SIDEWAYS CONSOLIDATIONS– This one is quite easy to trade, and it
happens quite often. Its characteristic is that the market is bouncing within a
range that is predominantly sideways, or with a very slight slant (slope).
In “Forex Surfing” you learned the concept of “Channel Surfing Zones”. You
can use that technique as a guide to help you to determine when to enter and
when watch for a reversal to exit on.
Generally speaking, while the price is near one of the boundaries you wait for
an indication that the market is reversing, and at that point you attempt to
enter a trade. As it approaches the other side of the range then you exit when
it is very close to your trendline, or if you see a stagnation or what looks like a
reversal. If it starts reversing then you simply jump back into another trade
for the opposite direction as the market again moves through the consolidation
range. It is important to realize that you will miss the opportunity to trade on
the first two or three bounces within the range as that is when the range is
becoming formed for you to recognize it for what it is. Also the longer the
range has been happening, and the more times it bounced around within, then
the greater the probability that a breakout might soon occur.
amplitude of this range is about 20 pips. Using your standard scalping
techniques (that you’ve learned earlier in this eBook) you could have easily
traded these petit trends within the range. (Extra discussion of the
chart: Something you probably didn’t notice (but with practice your eyes will
get accustomed to recognizing) is that towards the end of the consolidation the
range narrowed in somewhat like a triangle (lines not drawn on chart, just
imagine them), and then the market broke out of that tiny triangle going
up. The caffeinated candle that happened after the tiny retracement that
followed the consolidation break out should have tipped you off to go for a
scalp. It went up over 30 pips after that.)
Small consolidations can happen virtually any time, but you’ll often see tiny
consolidations outside of market overlap times (hence why many traders
simply call that time “consolidation time”). While most traders are bored
silly, and often leave their computers (not trading), you can be actively
engaged in catching a few pips. Over several hours of trading within a small
consolidation you could rake in as many pips as a lot of traders hope to attain
in a trading session.
Also keep in mind that sometimes a consolidation pattern might happen
before a significant Fundamental Announcement that everyone is waiting
for. If that is the case then by all means trade the range but BE SURE TO
GET OUT of your trade BEFORE the FA is released.
Want a cool tip? Of course you want it. Well, there is another thing you can
do. Before a Fundamental Announcement try to enter a scalp (in any
direction) and try to lock in 10 pips of profit if you can, but at the very least
secure your stop for a breakeven point. Then wait for the FA to be
released. If the market reacts to the FA by moving in your favorable direction
then congratulations, you just scored some nice pips. If the market reacts to
the FA by moving in the wrong direction then “oh well”, you got stopped
out. It’s basically a 50/50 deal (except for whiplashes). Very important!!!
You can ONLY do this if you are trading with a broker that guarantees stops
under ALL market conditions (so don’t try this with FXCM as you’ll get
burned bad). In the eBook “Forex Sailing” I’ll reveal to you a broker that
currently does guarantee stops under all market conditions.
This chart moves to the opposite side of the spectrum from the previous chart
(the 1 minute chart). This charts shows you about 5 days of consolidation on
1 hour charts. What is interesting to note on this chart is that I’ve used a
horizontal line for the top, but a sloping trendline for the bottom. Notice that
by connecting the first two bottom points it lined up near perfect with the
following three bottoms? The range started at about 100 pips but narrowed
over the following 5 days.
The “trick” to scalping larger charts is to zoom into smaller charts (say 5
minute) to watch for the major reversals. Simply scalp when the market is
near a boundary but moving back into the consolidation range. Secure a 10
pip profit stop and then wait (crossing your fingers) for it to move through the
consolidation range. If you get stopped out early (for a 10 pip profit) then
simply try again when the conditions appear right. Sooner or later (after
perhaps a few tries) you’ll catch a scalp that’ll run to the other end of the
consolidation range. When it is near the other side (past the middle) start
watching for reversals for potential exits.
Another way to trade such a large consolidation is to trade the petit trends
along the micro trends IN THE DIRECTION of the market moving through
the consolidated range.
forex sato
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