Micro Trends Trends

This should be easy for you to understand as it was extensively written about in my eBook "Forex Surfing" (which is prerequisite reading before reading this eBook). Furthermore, I discussed at length the topic of "Petit Trends" connected with "Micro Trends" in the above section of this eBook. For the above reasons I won't be writing too much here about this subject but will touch upon it to discuss some of the nuances that you need to be aware of, and to briefly review some concepts.

The concepts taught in "Forex Surfing" can be considered "scalping techniques" in and of themselves, but as surely by now you recognize, the techniques presented in this eBook are more specifically "scalping techniques". What is wonderful about the scalping techniques you have already learned about in the previous section is that, on a "Micro Trend" (as defined in "Forex Surfing") you can use these scalping techniques to more precisely enter into trades than what was taught in "Forex Surfing" to capitalize on a few extra pips, and of course make a more precise exit to maximize the pips. There is however a 'trade off between the "Surfing" approach versus the "scalping" approach.

The benefit of "Surfing" is that you can walk away from your computer regularly because your entry order will automatically kick you into a trade and you intend to get eventually stopped out of your trade (trailing your stops for profit). "Surfing" is thus much more automatic. The downside of "Scalping" is that you have to be paying more attention to your computer making constant decisions about entering a trade, trailing stops (to protect your profits) and manually exiting your trades. Thus "Scalping" is much more 'hands-on' and less automatic than "Surfing". The benefit of "Scalping" however is, as mentioned in the previous paragraph, that you can potentially gain more profits overall from the same market movement.

Surfing = Easier & More "Automatic"

Scalping = Bigger Profits but More "Work"

In general, you won't be entering a trade on a "Micro Trend" from the very beginning of the trend. As with any trend following trading technique you need to wait for a trend to have established itself, and then still early in the trend (after it has clearly commenced) you attempt to trade in the direction of the prevailing trend (generally don't trade against the trend on the pull backs).

Your ideal "Micro Trends" to watch for will usually happen within a market overlap time, though sometimes they can happen outside of the overlap times. If they happen outside of the overlap times it is generally due to some kind of news or FA, but generally outside of overlap times the slope is usually shallower (note the word "usually", meaning not always). Often you'll also see a "Micro Trend" on Monday morning (Monday morning for the Asian region is Sunday evening for North Americans) after the market has reopened from the weekend.

Most often a "Micro Trend" will develop by emerging from a familiar pattern such as consolidations, triangles, and other such formation breakouts (discussed more in subsequent sections). If you can catch a "Micro Trend" as it breaks out from such patterns then you can benefit by riding the majority of it with a price close to it's inception (obviously good for you).

Assuming that you didn't catch a ride on the current "Micro Trend" from its very beginning, then you'll of course attempt to catch a ride at any point along it that you can by scalping an entry, preferably closer to the beginning of the trend than the end. Watch the retracement zones (which third it retraces into) to get a sense of the "Micro Trend's" current strength. Watch your S.E.X. lines to see if it is bouncing off of the 15 period pairs (good), bouncing off the 30 period pairs (hmmm. probably loosing steam), but if it crossing through the 30 period pairs then certainly use your discretion as now the confidence in your micro trend is waning (keep in mind that it could potentially be the start of a larger scale retracement). Use any other indicator you like to use to get a sense of the strength of your trend.

Remember the general rule for trends of any size is when you have three points (highs/lows) that line up quite nicely (it is never perfect to the pip) then you have a very nice trend. Most trend following techniques attempt to enter around the trendline bounces (particularly if it converges with a key Fibonacci retracement level).

Thus here is an "Opportunity" that you can regularly find on larger scales that can be brought to a scalping level. Watch for larger trends on your Hourly charts over 30 days, and when you see the price moving close to your larger trendline then try to zoom into the small view (say, 5 min candles) watching for a clear reversal of the larger trend (around the trendline bounce), and then once you see a "Micro Trend" has established itself then try to scalp an entry. The nice thing about doing this is that you can then secure a stop for a profit then just leave the trade. Come back periodically to see what is happening on the hourly charts, and over time you could be up potentially hundreds of pips. When you see a top being formed (assuming an uptrend, reverse for downtrend) then simply get out. Here is a tip - use the scalping principles on the hourly charts to scalp an exit (the candles will look relatively similar to one minute candles even though the pips can be significantly larger).

The above chart is of EUR/JPY showing 3 Hour candles over 40 days (I selected the 3 hour candles to be able to show a little more detail on this chart for you). Notice I've drawn several trendlines (fanned) showing several larger trends that you could have potentially scalped an entry near the bounce levels. The blue lines are the support lines for your trend, the red lines show resistance to help you to gage when there might potentially be a reversal. Go look at the Hourly charts over 30 days on your own computer now to see what kinds of trend you can find. You'll see after a little while of looking at your charts that these kinds of opportunities happen quite regularly.

bounces, but let me explain to you how using scalping methods as an entry technique far surpasses what most people do.

Let's use a hypothetical situation for illustration purposes. Let's say you have $10,000 in your account (so we can calculate risk percentages). Let's say you spot a trendline bounce that looks like a potentially interesting trading opportunity.

In scenario one (as most traders would do) you would place your trade at about the place where a trendline bounce would occur (especially nice if the trendline bounce converges with a Fibonacci level), and you would place your stop at the level of the previous low (say the bottom of a Fibonacci swing). Let's say that this low is 200 pips away. Thus with an account size of $10,000 you would be permitted to trade 10K (just one mini lot) based on a 2% risk. Let's say that you exited the trade (for whatever reason) for a 300 pip profit, thus your profit would be about $300 (assuming you traded a pair that 1 pip = $1, but also subtract overnight interest if your trade lasted more than one day). This is certainly "not bad". You had a risk/reward ratio of 1:2, and most traders would have considered this to be a "good trade". Furthermore you've grown your account by 3%, which is better than most banks would pay you interest for a whole year - but your trade might have only lasted a few days.

In scenario two (using these "scalping methods") you too would want to place your trade near the trendline bounce. You watch for a clear reversal and then enter by using a scalp. As soon as you can you'd raise your stop to breakeven, and then to a 10 pip profit (so that if the markets were to reverse at least you made a 100% profit against your initial risk - getting stopped when scalping is a common experience). With an account size of $10,000 you would be permitted to trade 100K (one full lot or 10 mini lots) for a risk representing just 1%, or you could trade 200K (two full lots or 20 mini lots) for a risk representing 2%. Let's say that you also exited your trade for 300 pips as in the scenario mentioned above. This time you would have made $3,000 (had you risked 1%) or about $6,000 (had you risked 2%). This is a 1:30 risk to reward ratio, and a 60% increase of the account (quite impressive by most trader's standards, and try to find a mutual fund or other investment than can give you such an ROI (Return On Investment) especially in such a short time frame!).

Obviously there is a HUGE difference between a $300 profit and a $6,000 profit! What's the difference? The market was the same for both trading styles, the time frame was the same, and even the pips were the same. The difference is in the "work" you do. A standard trader might see the setup, place the entry orders (stop & limit orders too), and leave after 5 minutes of "work". A scalper might see the same set up but would have to wait patiently for the right moment to act. This might mean many hours of glancing at the computer waiting for the right moment. It definitely isn't "hard" work, but it does require more involvement than the other approach... but if the end justifies the means then certainly the extra profits justifies the extra "work".

Perhaps I should also mention here (as might possibly have been applicable in our hypothetical situation above) that once you've entered by using a scalp and have secured a profit with your stop, then if you want you may use a limit order set for the same reasons you might have set a limit order had you been trading using a different trading technique. For example, if you see a Fibonacci swing, rather than a standard entry method you could enter the swing with a scalp, but you could still set your profit limit as you otherwise normally would at the 162% (or 127%) extension.

I remember some years ago there was a saying (said on TV and parroted by environmentally minded people), "think globally, act locally", meaning think of the whole world when you recycle your trash. I encourage you to keep this thought in mind when you are trading by looking for standard opportunities on larger time scales (thinking globally), but then find ways to incorporate scalp entry methods (or "Surfing" entry methods) into those larger opportunities (acting locally). As you've seen from the above examples that if properly done (and hopefully you didn't get stopped - for a 10 pip profit - to allow your trade to mature) you can effectively leverage yourself into potentially gaining substantially larger profits than you would if you follow standard trading methodology. Sure, doing this does require more "work", but in the end you can grow your account far faster, and isn't this what you really want?

Now let's cut into a new topic.

In "Forex Surfing" (section "Compound Gains Exit Strategies", subsection "Exit 1 - Manual Exit") I introduced a very important concept. Don't let the fact that I only wrote a couple pages on this topic fool you; it is extremely important for you to integrate, especially with your scalping methods.

The topic was about preparing to exit your trade at 12 noon EST (go reread that section of the eBook). This is also somewhat true for 06:00 EST (at the end of the end of the Asian/European overlap time), but the stronger one is the 12:00 EST time (at the end of the European/N.American overlap time - when Europeans are putting on their coats to go home, and the Americans are going out for lunch).

If you are surfing or scalping along a micro trend, and your objective is just to make some day trading profits then be sure to look for a suitable exit by tightening up your stops between 11:30 EST and 13:00 EST as frequently you'll see a small reversal around that time if the market has been trending during the overlap time.

That is all I will say about that reversal time for now, however there is more that happens afterwards which I'll explain now.

Frequently after the market has made that reversal (let's call it the "Noon Reversal") you'll see some big sideways swings (scalping opportunities). Often afterwards, and moving into the evening hours, you'll see a sideways movement, often with a slant. These can potentially present some tiny scalp opportunities (generally going for less than 10 pips profits). Sometimes you'll see the market actually trending rather nicely, and on those days (it's definitely not everyday) you could try to scalp some petit trends in the direction of the trend. More about scalping sideways consolidations (including slanted) will be discussed in a later section.

So here is a summary for trend related opportunities:

• Watch for "Micro Trends" (as discussed in "Forex Surfing"), looking for scalpable trades along "petit trends".

• You can simply trade "petit trends" going for small pip profits, and entering multiple trades along a single "Micro Trend"

• Or you can enter a trade along a "Micro Trend" using a scalping method for entry, and then allow that trade to run along the "Micro Trend" with a trailing stop as learned in "Forex Surfing".

• Watch the S.E.X. lines and the retracement zones to get a sense for the relative strength of your "Micro Trend". Feel free to use any other indicator you feel comfortable with using also.

• Watch for trendline bounces along your "Micro Trend" for potential scalp entry opportunities.

• Watch for trendline bounces along larger time frame charts, then zoom into smaller charts to spot a clear reversal. Then scalp an entry, secure a profit with a stop order and then allow the trade to mature (gaining many, many pips).

• You can combine a scalp entry method with any standard trading technique, and exit as you normally would based on the standard trading technique. "Think globally, act locally" • If "day trading" then watch for the noon reversal by tightening up your stops or by scalping an exit around noon (EST). After the noon reversal are frequent small scalping opportunities.

PATTERN BREAKOUTS

In my previous eBook "Forex Surfing" I've illustrated some common patterns for you, so I'll not reiterate them here (so you might want to reread those sections for a refresher), but I will discuss how scalping methods can be employed on those common patterns.

Patterns are a scalper's paradise as they present two wonderful trading opportunities. They first provide a range that a scalper can trade within (elaborated upon in a later section), and then when they eventually breakout, which sooner or later must happen, they present a second trading opportunity known as a "breakout".

It is common knowledge to traders that pattern breakouts usually result in marvelous trading opportunities, however the vigilant scalper can often outperform the other traders who use more conventional approaches to trading those same patterns.

The most common patterns to watch for include:

• Sideways Consolidations Channels

• Triangles (all varieties)

There are certainly other patterns to watch for (feel free to work with them too), but here is one in particular that isn't so much a "pattern" but is also a great "breakout" opportunity:

• Breakout of previous day high/low

The method for the breakouts of Channels, Triangles and Flags is all pretty simple. Look for those patterns in your larger charts, such as the 5-minute charts or hourly charts (the size of the pattern doesn't really matter - the larger the better), draw your trendlines that confine the pattern configuration, then simply watch your charts much like a tiger watches prey - ready to pounce at the right moment.

When the market has penetrated the lines (preferably a significant penetration, not just a marginal one that is likely to retreat back into the pattern) then simply watch for a suitable scalping opportunity.

After the breakout, and once you are in a trade, be watchful for reversals, as it is not uncommon for the price to retreat back into the pattern range. Often in consolidation channels you'll see a dramatic breakout but then an equally dramatic retreat back into the channel. Most traders call this a "Bull/Bear trap", and when you see something like that happened you can be sure that a lot of folks lost a lot of money (because they probably set an entry order just beyond the consolidation range and a stop within or on the other side of the consolidation range, which they got entered then quickly stopped out by). As a scalper you have a definite advantage to not get caught in the "Bull/Bear traps" because you'd have quickly brought up your stop to at least a breakeven point, and hopefully scalped your exit at the first sign of trouble.

Even though "Bull/Bear traps" happen (which can get annoying for some traders) eventually the market must break out of the pattern, and when it does you simply pounce (like the patient tiger) into a scalpable trading opportunity.

Once such a breakout occurs you'll potentially see some kind of a micro trend happen. It can be a very short one, say lasting less than an hour and maybe only 20 pips, or it can be much more significant. The general rule of thumb is that the larger the pattern the larger the resulting breakout.

For sideways consolidations most traders use the idea that the width of the consolidation is similar to the height of the breakout, so you can use this to kind of estimate potential profits of the breakout. I understand this reasoning but personally think it is flawed because the relationship between the horizontal axis timeline on your chart is arbitrary to the scale of the vertical axis price scale, but nonetheless I'll go along with that common trader's cliché since it does seem to (very loosely) have some merit. This is certainly not a "scientific method" by any stretch of the imagination, and so don't be using that model to base any limit exit calculations upon.

So to briefly recap (since I think I went off into a tangent topic), after a breakout look for a scalp entry opportunity. Quickly bring in your stop to at least secure a breakeven or preferably a small profit. You may then proceed with the trade in whatever manner you prefer. The breakout will usually form a micro trend of variable duration that can also provide multiple scalping opportunities.

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Take a look at the consolidation that started the Monday morning trading session during the Asian/European overlap time. The consolidation was constrained between 1.2319 and 1.2331 (12 pips) and broke out at 03:00 EST. The end of this chart shown is 05:37 EST. What would you have done had you seen this tiny consolidation?

Let's now look at the other "opportunity" that was mentioned - breakout of the previous day's high/low.

How Trafe Micro Trends Forex

The above chart shows you about 4 months worth of the most recent daily candles of EUR/USD. Also notice that it shows the S.E.X. lines (as taught in "Forex Sailing"), and a couple of resisting trendlines. What I simply want for you to see from this chart is that as the prices change day to day, and as they trend, that most days the price will at some point in time during that day break through the price of yesterday's high or low (sometimes on busy days it'll break both). Sometimes the breakout of the previous day's high/low will be marginal, and some days it'll be quite dramatic.

Everyday make a note of the high price and the low price of yesterday's candle. Simply search for a suitable scalping opportunity when the price penetrates through the previous high/low, and secure your stop at a breakeven or profit as soon as you can, and continue the trade as you consider to be most appropriate based on the market conditions you see.

To refine this concept even further use trendlines to spot potential trendline bounces (as discussed in the previous section), and watch your S.E.X. lines. Generally speaking, when the market is trending (as you can see with your S.E.X. lines quite easily) you'll mostly be interested in the breakouts that occur in the direction of the trend, however, when the candles are far away from the trend line and far from the mid S.E.X. line after a pronounced movement in the direction of the trend then start to pay more attention to the day's high/low penetration in reverse of the trend to capture some of the retracement.

Also notice that some days are trending days (that have moved significantly from the breakout of the previous day's high/low), and some days are just "trading days" that didn't move much at all. Notice on the chart how there appear to be stagnant areas; almost like flags or consolidations on this large scale. On such days the market might break through the previous day's high/low, but then retrace back into the range of the previous candle - watch for a clear market reversal and just scalp a bit (if it appears like a nice opportunity) on it's way back into the range. We'll discuss more about within range trading later in this eBook.

Keep in mind that not every day will be a spectacular trading day for this approach, but it can certainly be used advantageously to help you to catch some nice pips.

The following technique, which is an adaptation of what was mentioned above

can be a HUGE OPPORTUNITY!!! Definitely familiarize yourself with this

technique as it could score you some unbelievable profits once in a while

(certainly not everyday, not even every week, but often enough). Properl;

y

executed this one trade could potentially DOUBLE, TRIPLE, or even

QUATRUPLE your account IN A SINGLE TRADE!!! I can't even begin

to tell you of the immense joy you'll feel when you pull this off! Doing

this a few times a year can completely set you nicely financially. If yoi

i

could only trade one technique at all (thank God we don't need to be

restricted like this though) then make this be the trading technique you

engage in. It is that powerful!!!

After writing this technique I realize that it is SOOOOO GOOD and SOOOOO JUICY that I have to include it in "Forex Sailing" rather than here. Go right now to that section and read it! Once you get the concept of it you'll probably be unable to sleep tonight! You can find it in the eBook "Forex Sailing" and it is the section titled "THE INCREDIBLE SCALP". There are two specific techniques there that ALONE can be all you ever need to do to score some truly incredible gains.

Go and read it now! After you've read it then you probably won't be able to sleep tonight, and if you don't feel blown away with excitement (like you've drank 20 cups of coffee) after reading it then you'd better check to see if you have a pulse! Go ahead, find that section within "Forex Sailing" now and read it. You don't have to read that whole eBook before you read that section, so feel free to skip right to it.

So here is a summary for pattern breakout related opportunities:

Patterns are a scalper's paradise as they present two trading opportunities. (1) within range trading, and (2) breakout trading.

Most common patterns to watch for include Sideways Consolidations, Triangles, and Flags.

Look for those patterns on larger chart time frames.

Scalp to enter after a breakout.

Watch out for "Bull/Bear Traps".

Breakouts usually result in a micro trend, so use the principles applicable to micro trend scalping once one has begun.

Additional pattern to watch for is the breakout of the previous day's high/low.

Read "The Incredible Scalp" within the eBook "Forex Sailing" for two powerful techniques.

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