From all the system vendors I work for (hehe) I mean have subscribed to, I have learned a decent scalping method that seems to be working. Using a 4 period fast Stochastic and 15 or 30 min chart. When Stochastic goes from less than 20% to over 50%, buy the high of the bar that closed over 50% set your stop under the low of the trigger bar. Target would either be a time target- or exit into S/R or major moving average. On the sell side- it must go from 80% to under 50% and everything else is inverse from the buy. Any care to pick it apart?
entry is easy. your description lacks what exit strategy to use. one might argue that the exit is the most important part of trading. from a more general point of view, this is a simple oscillator trading system (simple is good here). The difficult part is to make sure you have a positive expectancy. the usual problem with oscillator systems is their risk to be killed by trendiness. (and then the problem of active systems, like comms and slippage of course). the trend factor is really important. it is tough to make money scalping if the system enters on each reaction to the trend (the oscillator will trigger a long as you describe, while the trend is down). You have a stop and that's fine. but these losses accumulates and erodes your account quickly. nothing against osc systems. I love them in summer. very easy money. but not in trends. nothing works all the time. just some thoughts. waiting for your reply on the exits. tntneo
Download a free trial of Stockwatch (crontech.com) and do a simple backtest. I would do it for you but my trial ran out a month ago.
I don't use a 100% mechanical exit. I usually exit into a major MA on the time frame I am trading like the 50 or 200 period MA. If there isn't an MA to exit into, I'll exit into the HOD or the LOD. Any thoughts to make it better?