Scalping Forex robots – is that the automated trading system for the private trader? Many Forex believers bang their head against the question how such a robot could trade. We do it differently here and ask, what does the scalping robot trade?
Forex scalpers need random movements and such are plenty in Forex. Wrong! There are plenty of chaotic price moves in Forex but even the smartest robot cannot outsmart Fortuna. With random prices no trading system will work.
What a scalper needs are prices that are coming back. Prices that move anticyclically in the short-term. As in any market there is such price behavior in Forex, but… Forex has the nasty habit to drop or bump up prices by a whole percent or so within seconds on news. Forex scalpers will sooner or later take their knockout hit.
Compare Forex with stocks. They share the very same forth and back of prices intraday. Additionally the stock market offers a huge number of stocks. The fine thing is of course the possibility to select. The investor can look for undervaluation, while the momentum player searches trends. Both will find almost always what they are looking for.
Poor Forex traders have to deal with scalping. Not because it works so great. No, because there isn’t generally a single trend or undervaluation that is worth a trade or investment. That is why the scalping Forex robot was invented. If there were trends, we would have an army of trend following robots, but so we have only a trending army of scalpers. Keep care you Forex scalpers that you don’t wake up one morning, finding yourself scalped by your robot.
There are no trends in Forex? Trends are seldom and if they occur they are often finished within minutes. These intraday Forex trends can be traded manually, but that is difficult. Those that run days, weeks or months are often only in hindsight trends. Yes, they are hindsight-trends. Trends that may be spotted in a chart, but that are on average in that very moment finished you are buying them.
A real trend has to have more than the typical chartist will need to characterize something as a trend. The chart adept has too fine an eye and tends to interpret everything that looks the slightest bit straight as a trend.
Real trends are smooth, have higher volume, higher volatility and a fundamental reason that is not unknown. Not many stocks are offering that at the same time. Most behave like a currency – just with a bigger volatility – but it is the large pool of trading candidates that assures there are always interesting situations in the stock market.
