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EURUSD Scapling
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EURUSD Scapling

  #21 (permalink)
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Shar View Post
I wasn't suggesting YOU use a mental stop. I was giving info on different MM techniques to look up and I gave mine. I DON'T trade off the 30M. If I did I wouldn't even have a 20 pip stop loss as I would be looking at the smaller TF with a smaller stop loss and move it up/down as price would be going in my direction. But hey, if you feel better losing $1200 on a loser trade, who am I to suggest otherwise.

Good Luck!

Ha, unfortunately I don't like losing $1,200 a pop. But I think that's close to the best place for the stop loss with the targets set so high. I am probably wrong though. That's why I'm the beginner and you're the veteran.



mtaalamu View Post
So you are working with 30k? (1200 is 4% of 30k)--that's a good amount at your disposal.

The whole purpose of money management is to keep you in the game until the next series of winners show up to help you pay bills.

In a nutshell, if you cap your monthly loss to 6% of your starting balance, and the loss on any one trade to 2%, you will be better off.

Example; you start with 30k Oct 1st, 2012. You put on a trade with a hard stop loss of 2% ($600) It gets hit. You get in another trade and it's another loser, now you are down $1200. If you lose another 2% or $600 anytime during the month. you stop for the rest of the month and trade in simulation mode, no matter how much money you have made over and above the original losses! What this does is stop you from hurting yourself when your method is obviously not firing on all cylinders and keep you in the game, long term.

Now, Arich, go back over your records and see what might have happened with the same distribution of winners and losers IF you had applied the two rules above.

TWO RULES OF TRADING
If you DON'T bet, you CAN'T win...If you run out of money you CAN'T bet...

I will interested to learn what this exercise brings out.

As for scalping, I learned to "scalp" on a site called betfair.com and there, what you here call 'scalping', they called 'trading' (as opposed to 'backing' or 'laying', ie, betting on the outcome of a UK horse race. Instead of betting on which horse would win the race, "traders" on betfair would bet if the price on a particular runner would go up or down, providing liquidity and depth of market to the folks who simply wanted to bet that their horse would win--or lose!--yes, you can bet horses to lose on betfair.)

So a good trade in that environment, was a one-tick movement. Buy the bid, sell the ask. You have to remember also, that I trade forex on MB trading, so I in effect, get paid to place trades... $1 per 100k. ($2 per standard lot roundtrip).

If I can simply churn or "scratch" 10 million dollars, I've made $100 in commission rebates. So if the market isn't going the way I want in a hurry!--I just get out and look to get back in when conditions seem more favorable (per my Bill Williams' style "alligator" charts. For me, a scratch trade is a winning trade. It means I just won small.

Basically my method is this: check my charts and get a directional bias, say long; then I start buying... I scale in $1000 to $2000 at a time, and as soon as I am profitable (based on my average price per lot) and the trade starts to work for me, I scale out---quickly! Once that is done, I then "rinse and repeat".

On betfair, in the olden days, there were NO charts (except a very primitive price over time line on close chart.this chart did NOT aggressively update in real time like charts nowadays do) and in the beginning NO DOM to place bets--so it took several mouse clicks to place or cancel an order: it was truly slow and very tedious.

To succeed, you literally learned to "feel" the weight of money shifting the scales one direction or the other by watching the money pile up on the bid or ask side on the betfair website.

And of course, you could get tricked by "spoofers" (people who place LARGE orders and then quickly pull them before they get filled.)

But do you want to know what I found to be the hardest and most difficult thing to learn about scalping? taking losses quickly. You can't make a living on one tick gains taking 3 tick losses half the time.

Good luck.

Would you keep max monthly losses to 6% no matter the starting balance?

I will go test out the "no more than 6% total loss in a month" thing and see what it shows. It's gonna take me some time because I work full time and trade in my off time... (hopefully that will change someday )

That is very interesting. I always assumed "scalpers" were trying to collect 5-10 pips in each trade. Would your methods work on a slightly larger scale? Have you tried larger targets (say 5-15 pips)? Your method fascinates me.

Thanks for all the feedback!

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  #22 (permalink)
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stops and targets part 1


Arich View Post
Ha, unfortunately I don't like losing $1,200 a pop. But I think that's close to the best place for the stop loss with the targets set so high. I am probably wrong though. That's why I'm the beginner and you're the veteran.




Would you keep max monthly losses to 6% no matter the starting balance?

I will go test out the "no more than 6% total loss in a month" thing and see what it shows. It's gonna take me some time because I work full time and trade in my off time... (hopefully that will change someday )

That is very interesting. I always assumed "scalpers" were trying to collect 5-10 pips in each trade. Would your methods work on a slightly larger scale? Have you tried larger targets (say 5-15 pips)? Your method fascinates me.

Thanks for all the feedback!

Yes, I would keep it to no more than 6%--and most likely less. I work full time too, but self-study is a fascinating subject and highly instructive.

My trading method does allow me to scalp bigger bites out of the market, but my temperament won't let me wait that long! So while a move is going in my "predicted" direction, I will simply go in and out many, many times, nibbling the market.

STOPS AND TARGETS

Actually as far as where stops should go, the market itself is the best teacher. It is usually the first fractal in the opposite direction on the same time frame....

I am running out to work right now, but I will post pictures and explanations when I get back later today... Good luck!

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  #23 (permalink)
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Arich View Post
Ha, unfortunately I don't like losing $1,200 a pop. But I think that's close to the best place for the stop loss with the targets set so high. I am probably wrong though. That's why I'm the beginner and you're the veteran.
...

You are trading your equity curve not the market. You should not be placing stops based on the amount of money you are comfortable to lose, you should place stops where it technically makes sense in the market, whether that is 10 ticks away or 100 ticks away. You should not arbitrarily say, I can afford to lose 40 ticks, so that is where I will put my stop. The market does not care how many ticks you can afford to lose.

This is where position sizing comes in. You should be placing your stop according to market analysis, then size your position accordingly to achieve or maintain the desired dollar risk. The formula is: PositionSize = DesiredDollarRisk / StopSize. (Search for Van Tharp's R-Multiples to learn more)

Using this method, you can say I only want to risk $50 on any trade, now using the formula you can size your position so that you will only risk $50 whether you place your stop 20 ticks away or 200 ticks away. If your account size will not allow you to do this, then you are under capitalize for the trading method you are using, therefore you should be trading micro lots in order for you to have more granularity in position sizing.

If you are using Ninjatrader here is an on chart position sizing indicator that does all the calculations for you: TradeRuler

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  #24 (permalink)
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monpere View Post
You are trading your equity curve not the market. You should not be placing stops based on the amount of money you are comfortable to lose, you should place stops where it technically makes sense in the market, whether that is 10 ticks away or 100 ticks away. You should not arbitrarily say, I can afford to lose 40 ticks, so that is where I will put my stop. The market does not care how many ticks you can afford to lose.

This is where position sizing comes in. You should be placing your stop according to market analysis, then size your position accordingly to achieve or maintain the desired dollar risk. The formula is: PositionSize = DesiredDollarRisk / StopSize. (Search for Van Tharp's R-Multiples to learn more)



I also covered at length here:
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  #25 (permalink)
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Arich View Post
Ha, unfortunately I don't like losing $1,200 a pop. But I think that's close to the best place for the stop loss with the targets set so high. I am probably wrong though. That's why I'm the beginner and you're the veteran.




Would you keep max monthly losses to 6% no matter the starting balance?

I will go test out the "no more than 6% total loss in a month" thing and see what it shows. It's gonna take me some time because I work full time and trade in my off time... (hopefully that will change someday )

That is very interesting. I always assumed "scalpers" were trying to collect 5-10 pips in each trade. Would your methods work on a slightly larger scale? Have you tried larger targets (say 5-15 pips)? Your method fascinates me.

Thanks for all the feedback!


Iīm also a scalper and have good results with using an initial stop of 4 ATR of the tradet timeframe for the Dax. Iīm using a 3 JamRenko chart. If the scalp turns into a trend move, I trail my stop according 4 ATRīs from the next higher timeframe which is a 36 tick BetterLineBreak3 chart. You can check this for Forex if you want and maybe have to adjustet the ATR.

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  #26 (permalink)
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Small Targets VS Large Targets

I read a comment that a trader posted recently on a forex site. He said something that interested me, which is why I started this thread.

He claimed that too many traders emphasize "aggressively capturing pips" (i.e. aiming for 50,75,100, 200, etc. pips) when, in his opinion, they should rather scale back on how many pips they target and aggressively use more capital. He said that he aims for one 5-10-pip move a day and uses ten lots, effectively making $500-$1,000/day.

Now, obviously this begs several questions about indicators, methods, strategies, etc. that he uses to achieve these profits. Also obvious is that he can't just make one trade a day (which he didn't elude to or say that he did), but rather sets his goal for the 10 pips. He also said that he doesn't use stops, which surprised me.

I tried to look up his post but couldn't find it again.

I know there are hundred if not thousands of different mediocre strategies out there trying to be passed off as the holy grail of all tradingdom, so I wouldn't be surprised if this guy was just gloating about another mediocre method. He wasn't selling anything, and he didn't seem to be prodding anyone to ask him for information. He did just seem to be presenting an opinion, so I would like to know your thoughts on this.

Is his basic theory concrete? Market exposure does not seem too appealing, and targeting high amounts of pips opens a trader to more market exposure.

Is this just another opinion that is good or bad based on preference? Are there legitimate rewards to aggressively using capital like that without stops as long as the target is small? (Seems really risky to me)

What are your thoughts on this?


Last edited by Arich; October 4th, 2012 at 12:55 AM. Reason: typo
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  #27 (permalink)
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Arich View Post
I read a comment that a trader posted recently on a forex site. He said something that interested me, which is why I started this thread.

He claimed that too many traders emphasize "aggressively capturing pips" (i.e. aiming for 50,75,100, 200, etc. pips) when, in his opinion, they should rather scale back on how many pips they target and aggressively use more capital. He said that he aims for one 5-10-pip move a day and uses ten lots, effectively making $500-$1,000/day.

Now, obviously this begs several questions about indicators, methods, strategies, etc. that he uses to achieve these profits. Also obvious is that he can't just make one trade a day (which he didn't elude to or say that he did), but rather sets his goal for the 10 pips. He also said that he doesn't use stops, which surprised me.

I tried to look up his post but couldn't find it again.

I know there are hundred if not thousands of different mediocre strategies out there trying to be passed off as the holy grail of all tradingdom, so I wouldn't be surprised if this guy was just gloating about another mediocre method. He wasn't selling anything, and he didn't seem to be prodding anyone to ask him for information. He did just seem to be presenting an opinion, so I would like to know your thoughts on this.

Is his basic theory concrete? Market exposure does not seem too appealing, and targeting high amounts of pips opens a trader to more market exposure.

Is this just another opinion that is good or bad based on preference? Are there legitimate rewards to aggressively using capital like that without stops as long as the target is small? (Seems really risky to me)

What are your thoughts on this?

Ok, my thoughts on this.

IMO itīs a very lucrative and valid trading style. BUT, this is only doable if you know exactly what you are doing and are very good at it (discipline). This means no hopium or hesitation by following your trading plan.

However I have a different opinion regarding stops. of course you canīt work with tight stops but must have at least a whorst case stop for such as broken connection, pc trouble, unecpected major events etc.

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  #28 (permalink)
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Abde View Post
Ok, my thoughts on this.

IMO itīs a very lucrative and valid trading style. BUT, this is only doable if you know exactly what you are doing and are very good at it (discipline). This means no hopium or hesitation by following your trading plan.

However I have a different opinion regarding stops. of course you canīt work with tight stops but must have at least a whorst case stop for such as broken connection, pc trouble, unecpected major events etc.

I concur, i can't see any reason for not using a stop for "protection"?

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