High frequency scalping

Discussion in 'Forex Trading' started by thetrendfollowe, Jan 8, 2008.

  1. Hi,

    Does anybody trade Fx through a strategy which would best be described as high frequency scalping?

    If so, id like to know:

    *Do you trade through a mechanical system or is your method discretionary?

    *If the former, have you automated your strategy?
    Through which broker?
    And which software did you use for systems testing and design?

    *Which pairs do you trade?

    *How many trades do you pull a night?

    *How many pips does every trade nett on average?

    I'd appreciate any sort of discussion on this matter.

  2. MTE


    "High frequency scalping" :D

    Scalping is high frequency trading by definition. It's like saying "ice skating on ice".:D
  3. Really? I always considered that the 'general' use of term 'scalping' was in regard to the size of the profit target rather than the frequency of the trade.

    But then again, some would fervently adhere to the traditional stock trading definition of 'buying at the bid and selling at the ask'. No mean feat in the world of spot forex. In which case I guess you would need to be a super scalper to market-make a market-maker.
  4. MTE


    The two are closely related, wouldn't you say!?
    So let's put it this way. Scalping has a very small profit target. So if you are to make any reasonable money you need to have a high frequency of trading, otherwise it doesn't make any sense, or does it!?
  5. Ummm, not exactly what I was hoping for, but thanks for your responses, gents.

    Well i always thought scalping means small profits.
    Some people are happy with small profits full stop. I hear of a thread titled 10 pips everyday. Not exactly reaching for the stars if you know what i mean.

    And i dont plan on ever trading with a market maker. Ever.

    Do either of you guys scalp?
    My questions please.......

  6. Hi,

    Does anybody trade Fx through a strategy which would best be described as high frequency scalping?

    If so, id like to know:

    *Do you trade through a mechanical system or is your method discretionary?

    Both mechanical and discretionary, as well as scalping news.

    *If the former, have you automated your strategy?

    Yes, but it needed constant monitoring and tweaking to adapt to market conditions so was a bit of a pointless exercise.

    Through which broker?

    Alpari UK and Interbank FX (a misnomer if ever I heard one!)

    And which software did you use for systems testing and design?

    Metatrader 3 and 4, unfortunately the results of backtesting are not at all reliable.

    *Which pairs do you trade?

    Anything with a spread less than 4 for obvious reasons.

    *How many trades do you pull a night?

    Did, I don't scalp any more, but 15 or 20 a day when I was.

    *How many pips does every trade nett on average?

    Pure scalping roughly 5 pips

    I'd appreciate any sort of discussion on this matter.

    It's not worth doing for a number of reasons such as risk and the intense work that goes into it, as well as the difficulty finding a broker who doesn't object to being pickpocketed! Manual execution puts an end to the party very quickly, they end up screwing you one way or the other.

    Unless you're an adrenaline junkie why the need to scalp anyway? Why not trade as your moniker suggests, follow the trend. It may be boring but it's easier, less intense, makes more sense from every angle, and is much more profitable in the long run.
  7. You could always leverage the hell out of the account and go for broke, it's probably going to be the outcome anyway so may as well get it over with quickly!
  8. Hi cabletrader,

    Thanks for your response,

    I realise that you trade through a market maker. Yes Iv heard those stories as well. That's why I would trade through an ECN broker, like EFX/MBT, you pay a bit of commish, but tight spreads, great executions, top customer service, and they dont give a damn how you trade.

    Im not sure what you mean by the risk?

    I would think scalping is quite a low risk strategy due to the short holding times you would never let a trade go against you too far and thus maximum trade drawdowns and overall drawdown would be quite low.

    Also, market exposure would be decreased as well due to the nature of scalping. Less time in the market = less risk.

    I trade a long term trend following system for equities. This trades off weekly timeframes, and though its only just started, I expect it to do very well over the course of time.

    I turned to forex only recently because of the high volatility and because its a very dynamic market, i saw the potential for income from forex, and because forex and equity markets have historically very low correlation, it makes sense to have both systems running in the portfolio.

    so why don't I trade both forex and stocks longer term?
    Well, Short term trading has many advantages, less market exposure, as mentioned before, quicker recovery time from drawdowns, more opportunity (trade frequency), and a super smooth equity curve.

    The forex advantages over this are much higher liquidity than stocks, and also its a 24 hour market.

    And though I have a fulltime job outside of trading and have no intention to watch the screen all day so thats why automated trading holds great appeal.

    I have been looking at some charts over the past week or so and the strategy though only in its initial stages, looks promising.

    It trades off 5-minute charts, on the cable and Usd/Jpy, does 60-80 trades per day, and makes about 3pips nett of spreads and commissions per day, with average trade length being about 15-20mins.

    The hit rate actually is only about 50%, and the average win/average loss less than 1.5. But its the high trade frequency that brings home the bacon.

    USD/JPY actually alone has better stats, but adding cable though it decreases expectancy a touch, it adds to the trade frequency quite significantly.

    Lot of work still to be done though, but im in no hurry.

    Im planning to use Neoticker/Esignal for software and data and EFX as the broker.

    And further feedback or discussion appreciated.
  9. Hi

    I'm not so sure about ECN's being more tolerant, they're counterparty just the same as a marketmaker. I'm very suspicious of this new breed of non dealing desk supposedly STP broker, it seems to be more of a marketing exercise somehow. Aggressive scalping would soon answer that question!

    The risks I was thinking about are things like slippage and disconnections at volatile times like news and data, especially for an automated system unless it was run server side. With a hit rate of 50% at less than 1:1.5 scalping a few pips it wouldn't take a lot to wipe out gains. When you said '3pips nett of spreads and commissions per day', did you mean 3 pips nett per trade? If so, with a risk:reward of less than 1:1.5 means a stop of what, 2.5 pips including spread and commission? That can't be right surely, maybe I've misunderstood, especially if your average trade length is 15-20 mins.
  10. Mb/EFX commish is too high for scalping. You'd be better off trading the Globex. You can get RT for around $5-6 per trade there as opposed to $14+ with MB.
    #10     Jan 9, 2008