Scalping the EUR/USD

Discussion in 'Forex' started by Trend Fader, Mar 31, 2004.

  1. Mike, I scalp. I trade for a living. I am in building my account mode, so every cent I earn stays in the account. Because I started with a micro $ account size.

    My BEST advice when it comes to scalping technique, and I have promoted this to all the traders who ever wrote me for advice, is this:

    Most (loser) traders make trades too big for their account size. Therefore trade the opposite!

    I calced it out - with my 50/50/30/1-2MM system and now I think I could literally withstand a sudden 1000 to 2000 point hit/drawdown on my account if I traded it properly. And that is having a portion of my account untouched, intact and in reserve incase I need to switch into survival mode.

    For example, I traded the recent 700 point USD/JPY bull spike, short all the way, adding short positions, and came out of it back down around 106.50, never lost a cent, though I did incur operating costs, that, I have rewired my money management some in order to prevent that from happening in the future. I didn't make any money because I made WAY too big of trades compared to what my account size could successfully handle. I was expecting it to go 50 points up - it climbed over 600 points more. One of my best trading friends, the one who recommended the trade to me, got bagged on it.

    Forex trading is trading the world - it's dangerous. Therefore your system must be adapable when Hell breaks lose and tries to vaporize your position. The world is an insane place at times therefore fx has an element of insanity to it.

    Winning in structure (a sane thing) before you ever place a trade is one of the few things that made sense to me, therefore I apply trading principles that are sensible in a (sometimes) insane trading environment.

    Shit happens - your trade structure has to be able to take a massive and violent beating if you expose yourself to the market.

    Most the time we open a trade in a nice gentle breeze on a warm day in a peaceful meadow.

    Next thing we know a huge thunderhead is bearing down on us and the gentle breeze has become a gale with lightening bolts and freezing sleet pounding us. To top it all off we somehow got transported to Pakistan dropped in the middle of a fierce firefight gun battle with friggen bombs going off all around us, along with a simple message: "Try to survive, sucker!"

    Opening a trade setting a stop loss is simply assuring that within a few moments you will be sitting again on the sidelines a few dollars poorer.

    I have not set a single stop loss in what, now, over 5, 6 weeks trading a live account?

    My cap is growing. Granted I have not doubling it every day but I don't take every trade.

    I used to use profit to "release" positions that I felt were questionable in my ability to manage. I don't use my profit anymore like that, because I kicked in this 50/50/30/1-2MM system. Therefore I am now having a steady gain.

    If you want to trade my advice is to NOT trade. Does that sound counter productive? Well it's not.

    Most losers get an account, go out and trade their arse off like maniacs trying to get money. They get eaten. So I say, don't trade, work on your structure. When I am in a trading session like I am now and will be for the next 10 or so hours, yes, I am trading but I am not making trades unless the probabities for my success are in my favor.

    I'd rather miss 99 winning trades and make one successful one than make 99 winning trades and get wiped out on one loser trade.

    The significance of losing terrifies me, therefore I figure out ways to win. Losing is not part of my trading structure. It shouldn't be part of yours either.

    Hey, if any of you guys want Bumfights I have both volumes, just let me know - a $40 value, yours free. PM me.

    Best regards,

    #21     Apr 1, 2004
  2. When is the best hours EST time to scalp the EUR/USD?

    Michael B.
    #22     Apr 1, 2004
  3. Saham.. thanks for your response.

    I am interested in developing a technique were I try to play breakouts... I think there is money to be made there... I will be looking to scalp and make 10-50 pips.

    The strategy for me is to really try to time them with eco# or news events... I noticed than when the market jumps over an hourly level and stops get triggered.. look out.. the thing jumps.

    Fading breakouts also works... except there rarely is good momo on the fade... it happens once in a while.. but the risk to reward stinks. I have seen the market breakout right then run right into key resistance... then pause and breakout again.. before it finally caved in. I know u could of made money on the fade.. but its nerve recking because u are usually going against the stops in place...sometimes the market can jump 20 pips through the stops then u enter a fade.. then it jumps another 10... the momo can be crazy sometimes..
    #23     Apr 1, 2004
  4. I would not consider myself a pro trader but I am a competent euro trader. I look for maybe 20 points in a shortish move. My stops vary between 4 points and 10 points on EuroFx globex contracts.

    I am interested in Oanda's performance particularly specifics on slippage in non-news event situations.

    The answer to electricsavants question seems to me to be in the attached chart (US EST) of volume and range for globex. Note that FX apparently has a higher relative volume during the early european hours than the futures.

    #24     Apr 1, 2004
  5. jrs3


    I have had success using a five minute chart with a 50 period weighted moving average. Trading in the direction of the slope of the moving average, and using a stoch RSI to nail down entry and exits. I use CMS Forex because I like being able to trade directly from the chart, I do not like having to open an order window every time I want to place an order, CMS also has streaming Reuters news FREE.
    #25     Apr 1, 2004
  6. Trend Fader: Yeah, it's definitely a game of death.

    Usually what has happened to me is, I've closed a position at 2 to 4 point (usually closer to 2) thinking I am doing good to get out of the exposure plus pick up 2 points... just to have the trade shoot 8 to 10+ more points in my direction (after I closed the trade).

    If I could figure out a system to get all those LOST pips on most trades, I sincerely would consider myself a good trader: One that Vonda Shepard may do well to seek out.

    The way it's been, and the thing I have not liked, is that I have held positions far enough in drawdowns to make the average trader puke.

    Then what? When the market happens to float up I pick off 2 pips for my trouble? It has dropped back down 2 pips (that makes me happy) then has shot up 15 pips beyond where I closed it. You think it is wise to risk an entire port for 2 pips?

    That has made me feel like a loser.

    When you come up with a way to gain otherwise lost pips pls let me know.

    One other thing, I used to do breakouts on news but once I got bagged several times doing that (on demos) I've concluded that they are too fickle to trade.

    Also, I don't believe in resistance/support levels, especially in fx where the instrument (money) is so liquid and ever changing. You could hit a level once, twice, then it's changed. Not a good thing to base trades on.

    As is commonly known, the longer a trader sits in a trade the more risk there is of having the market go so far against him/her they get a margin call. So far it hasn't happened to me. If I am still posting here 5 to 10 years from now then you can call me a successful fx trader who has made it somehow.

    #26     Apr 1, 2004
  7. Kiwi, so it looks like about 6:30AM EST to 1:30PM EST are the busiest times?
    #27     Apr 1, 2004
  8. Come on.....I live in California....Lets make it 7:30est-15:30est....(4:30 in the morning pacific time!)


    Michael B.

    #28     Apr 1, 2004
  9. cable


    I find that if the market's open, you can make (or lose) money... if you want to make good money with less stress, yeah, the morning seems good. It trends for a while, you can sit back and keep raising your mental stops. If the market's sluggish, you will have to fight to squeeze a few pips out of her, but it can be done by focusing on smaller moves, fading the tops and bottoms of ranges, stuff like that. Oh yeah, and being lucky, and praying a lot. You will soon find that there are no atheists in the foxholes (or in Forex when you're down 350 pips on JPY)! Just kidding, I wouldn't recommend luck or prayer as a primary trading tool. If you get to that point, you're very likely f**ked beyond hope. Welcome to the club.

    2 or 3 pips sounds cheap, but if the market's not moving, or you're only shooting to make 4 or 5 pips total on a quick trade, from the get-go, you've got to dig yourself out from a pretty deep hole. Some short term scalpy moves are like 6 pips, and you're handing a bunch of them over to your broker.

    I think Gamalruach's problem of getting out too soon is common -- I do it all the time. But you're getting out because your gut tells you to get out, and you should listen to your gut if it's been right before ("Better safe than sorry", says Martha Stewart as she dumps her ImClone shares). If it happens too often, focus on holding back more and letting trades ride. It's psychological. Every time I look at a chart, I feel I should be doing something or tweaking my position. Of course, an hour later, I would have been super-rich if I had just not turned my computer on.... I'm a big fan of trailing stops, though I'm too stupid to use them myself.

    Jesse Livermore said something like "I never made any money thinking; it was sitting tight that made me money". Often I look at the charts 3 days after I close a position and realize that the EUR/USD went 250 pips in my direction after I closed out the trade. The market's prime purpose is to drive traders insane. Look at the people who post on ET and you will understand. Reading chit-chat is like wandering through an insane asylum.

    And the BEST way to make money GUARANTEED is to tax-shelter it. ALL of your political and business leaders do it; it is the difference between the upper class and the lower class.

    Slightly Offtopic: Has anyone used OANDA with Mac OSX? I'm getting suckered by the hype and am planning on getting a PowerBook, hopefully next Wednesday. A kind soul already PM'd me about, which I also use, but it would be helpful to know about OANDA as well...
    #29     Apr 1, 2004
  10. OK. The chart is a little difficult to read.

    Volume comes on strongly in the 2:30 est (which is 2:30 to 3:00 on the spreadsheet and graphed slightly to the right by excel). This corresponds to 7:30 in London or 8:30 in Frankfurt when european futures traders start to get serious. In the hour prior to this spreads are 3-4 points on eurofx which is tradable but can be frustrating.

    There are two or three good hours from 2am est where overnight issues/news and emotions seem to give nice trends in my timeframe. Spreads of 1-3 points.

    Then at 8am the US traders start to take effect and you frequently get a good move. Spreads are also in the 1-2 point range. Coming in to eastern lunchtime the markets frequently deaden and the US evening is very rarely worth trading for a short term trader (better to look to hong kong markets).

    Cant do California sorry ES, spent so long translating western pacific times into EST that I do everything in EST now.

    #30     Apr 1, 2004