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FX Super Scalper

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Copyright © 2010-2011 - EthosTraders Inc. & Cecil Robles - All Rights Reserved Worldwide.

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FX Super Scalper

www.thesuperscalper.com

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Copyright © 2010-2011 - EthosTraders Inc. & Cecil Robles - All Rights Reserved Worldwide.

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FX Super Scalper

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You are going to love these strategies. Why? Because they work and are super simple. In fact I believe in keeping things simple. You will find that most great trading strategies are kept simple. By using simple strategies you can be very flexible and very adaptive to the conditions of the market. Every strategy I develop and use follows the same core principles. Here they are: 1. They are simple. 2. They are behavioral and focus on repetitive patterns that can be exploited within the market. The markets are based on people and the actions that they take. People do not change. Human behavior has not changed since the beginning of time. The emotions of greed and fear are still two primary emotions that rule most human's behavior. It is the same with traders. Therefore we understand that if people are behind the movements in the market and if people don't change, then the markets will create repetitive patterns that don't change. 3. They use proper money management to maximize returns. 4. They are mostly mechanical. 5. They try to trade through all markets. 6. They use indicators only to make trades as price action changes in relation to those indicators. This is how I build strategies. You too can take these six principles and build great trading strategies yourself. I highly encourage you to do that. As you learn and grow you'll find that this becomes easier for you to do. I have built the Super Scalper Strategies with these six principles in mind as I have with all of the other strategies that I have used.

Copyright © 2010-2011 - EthosTraders Inc. & Cecil Robles - All Rights Reserved Worldwide.

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FX Super Scalper

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WHAT IS SCALPING?

What is scalping? Most traders would define scalping as entering and exiting the market very quickly for small price gains. I have a little different definition. Most of the strategies that I use don't use targets. I let the market tell me where to get out. In other words, I usually go big or I lose. It works out well for me. However I know a lot of traders can't grasp this kind of trading right off of the bat. I am a risk taker and I know it. That is my personality. As such I don't require knowing the outcome of a particular trade before I take it. But most traders are not this way. But the Super Scalper Strategy does use targets and it can be traded on the 189 tick chart and above. That means that you can use the 1 minute, 5 minute, even the 240 minute (4 hour) chart and make some quick profits. As you probably already know I'm not one to fluff it up and I am assuming that you already have a basic knowledge of how the markets work. If there are terms that you do not understand please refer to my free Forex University at www.yourforexmentor.com/university. Here you will find all of the basic terms and some advanced terminology you need to begin trading the Forex markets and many other markets including, ETF's, Stocks, and Commodities. Most of the strategies that I use are very dynamic. This means that they can be traded in multiple markets and on multiple time frames. Remember trading is all about feeling comfortable. I don't mean feeling comfortable when you are in a trade. Sometimes when real money is on the line this is impossible. What I do mean is feeling comfortable in the method that you are using. The Super Scalper method will probably fit you no matter what kind of trader you are because there are three unique trades that we use in the Super Scalper methodology.

Copyright © 2010-2011 - EthosTraders Inc. & Cecil Robles - All Rights Reserved Worldwide.

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FX Super Scalper

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THE CHARTS AND INDICATORS

You can use any charting platform you want. All the indicators we will be using with this particular

system come standard on any charting platform. Here are some of the free charts that are available: This is what your charts should look like once you get them set up (the example is of a thinkorswim chart): www.thinkorswim.com www.metatrader4.com www.tradestation.com (tradestation charts are free only if you have an account with them).

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FX Super Scalper

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INDICATORS

We use five indicators with the Super Scalper system:

1. Slow Stochastic 2. 8 Period Simple Moving Average 3. 34 Period Exponential Moving Average 4. Fibonacci Retracement Tool 5. Candlesticks

SLOW STOCHASTIC

We use this as a filter for a couple of our trades. We always use our indicators in relationship to price action, so price action still has to line up. The following are the settings we use for the Slow Stochastic indicator. They are the settings that come standard for this indicator on most platforms, so you probably will not need to make any adjustments to this indicator. Oversold of 20 and overbought of 80 Applied to Typical price (High, Low, and Close) It is a simple moving average The K period is set to 8 The D period is set to 3

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Settings for the Slow Stochastic Indicator:

8 PERIOD SIMPLE MOVING AVERAGE (SMA)

Applied to Typical Price (H+L+C)/3

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34 PERIOD EXPONENTIAL MOVING AVERAGE

Applied to Typical price (H+L+C)/3

Here is a screenshot of what the settings for this indicator should look like:

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FIBONACCI RETRACEMENT

We will use 9 points on the Fibonacci retracement line: o o o o o o o o o Here is what the Fibonacci Retracement lines will look like when you get them loaded properly: 0.0% 23.6% 38.2% 50% 61.8% 78.6% 100% 127.2% 161.8%

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REVERSAL CANDLE

One of the reasons we use candlestick charts is because it makes it easier to visually identify Reversal candles. We use reversal candles in one of our setups. The definition of a BUY reversal candle is: Has a lower low than the previous candle Closes in the upper half of the candle

The definition of a SELL reversal candle is: Has a higher high than the previous candle Closes in the lower half of the candle

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OVERVIEW OF THE THREE TRADES

There are three specific trade setups that I use in the Super Scalper methodology. You can use each individually or you can combine them all together to create one whole system. The three trades are:

THE SLINGSHOT TRADE

With this screenshot, you can see how the Slingshot Method got its name. Imagine putting a marble in a slingshot, pulling it back slightly, and then letting it go. The marble, just like this trade, has the potential to travel far. We are looking for the trade to get to its destination quickly, take some profits, and then see how far it will go.

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THE QUICK PROFIT TRADE

The QP Trade is, as the name implies, about taking profits quickly. It uses tight stops and tight profit targets. There are two take profit points and we protect ourselves as quickly as possible.

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THE CROSSOVER TRADE

The crossover trade utilizes a crossover of the stochastic indicator in the direction of the trend. It uses Fib levels for stop losses and take profit.

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FX Super Scalper

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THE SLINGSHOT METHOD

The slingshot method is probably my favorite method because there is so much upside potential to this trade. I do not use normal profit targets on this trade and therefore it tends to give us a much higher reward to risk ratio. Reward to risk ratio is simply defined, as how much is my reward compared to how much is my risk? If my potential reward is 3% and my total risk is 1% then my reward to risk ratio is 3 to1. This is a good reward to risk ratio. I will make three times as much as I risk if this trade goes in my favor. In general most strategies either have a higher reward to risk ratio and a lower winning probability or a lower reward to risk ratio and a higher winning probability. The key is to find a strategy that has the best of both worlds. This is what the Slingshot Method is all about. You really want to trade this particular method during peak market hours. You can do very well on the 1 minute chart during peak market hours. If you want a little more flexibility in the times you would like to trade, you can also use the 5 minute, 15 minute or one hour charts.

THE INDICATORS

Each of our strategies uses the same basic indicators with minor exceptions. We use the following indicators with the Slingshot method: 1. 8 SMA entry and take profit filter 2. 34 EMA entry filter 3. Stochastic Indicator entry filter 4. Reversal Candle entry filter 5. Fibonacci Retracement Levels for take profit

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BUY ENTRY CRITERIA

1. Must have a BUY reversal candle. a. Remember that a buy reversal candle is defined as having a lower low than the previous candle and closing in the upper half of the candle. 2. The Stochastic must be below the 20 level at the time the BUY reversal candle forms. 3. The BUY reversal candle must be below the 8 SMA. 4. The stochastic MA's must cross. The candle that closes on the cross is your entry candle. The 3 line must cross the 8 line.

For this trade, you will want to, 1. Identify a reversal candle. The red candle above (outlined by the blue rectangle) is a great example of a BUY reversal candle. The candle must be closed before it can be considered valid. TRADE ONLY ON CLOSED CANDLES. Next, you will want to verify that the stochastic is below the 20 level.

Copyright © 2010-2011 - EthosTraders Inc. & Cecil Robles - All Rights Reserved Worldwide.

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FX Super Scalper

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Check that the BUY reversal candle is below the 8 SMA (the blue dotted line on the chart above). 2. Watch for a cross of the stochastic MA's to take place (highlighted by the green rectangle). Remember, you must wait for the candle to close. The candle that closes with the cross is your signal candle. 3. Place your BUY order (marked with an orange line on the chart) above the high of the signal candle plus a. ½ to 1 pip on the 1 minute chart b. 5 pips on the 1 and 4 hour charts c. 10 to 20 pips on the daily and weekly charts 4. Place your stop loss below the low of the reversal candle (marked with a red line on the chart above).

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SELL ENTRY CRITERIA

The SELL setup is just the opposite of the buy setup. Here is a chart example demonstrating a sell slingshot setup and the step by step process for trade entry.

1. Look for a sell reversal candle that corresponds with the stochastic above the 80 level (highlighted by the blue rectangle). 2. Look for the cross of the stochastic lines. The 3 line should cross above the 8 line. In my chart this is the red line crossing below the magenta line. 3. Wait for the candle that has crossed to close then place the sell stop below the low by at least 1 pip. This is highlighted by the orange line and the corresponding candle is highlighted by the green rectangle. 4. The stop loss will go above the reversal candle.

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BLUE LIGHT SPECIAL

This is a similar setup as the one before it, but it is what I like to call a Blue Light Special. 1. Look for a sell reversal candle that corresponds with the stochastic above 80. Highlighted by the blue rectangle. 2. Look for the cross of the stochastic lines. The 3 line should cross above the 8 line. In my chart this is the red line crossing below the magenta line. 3. Wait for the candle that has crossed to close then place the sell stop below the low by at least 1 pip. This is highlighted by the orange line and the corresponding candle is highlighted by the green rectangle. 4. The only thing different about this setup and why I call it a Blue Light Special is that the entry is not triggered on the next candle and it actually gives us a better entry point. We can move our entry point to below the low of the next candle. If that one doesn't trigger then we do the same thing until it triggers or the high of the reversal candle gets broken. If that happens, we remove the trade and look for another setup. 5. The stop loss will go above the reversal candle.

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POSITION SIZE

Shorter Time Frames: If you are trading on the 1, 5, or 15 minute charts you will probably not have a lot of time to calculate complex money management scenarios. As such we keep it simple. We only risk 1/2% to 1% on each trade. I would actually suggest that you really keep your risk to ½%. Here is how you would do the math: $1,000 account size ½% risk would be $5 (you'll need to trade a micro account if your account size is small. With a micro account each pip is worth roughly $.10) The pip risk on this trade is approximately 17 pips. $5/17 pips = .29 or rounded up to 3 micro lots. This calculation should not take you any more than 20 seconds to figure out once you get good enough. This trade would have netted about $7 in profit. Now you are free to take whatever risk level you want, however on lower time frames you will take more trades so if you took three of these trades a day on a conservative basis you could easily yield 34% of profit in a day even using a conservative risk of ½%.

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TRADE MANAGEMENT

The direction of the trend will determine how we set profit targets and manage trades. Uptrend = 8 SMA above 34 EMA

Downtrend = 8 SMA below 34 EMA

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FX Super Scalper

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1. First, we use the Fibonacci Retracement tool to determine our initial take profit point. 2. If the trade is against the trend we use the 61.8% Fib level for our initial take profit. If the trade is with the trend we use the 127.2% fib for our initial target. 3. Once the initial take profit is achieved we move our stop to break even. 4. We look for one of four ways to exit the trade. a. A slingshot trade in the opposite direction. b. A candle close below or above our 8 SMA. Below if we are buying and above if we are selling. c. A Quick Profit or Crossover trade in the opposite direction.

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In the chart example above we have a buy setup. The entry is marked by the orange line, the stop is marked by the red line at the top of the chart. The take profit 1 at the 127.2% fib is used for two reasons. First, the entry is already past the 61.8% fib level. This will happen sometimes when there is a lack of a really defined trend. So we revert to the 127.2% fib when this happens. Once the take profit 1 is achieved we will move our stop to breakeven and let the rest ride. We get stopped out on the remainder of the position when price reverses on us and gives us a Slingshot Trade in the opposite direction. The Fibonacci Retracement is drawn from the closest two swing points. A swing point is defined as a candle that has two higher lows on either side or two lower highs on either side.

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FX Super Scalper

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The chart example above is an example of how a sell signal would work. The entry is marked by the orange line, the stop is marked by the red line at the top of the chart and the take profit 1 is marked by the red line at the 61.8% fib (it is against the trend) and the take profit 2 is marked by the red next to the take profit 2 box. The take profit 1 is set at the 61.8% fib because we are trading against the trend and there is plenty of room to go. We hit our first target 5 minutes into the trade (this is a 1 minute chart). We got stopped out on the remainder of the position when price reversed on us and gave us a Slingshot Trade in the opposite direction. The Fibonacci Retracement is drawn from the closest two swing points. A swing point is defined as a candle that had two higher lows on either side or two lower highs on either side.

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THE CROSSOVER TRADE

The Crossover Trade is named for the stochastic crossover filter that we require before entering a trade. We only take this trade in the direction of the overall trend. The trend is identified by the direction and position of the MA's. If the 8 is above the 34 the trend is up. If the 8 is below the 34 the trend is down.

THE INDICATORS USED

1. The 8 SMA 2. The 34 EMA 3. The Stochastic 4. Fibonacci Retracement

BUY SIGNAL SETUP

1. The trend must be up (8 SMA above 34 EMA). The 34 EMA must also be sloping up from one candle to the next. 2. The stochastic should cross from sloping down to sloping up. The 3 line should cross to be above the 8 line. 3. Place the buy stop on the closed candle after the cross. Note: the stochastic must be below the 60 level when it crosses.

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1. Look for the direction of the trend. In this case the 8 SMA is above the 34 EMA. 2. Is the 34 EMA sloping up? If yes, then go to step 3. 3. Look for the stochastic to cross from down to up. 4. Place the buy stop above the high of the candle that corresponded to the cross. 5. Place your stop loss at the closest support level. The support level is identified by a swing low. Do you remember the definition of a swing low/high? A swing low is usually preceded by two higher lows and is followed by two higher lows. The orange line represents the entry here and the red line represents the stop loss.

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1. This is the same chart as the previous only it has been advanced so you can see what happens. The first trade was executed and we had an opportunity to execute a second trade. Here are the steps again: Look for the direction of the trend. In the case the 8 SMA is above the 34 EMA. 2. Is the 34 EMA sloping up? If yes, then go to step 3. 3. Look for the stochastic to cross from down to up. 4. Place the buy stop above the high of the candle that corresponded to the cross. 5. Place your stop loss at the closest support level. The support level is identified by a swing low. Do you remember the definition of a swing low/high? A swing low is usually preceded by two higher lows and is followed up by two higher lows. The second entry is highlighted by the orange line and the stop loss is highlighted by the red line.

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SELL SIGNAL SETUP

1. The trend must be down (8 SMA below the 34 EMA). The 34 EMA must also be sloping down from one candle to the next. 2. The stochastic should cross from sloping up to sloping down. The 3 line should cross to be below the 8 line. 3. Place the sell stop on the closed candle after the cross. Note: The stochastic must be above the 40 level when it crosses.

1. Look for the direction of the trend. If it is down then go to step #2 2. Look for the crossover of the stochastic to occur. 3. Place your entry below the candle that corresponds with the crossover. Place your stop at the closest resistance level. The closest resistance should be a swing high point within the market.

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FX Super Scalper

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1. Look for the direction of the trend. If it is down, then go to step #2 2. Look for the crossover of the stochastic to occur. 3. Place your entry below the candle that corresponds with the crossover. 4. Place your stop at the closest resistance level. The closest resistance should be a swing high point within the market.

EXIT TECHNIQUE

1. When you place the trade you will set the initial target at the 127.2% fib level. 2. Once the initial target is hit you will take off half of your position. 3. You will then let the other half ride and wait for another exit signal. 4. The second exit signal can come one of two ways: a. A slingshot signal in the opposite direction b. A candle close below or above the 8 SMA. (The candle must close and the high or low must be broken.)

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1. Draw your fib from the most immediate swing low to the swing high prior to the signal. Always draw from left to right. 2. You enter on the candle after the crossover candle. 3. Set your stop at the closest resistance point (in this case that is the swing high the fib line is drawn to. 4. Set your first take profit point at the 127.2% fib level. 5. Let the rest ride and exit the trade when a reversal happens in the opposite direction.

MONEY MANAGEMENT

You will treat your money management on this trade the same as you do the Slingshot Trade. You want to risk ½% to 1% on each trade. If you are trading on a higher time frame that gives you more time to calculate your reward to risk, you can use more advanced position sizing techniques.

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THE QUICK PROFIT TRADE

We call this the Quick Profit Trade because we are looking to take profits very quickly. This is a true scalp trade. This is what we would consider a breakout trade. You can trade it on any timeframe.

INDICATORS USED

1. 8 SMA 2. 34 EMA 3. Fibonacci Retracement 4. Swing High/Low

BUY SIGNAL RULES

1. The 8 SMA and the 34 EMA must be very close to crossing. You want them to almost change direction. 2. Price must go from below the MA's to above. 3. When this happens look for a breakout of a swing high. 4. Place your entry at the breakout level. 5. Place your stop loss at the closest support level.

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FX Super Scalper

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Here are the setup criteria: 1. Price must go from trading below the MA's to trading above. When it crosses over look for a breakout. 2. The breakout should be based on a swing high point that occurred prior to the cross. 3. Take the trade as soon as it hits the breakout point. 4. Set your stop loss below the closest support level.

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Once again: 1. Price must go from trading below the MA's to trading above. When it crosses over look for a breakout. 2. The breakout should be based on a swing high point that occurred prior to the cross. 3. Take the trade as soon as it hits the breakout point. 4. Set your stop loss below the closest support level.

SELL SIGNAL RULES

1. The 8 SMA and the 34 EMA must be very close to crossing. 2. Price must go from above the MA's to below. 3. When this happens, look for a breakdown of a swing low. 4. Place your entry at the breakdown level. 5. Place you stop loss at the closest resistance level.

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TRADE MANAGEMENT

1. When we take the trade you need to draw a Fibonacci Retracement from the closest swing high to swing low or swing low to swing high. 2. Your target is the 127.2% fib level. Take profits here. 3. If you have a trade in the opposite direction you can exit the trade also.

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In this chart we have a QP Trade followed by a Crossover Trade. 1. Price went from above to below MA's. Look for closest swing low at that point. 2. Enter on break. 3. Set stop loss at the closest swing high. 4. Set profit target at the 127.2% fib level. You need to make sure you factor in the spread. In this instance our entry was at 1.9582. The target was at 1.9571. However, if we have a two pip spread we need to set our target at 1.9569 to account for the spread. 5. In the meantime we had a Crossover Trade come about. This is highlighted by the blue rectangle. 6. The first QP trade hits profit. 7. The second trade also hits the first profit and the second position runs for quite some time.

MONEY MANAGEMENT

We want to risk 1% per trade. Our risk to reward ratio is usually skewed on this trade but it wins a very high percentage of trades. So we may only make back .25% to .5% each trade. But it adds up.

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