Probably One Of The Best Books Ever Written About Trading Forex
In recent years there have been many books written about how to trade forex, no doubt cashing in on the growing popularity of currency trading around the world. However, few are as comprehensive, insightful and as well thought out as Bob Volman's book called Forex Price Action Scalping.
Scalping is a trading style geared to fast paced action with the aim of taking many small profits and relies on tick or minute charts. It's one of the most intense and demanding styles of trading, certainly more so than systems relying on hourly or daily charts. Using a military analogy, it's a bit like hand to hand combat versus being a sniper who may wait for days before seeing any action.
Volman, who does scalp trading on his own account, sets out what is needed to do scalping in terms of charting software and a forex platform provider. He also focusses exclusively on the EURUSD pair where liquidity is greatest and spreads thinnest – an important cost consideration with forex scalping. He advises finding a platform provider consistently charging no more than a one pip spread on EURUSD. For MahiFX it is currently 0.8 for that cross.
The tools of the trade
He trades from a tick chart and advises applying one showing 1 1/2 hour of prices from an independent chart provider. The only technical indicator he uses is a 20 bar exponential moving average and that is mainly to provide guidance on price direction. A mistake many aspiring scalpers make is to clutter their screens with many technical indicators and given the pace of this style of trading it makes judging entry and exits more complicated and time consuming. Simplicity is best for scalping.
Volman strictly targets a 10 pip profit per trade with a 10 pip stop loss and works with seven individual set-ups. Mostly these are patterns associated with break-outs from ranges or areas of consolidation in a trend and are well known. However, what he does do is describe each set-up in great detail helping the reader evaluate how to trade them and writes extensively about the potential pitfalls as well. He also shows countless trading examples and explains they did or didn't work. This is extremely useful for helping to understand his trading system and approach.
Trading is a business
The book is also packed with many other useful pieces of advice – trading is a business and should be approached with a sound business plan.
He advises traders to detach themselves from the need to make a profit on every single trade: “if a trader executes his method correctly and consistently, all results, good and bad, only reflect the typical variance to be expected in a random distribution of outcomes.”
Contrary to popular advice, Volman has doubts about the psychological value of paper trading for novices and advises doing so with real money, but only very small amounts, as it is a more realistic way to learn trading from his point of view. And he stresses that mental stability, more than technical skill, is the most important ingredient for trading success.
Is scalping forex for you?
For anyone considering forex trading for the first time or even experienced traders the book is worth a read even if for no other reason than to help decide if scalping forex is the right trading style for you. And it certainly isn't for everyone. The book can be bought from online retailers such as Amazon.