Make Money 'Spike' trading. Part 1

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Alex

Alex

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Hello everybody, and welcome to our Forex-related section!

Here, I’m going to share my experience, personal observations, and useful tips and advices.

Actually, my 4 year trading experience includes thousands of sleepless nights, hundreds packs of sedatives and, of course, a good profit. I’m happy to tell you about several time-proven ways of making money on Forex trading

Today I’ll tell you about such phenomenon as ‘spike,’ a quote that substantially deviates from the market price, non-market quotes.

All Forex brokers face a spike as it is one of the unsolved technical problems of Forex. The fact is, different exchanges periodically have a significant price gap for both CFD and listed currencies, which can reach hundreds of pips.

Usually, dealers try to prevent the situation when a non-market quote leaks into the current price. When this happens, the system automatically returns the price to the current level.

The screenshot below shows what the «spike» looks like. The non-market rate usually lasts only a few seconds, and the next price (tick) returns to the prior rate.


skyke2.jpg


spayk1.jpg



What can we do in this case?

After all, if our stop-loss is set between the current quote and the «spike," it will be executed and we will get an unplanned loss in this position. Of course, it can be challenged, but it costs time and nerves. You need to communicate with the support team for a long time, provide supporting screenshots, and wait for a decision on your issue.

We take a different approach.
I offer you a simple way of making money. There are several important points that must be met. So, here are the steps you need to take to start earning on non-market quotes.

Analysis of traded (financial) instruments.
We choose a financial instrument and look at the course of quotations during the day to find non-quote «candlestick." Keep in mind that the candlestick’s body must be MUCH large in size then other ones, the candlestick chart must be the only one. In addition to the usual «candlestick," you can choose a dodge candlestick. That is the «spike». Usually spikes are repeated at the same time, daily, or quite often.

Preparation for trading.
At the chosen time, you have to place two orders — one much higher than the SELL price, and another one lower than BUY price. Orders should be at a sufficiently safe distance, so that they will not be executed during normal volatility.

Spike catching.
You have monitor the price carefully, constantly adjusting the price of pending orders to keep the distance between the orders and the price. With the orders you need to get an «fork» or «gate» around the price. Then, you have to be waiting for a non-market quote.

When a «spike» occurs, the price rises sharply up or down, and almost immediately comes back. Let’s assume the price had sharply increased of 100 pips and returned back. Due to the slippage, the SELL order is opened at the highest level of the non-market price. When the price returns to the prior level, we have a profitable position of 100 pips. The same situation is when the price falls below the current one — the BUY order is executed, and we still get a profitable position.

Than you have to close both executed and pending orders. You can also not close a pending order if you see that the price is moving in the right direction, or assign it Break-Even status.

Key conditions for successful trading with spikes:

1. DO NOT BE GREEDY. Do not put large volume on pending orders. Remember that all positive deals are checked manually by managers — a large profit will attract the attention and most likely your transaction will be canceled.

2. Ensure a stable Internet connection. If the connection fails, you do not have time to move the orders, both or some of them will be executed, and you will get an undesirable trading situation.

3. Do not make only spike-related transactions. It is desirable that the volume of your ordinary transactions and the spike ones was commensurate. This will dispel risk manager’s superfluous suspicions.

How much money can you earn on forex spikes?
Let’s agree we don’t discuss profit in $$$, but as a percentage of capital. For example, if you work with 5% of your funds, the non-marketquotation «shoots» at 100 pips (in my time I have seen «jumps» of 200 and 250 points), and you catch «spikes» three times a week, you will get 60% growth of your balance just using this strategy.

In the next posts, I will speak about other important moments of trading, which were not mentioned above due to the posting requirements. Ask your questions, write comments, thoughts — I will be happy to answer everyone’s questions!

Good luck to everyone with trading!
 
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Carly Swinson

Carly Swinson

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Hi Alex, thank you for sharing your hard earned experience on Forex trade with us.
 
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