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Scalping system #6 (EMA Bands)

This scalping system was sent by Frank Tenerife (Spain).

Thank you Frank! You contribution is greatly appreciated!

Here is the system:

"This is an efficient system of scalping that works in 1 minute up to 1 day all periods and all Currency pairs

Ema 3
Ema 5
Ema 7
Ema 9
Ema 11
Ema 13
Color yellow


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All of the EMA's are they on close, open, high low? Where do you set them at?Thanks,
Paul

Hi Paul,
All EMAs should be set on Close.

Regards,
Edward

Edward-

I use the Oanda trading platform and chart also . When I click on " Add Study " , and the EMA, my only choice is to type in the EMA number.
How do I choose " Close ' ?

Regards

George

Hi George,

In Oanda's platform studies are applied to Close by default.

Regards,
Edward

Thanks again Edward . I was hoping that was the case .

Regards ,
George

Edward :

When I set up a live account with Oanda , I want to be very conservative . With a modest $ 300.00 account and going for a Pip value of

$ 5.00 , what Leverage level would you suggest ? I am aware of the dangers of high Leverage and don 't want to risk more than 2 % of

my account on any one trade .

Best regards ,

George

Hi George,

Leverage levels, such as offered by Oanda carry very little to no risk to a smart trader, I'll explain why below.

That's good that you are going to start with a small account size: you'll learn about your new broker
and you will risk little money to get first experience.

What I suggest to review is the pip value you are planning to trade with. You see, $5 per pip would be too expensive in case a trade turns into a loser. Calculate it: only -20 pips each $5 value would cost you -$100 dollars, which is 1/3 of the initial investment.
Roughly -60 pips and you are out of the game...

I'd suggest looking at most at 50 cents per pip for the first few months. (In case you encounter a streak of losses, 10-20 cents per pip is advised till the balance is recovered in full).

Leverage won't hurt you if you know what you are doing.
We know that the higher the leverage, the more money one can trade and the lower is the margin requirement. Right.

Now, you don't want to trade large positions for the obvious reason that you don't have that much money to cover the risks involved in such trading, but you do need a lower margin, because the lower the margin, the further you are from getting a margin call.

Solution for Forex mini account holders is to take the highest leverage, but trade mini lots. Trading few mini lots at once is fine as long as you know your limits and manage it right.

Why everyone then is warned about risks that come with leveraged accounts. Who should be concerned:

a) High leverage punishes those who try to trade large positions while having small accounts.
.. or extra large positions while having large accounts.

b) High leverage also punishes those who doesn't apply proper money management and/or never place stops loss orders. There will be no shield to protect investments of such traders in case serious losses start to emerge.

To illustrate this, imagine that a holder of a regular Forex account bought several large lots anticipating that the market would rise, but for some reason forgot or postponed placing a Stop order. The market traded quietly for some time but then suddenly fell like rock 600 pips down while our trader was away. The market continues to fall, what will happen to trader's account?

If a trader had high leverage then his low margin requirements would postpone a margin call till some extent, but once it's triggered, almost nothing will be left from the original investment.

If a trader had a low leverage and thus higher margin requirements, in a bad situation a margin call would be triggered earlier and trading positions would be closed leaving some capital on the account.

Either way we return to an improper money management that created problems for our trader and cost him money.

So, here comes the topic of money management and those 2% of the account balance one can risk in each trade. Here you choose your own comfort level.

If to calculate it according to a planned investment:
$300 * 2% = $6 to risk in each trade.

If pip value is going to be 50 cents, then you may risk $6 / $0.5 = 12 pips. Means -12 pips and you must exit a trade.
Depending on your own risk tolerance and the strategy you are going to use these figures can be adjusted. I use 4%, for example.

Hope this helps,
Happy trading!

Edward

Hello Edward -

I can ' t find the words to properly thank you for going to the trouble to give me such a detailed and

informative answer to my question. It was a big help in explaining a topic that , I know , a lot of traders

never learn about until they experience big losses . I THINK SOME OTHER PARTICIPANTS ON THIS WEB SITE

WILL BENEFIT AS WELL . Thank you so much !

Best Regards ,
George