the stops and then move it down 20-30 pips against the buyers, running the stops on the other side.

They will then wait, churn the price, going nowhere to bore you to death for about 2hrs, then fake a big candle in one direction, only to go in the other direction, which will be the real trend of the day for about 100 pips or whatever the average daily range of that pair is.

Its all there on the chart daily, yet most traders do not see it.
This game by the syndicate traders- big money hedge funds and banks and central banks trading billions of dollars- creates tell-tale chart patterns. You will often see a ‘M’ at the top and a ‘W’ at the bottom or a variation of those shapes. ‘W’s or ‘M’s with short or long legs, uneven formations, but if you look hard, its all the same.

So, to avoid whipsaws and losing money unneccesssarily, trade the other 2 sessions. Why?

You can already see the Asian game played out. Then you can follow the real trend. Also, liquidity. The price moves faster and your strategies will work better in a moving market. The ticks come in faster, there is more volume. This will lead to better information for you to make trading decisions off of, and better trades to take.

Round numbers are very important so keep your eyes on chart. Good luck!

Last month I wrote how to trader with simple 200 Moving Average Trading System. I get few emails regarding moving averages indicators. I like to watch moving averages on my charts, I use several different MA indicators, depend which strategy I use. Here is my favorite Moving Averages Indicators list:

1. Simple Colored Moving Average MT4 Indicator

2. 4 EMA Trend MT4 Indicator

3. 2 Moving Average Signal MT4 Indicator alert

4. Rainbow MA MT4 Indicator

5. Multi Moving Average MT4 Indicator

6. MTF Moving Average MT4 Indicator

7. VarMovAvg MT5 Indicator

If you are interest in more about MA check this Moving Averages Guide.