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EURUSD Scapling
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EURUSD Scapling

  #1 (permalink)
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EURUSD Scapling

Hello all,

Since I'm fairly new to forex, I'm still trying to figure out which methods to focus my attention.

I've heard that scalping in forex is a bad idea due to the (potentially) large spreads. I'm in the process of learning how to code and backtest my trading ideas, but until I can fully implement my backtesting I'd love some input (critiques) by more experienced traders.

My question is this: what is your opinion of scalping on the EURUSD when using a 30m candle and 10-15 pip targets? The spreads are generally pretty low on that pair... Is this even a viable outlet? I've been trading using large targets (40-100 ticks) for almost a year now, and it amazes me how many times my entries will hit somewhere between 10-30 ticks before going against me. It seems logical to lower my targets then, right?

Any/all opinions welcome here!

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  #2 (permalink)
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  #3 (permalink)
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It's my bread and butter right now. If profitable you will find the shorter the time frame/more intense the trading the higher your win/loss percentage. This is a function of the larger risk/reward ratio--you will probably see 60% - 70% win/loss to be profitable. Traders with equal proficiency but who choose smaller risk/reward ratios (e.g. 1:3) may make the same profits, but with an equally smaller win/loss ratio (e.g., 30%).

The other issue you may encounter is while you can realize almost 100% of a trend (pip-wise) its because you're taking with- and counter trend moves and spending a fortune on commission to do it, as opposed to the ones (in hindsight including non-traders, ) who say why didn't you simply buy at the low and sell at (what turned out to be) the high?

At the end of the day, if a style feels right adopt it and learn from it.

ETA: Depending on your method 30 minute candles may be too lengthy--work up from 1-5 minutes if you prefer time based bars. Bear in mind at that resolution noise becomes a factor.

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  #4 (permalink)
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bnichols View Post
It's my bread and butter right now. If profitable you will find the shorter the time frame/more intense the trading the higher your win/loss percentage. This is a function of the larger risk/reward ratio--you will probably see 60% - 70% win/loss to be profitable. Traders with equal proficiency but who choose smaller risk/reward ratios (e.g. 1:3) may make the same profits, but with an equally smaller win/loss ratio (e.g., 30%).

The other issue you may encounter is while you can realize almost 100% of a trend (pip-wise) its because you're taking with- and counter trend moves and spending a fortune on commission to do it, as opposed to the ones (in hindsight including non-traders, ) who say why didn't you simply buy at the low and sell at (what turned out to be) the high?

At the end of the day, if a style feels right adopt it and learn from it.

ETA: Depending on your method 30 minute candles may be too lengthy--work up from 1-5 minutes if you prefer time based bars. Bear in mind at that resolution noise becomes a factor.

Thanks for the input!

If you don't mind me asking, what indicator do you use, and do you only trade during certain periods of the day (i.e. during EUR or US market hours)?

I trade 24/7..... it wears on a guy... and I use a MACD for my indicator. My strategy is good enough that I haven't wiped my account after almost a year of frequent trading, but it lacks consistency and isn't very profitable for the long hours it requires. So, I'm back to the drawing board. Scalping looks interesting because one doesn't have to dedicate 24 hours to it... and it seems like it would be easier to be consistently profitable. Thoughts?

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  #5 (permalink)
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San Diego, Calif. USA
 
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consistently profitable

Hello all,

Since I'm fairly new to forex, I'm still trying to figure out which methods to focus my attention.

I've heard that scalping in forex is a bad idea due to the (potentially) large spreads
.

I trade forex on MB trading because I pay NO commissions and can set my own spreads. Overhead (meaning win percentage, commissions, spreads and slippage) is what makes scalping a bad idea. If you can eliminate or at least minimize those variables, you will do better.

My question is this: what is your opinion of scalping on the EURUSD when using a 30m candle and 10-15 pip targets? The spreads are generally pretty low on that pair... Is this even a viable outlet?

I personally only use 20-60-and 180 "range no gap" bars (available on Big Mike's) because it quiets my charts down compared to time or tick based charts.

Most of the trading on forex IS EURUSD so the market is liquid. I trade on MBTrading (through Ninja Trader 7) and set my own spread, but in general, when I was on currenex, the spreads were fairly low as well...so yeah, I think this is a viable option. It's all I trade.


I've been trading using large targets (40-100 ticks) for almost a year now, and it amazes me how many times my entries will hit somewhere between 10-30 ticks before going against me. It seems logical to lower my targets then, right?

Yes absolutely. Considering that I think 1/10 pip is a win--10 pips to me is nothing short of phenomenal. Personally, if I had the temperament to stay with a trade long enough to take 10 pips, no way would I let it go against me for more than say... half or 5 pips before I'd take my money off the table and wait for another entry.

But really, scalping is not for everybody--it's labor intensive. To scalp profitably you need to be RIGHT most of the time and then you need to be able to cut losers so quickly and dispassionately that it borders on the super human.

Or, you need bigger winners; which is what you have. Why not stay with the big winners and just don't let it go against you once it's turn profitable? I guess the key factor to consider is what is your hit rate or win percentage? The more you win when you are right, the more you can afford to lose when you are wrong--up to a point.


If you are consistently profitable now, I would just keep that going and increase the size of my trades over time... until I reached the point at which my judgement is clouded because the size is too large.

To me, consistency is the only thing that matters ...


Last edited by mtaalamu; September 25th, 2012 at 04:28 PM. Reason: add a question
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  #6 (permalink)
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mtaalamu View Post
[COLOR="Teal"]Hello all,

I trade forex on MB trading because I pay NO commissions and can set my own spreads. Overhead (meaning win percentage, commissions, spreads and slippage) is what makes scalping a bad idea. If you can eliminate or at least minimize those variables, you will do better.

I personally only use 20-60-and 180 "range no gap" bars (available on Big Mike's) because it quiets my charts down compared to time or tick based charts.

Most of the trading on forex IS EURUSD so the market is liquid. I trade on MBTrading (through Ninja Trader 7) and set my own spread, but in general, when I was on currenex, the spreads were fairly low as well...so yeah, I think this is a viable option. It's all I trade.

Yes absolutely. Considering that I think 1/10 pip is a win--10 pips to me is nothing short of phenomenal. Personally, if I had the temperament to stay with a trade long enough to take 10 pips, no way would I let it go against me for more than say... half or 5 pips before I'd take my money off the table and wait for another entry.

But really, scalping is not for everybody--it's labor intensive. To scalp profitably you need to be RIGHT most of the time and then you need to be able to cut losers so quickly and dispassionately that it borders on the super human.

Or, you need bigger winners; which is what you have. Why not stay with the big winners and just don't let it go against you once it's turn profitable? I guess the key factor to consider is what is your hit rate or win percentage? The more you win when you are right, the more you can afford to lose when you are wrong--up to a point.


If you are consistently profitable now, I would just keep that going and increase the size of my trades over time... until I reached the point at which my judgement is clouded because the size is too large.

To me, consistency is the only thing that matters ...

Since May of this year (I took a break from trading about a month prior to May while I switched brokers) my strategy is 47 percent profitable... I had 305 losing trades and 275 winning trades (that's what trade management can do for you I guess ). The problem I have with my strategy is that it "isn't" consistent. It's very sporadic. Most (if not all) of my profit these past several months came from one three week period!

My strategy has three targets, so that helps keep me from giving too much of my profits back. The issue is reaching the targets and breakeven. Since my goals are so lofty, I can go several trades without seeing a profitable one (that bothers me...).

I use Interactive Brokers, and their spreads average between .5 and 1 pip which seems very reasonable (even in a scalping strategy). But my idea of what scalping is seems to differ from what I've been hearing. Is 10 pips too lofty a goal when scalping?

Are 20-60-and 180 "range no gap" bars available for EasyLanguage?

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  #7 (permalink)
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mtaalamu View Post
Hello all,

Since I'm fairly new to forex, I'm still trying to figure out which methods to focus my attention.

I've heard that scalping in forex is a bad idea due to the (potentially) large spreads
.

I trade forex on MB trading because I pay NO commissions and can set my own spreads. Overhead (meaning win percentage, commissions, spreads and slippage) is what makes scalping a bad idea. If you can eliminate or at least minimize those variables, you will do better.

My question is this: what is your opinion of scalping on the EURUSD when using a 30m candle and 10-15 pip targets? The spreads are generally pretty low on that pair... Is this even a viable outlet?

I personally only use 20-60-and 180 "range no gap" bars (available on Big Mike's) because it quiets my charts down compared to time or tick based charts.

Most of the trading on forex IS EURUSD so the market is liquid. I trade on MBTrading (through Ninja Trader 7) and set my own spread, but in general, when I was on currenex, the spreads were fairly low as well...so yeah, I think this is a viable option. It's all I trade.


I've been trading using large targets (40-100 ticks) for almost a year now, and it amazes me how many times my entries will hit somewhere between 10-30 ticks before going against me. It seems logical to lower my targets then, right?

Yes absolutely. Considering that I think 1/10 pip is a win--10 pips to me is nothing short of phenomenal. Personally, if I had the temperament to stay with a trade long enough to take 10 pips, no way would I let it go against me for more than say... half or 5 pips before I'd take my money off the table and wait for another entry.

But really, scalping is not for everybody--it's labor intensive. To scalp profitably you need to be RIGHT most of the time and then you need to be able to cut losers so quickly and dispassionately that it borders on the super human.

Or, you need bigger winners; which is what you have. Why not stay with the big winners and just don't let it go against you once it's turn profitable? I guess the key factor to consider is what is your hit rate or win percentage? The more you win when you are right, the more you can afford to lose when you are wrong--up to a point.


If you are consistently profitable now, I would just keep that going and increase the size of my trades over time... until I reached the point at which my judgement is clouded because the size is too large.

To me, consistency is the only thing that matters ...

Great Post, mtaalamu. I do have a question for clarification please. My Broker is also MBTrading and although I don't have the $ to not have a spread, I certainly have no complaints. I'm also using NinjaTrader so we're kind of on the same page.

You mention you use 20 - 60 - 180 Range bars and I'm wondering if those bars are set up in NT for 1/10 of a pip. (Tools, Options, Data). I also use Range bars and had those type of bars (1/10) until yesterday when their Support helped me change the bars to just Pips so my Range Counter would be correct.

Common sense tells me you're using 1/10 Range bars so just making sure. I'm using 5, 8, 10, 20. Presently experimenting different strategy trading mostly off the 8Range. Previously had to input for 50, 100, 200Range.

TIA Sharon

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  #8 (permalink)
Elite Member
San Diego, Calif. USA
 
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good enough

Since May of this year (I took a break from trading about a month prior to May while I switched brokers) my strategy is 47 percent profitable... I had 305 losing trades and 275 winning trades (that's what trade management can do for you I guess ). The problem I have with my strategy is that it "isn't" consistent. It's very sporadic. Most (if not all) of my profit these past several months came from one three week period!

Okay Arich,
the question I have for you now is how much do you win when you win and how much do you lose when you don't?

Are you trading standard lots (100k) mini lots (10k) or micro lots (1k)? Or do you bounce between all three? What's your margin (average) on each trade you've placed?

I once read a long time ago that when you put on a trade there are only 1 of 4 possible outcomes: Win Small..Win Big...Lose Small...Lose Big. Guess which one of the 4 is responsible for traders NOT being successful?

One of my other trading mentors, Bill Williams (author of Trading Chaos) said he only wins about 40% of the time. 47% is good enough if they are good sized winners and the other 53% are small losers.

So for example, let's say over the last 100 trades you won a dollar when you won and lost 50 cents when you lost...

the math looks like this:
100 trades:
47 winners x $1.00 = $47 minus
53 losers @ x .50 = $26.5 for a net of
$20.5 per 100 trades or $2.05 for every trade you place.

This is just an example, and this could be a winning strategy IF the winners are fairly evenly spaced... OR the losers are tiny... OR you are only risking a tiny fraction of your working capital... you may want to plug your own numbers in, if you have them. If these were MY numbers I would only worry about how could I place MORE trades...keep those $2 bills rolling in!


My strategy has three targets, so that helps keep me from giving too much of my profits back. The issue is reaching the targets and breakeven. Since my goals are so lofty, I can go several trades without seeing a profitable one (that bothers me...).

That would bother me too. But your own numbers will answer your questions. Since your losers are bothering you (assuming your strategy is sound) it sounds like you may be betting too large... What % of your capital do you put at risk on a trade? How much margin do you have on any one position?

I use Interactive Brokers, and their spreads average between .5 and 1 pip which seems very reasonable (even in a scalping strategy). But my idea of what scalping is seems to differ from what I've been hearing. Is 10 pips too lofty a goal when scalping?

Whether or not the spreads are reasonable depends entirely on your numbers. For example, in my case, a 1 pip spread would greatly impact my profitability because although I am extremely accurate, my gains are TINY. I may scratch a trade before it moves against me 2/10th of a pip... A one pip spread means I am increasing my "overhead" by a factor of 5!

...Sometimes... I feel the way I trade is like running in front of a bulldozer collecting pennies. lol.

But in your case, you may be able to hold out for the big paycheck and collect 10--20 pips at a pop. More power to you. But the straight answer to whether or not 10 pips is too lofty a goal depends on how often you reach the goal. That is the only way to know.


Are 20-60-and 180 "range no gap" bars available for EasyLanguage?


That I don't know; but I am certain one of the many talented coders here on Big Mike's could probably do it up for you. Hope this helps.

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  #9 (permalink)
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you do have the $

Great Post, mtaalamu. I do have a question for clarification please. My Broker is also MBTrading and although I don't have the $ to not have a spread, I certainly have no complaints. I'm also using NinjaTrader so we're kind of on the same page.

TIA Sharon: thank you for your kind words... first off, I think you DO have the $ not to have a spread--because both types of accounts can be opened for the same $USD 400. In both account types you can use limit orders to tighten up the spread--it's just in the plan I'm on, I'll earn $1 per 100k and I can make the spread as tight as I want it. However, if I were to start placing a lot of stop limit or market orders then your plan would be better as the commissions would become cost prohibitive.

As I said in an earlier post, my gains, though consistent, are really small. Therefore, I need to eliminate all expenses whenever possible, so I want the best of both worlds: no commission AND no spread (if I want) PLUS getting paid on my volume, so I only place limit orders.


You mention you use 20 - 60 - 180 Range bars and I'm wondering if those bars are set up in NT for 1/10 of a pip. (Tools, Options, Data). I also use Range bars and had those type of bars (1/10) until yesterday when their Support helped me change the bars to just Pips so my Range Counter would be correct.

Common sense tells me you're using 1/10 Range bars so just making sure. I'm using 5, 8, 10, 20. Presently experimenting different strategy trading mostly off the 8Range. Previously had to input for 50, 100, 200Range.


Yes, Sharon, you are absolutely correct. I am using 1/10 pips, because I can trade 1/10 pips. My range counter has no problem with this. I use the 20-60-180 the way some traders use multiple time frames. The longer time frame gives me a directional bias (if the trend is strong) the shortest time frame gives me entries for scalping and the middle time frame is what I really trade.

So... say the 180 (or 18 in your case) says stay long, I would wait for the 60 to cycle to the long side and then I'll look at the 20 to time the entry, then dive in and try to hold on as long as I can stand it!

If for whatever reason, I only have one chart up, it'll be the 60 and I could take all the signals off that one. It just usually means I'll probably take some heat before the trade works in my favor. Hope this helps.

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