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>> ".....If you want to trade the CME then just experiment until you come up with a tick number that looks doable and produces bars of around 2-4 pip in height on average. <<
FXCM recently introduced lower spreads on our new dealing desk execution. The spreads are 1 pip lower for the most popular currency pairs than on our standard No Dealing Desk (NDD) forex execution. Mongoose, you mentioned wanting to pay less than 1 pip round turn. I'm not sure if that includes commission which would be an additional cost. Below you can see our spreads, and there is no commission charged on top of that.
Dealing desk execution is used by many brokers in the forex industry. However, FXCM's dealing desk is different because we use the FXCM NDD price feed as a base to derive prices and execute orders. This means that our dealing desk execution shares important features with our NDD execution such as no requotes and no restrictions on stops and limits. You can get a free practice account at FXCM.com to try our new spreads. Make sure to select "Lower Spreads (Dealing Desk)" for the Execution Type on the demo signup page as shown below.
Jason
If you have questions about our services at FXCM please send me a Private Message.
I've been using Bob Volman's method for the most part, but still use other indicators too (not quite ready to let themm go yet). I've read approximately two thirds of Bob's book and so far have good successs with the range break trade.
I can only trade in the mornings between 6:15and 7:15 AM EST, so my goal is to get in one nice range-break trade before work each day. I've attached charts with two of my recent trades. They are not the prettiest 70 tick trades I've made, but they got the job done. In case you are wondering, the lime green line in the charts is a 20 EMA, the red and green line is a 14-period HMA Colour Change.
Just curious but is the rectangle your 'range'? Because it seems to be only three ticks. Or is that simply your signal line. I just read Volmans book and the method has peaked my interest. From my understanding though his ranges are longer, preferably being the better part of an hour.
Thanks for your thoughtful question. It has been a while since I read the chapter on range breaks, so I took this opportunity to revisit it with respect to your question.
I do agree with you that range break setups are typically more protracted than the trades I posted. Bob Volman said on page 138 that range formations can last from about 15 minutes to several hours, and that the average is the better part of an hour. Both of my setups were approximately 10-12 minutes long, which may better fit either a block break setup, or perhaps an inside range break if they were to occur within a larger range. Since the characteristics of the setups are pretty much the same for block and range breaks, I personally do not differentiate between them. In fact, in discussing inside range breaks, the author refers to small, compressed blocks of price action within the larger range as mini ranges.
As for the height of the boxes, in the second trade I could have drawn the bottom at 1.2943, which would have made the width more like 6 ticks. I did not bother to draw the bottom of the box precisely because I was looking for a trend continuation and for my trend line and the pivot at 1.2945 to hold. Strictly speaking, this better fits the block break than the range break, but as I mentioned I personally treat them as the same.
Although I have not read the entire book, what I have is very helpful in teaching/ enforcing the elusive price action - esp in context to what happened on the left of the price chart. If you've come to this point in the ball game Volman points out what you don't know, you do know.
The book is well written w/ thorough explanation of the thought process, charts, price action, progress of strategy building one on the other from chapter to chapter.
The only thing that I question is why not futures instead of cash? He uses a 70 pip (tick) price bar which is about 30 seconds as Volman notes. Obviously in a fast market it could be much shorter in duration, 10-15 seconds. Also a 1.5 pip spread between the bid ask on EUR/USD (the currency pair used exclusively in the book) is about the same as the spread on 6E which is on a regulated exchange - other than the algos (pun intended.) If I'm guessing correctly it is most likely the no commission/ exchange fee etc. I'll stick with 6E.
For this type of read it's "easy" to read
If you are an indicator type person this book is not for you - although keep in mind everything comes down to price (action.)
Perhaps you should read chapter 16. Here he gives an in site into a reason to use cash as opposed to futures.
In a brief nutshell, for a new person to the markets, and trading futures, it can be quite difficult to decide from a proper money management perspective, when to change from trading 1 contract, to 2 or 3 or 4 etc.
Say 1 futures contract = $10 per pip, and 1 cash contract (100,000) = $10 per pip and you are using a 10 pip stop.
At risk is $100. With a 2% risk rule your account size should be > $5000.
Now the futures trader is getting better and decides that they would like to increase their position size, the only option they have is to double their position size ie from 1 too 2 contracts, with a 10 pip stop, your account size should be > $10,000. So before you can move up in position size, you need to double your account size.
Some traders would argue that the account size needs to be >$15,000 before moving from 1 to 2 contracts.
By using the cash forex, as your account grows, you can slowly increase your position size to reflect this.
As an example, after two months trading you are now up 10% and have an account size of $5500.
Keeping with the 2% risk rule, your at risk using above examples would be $110 and therefore your position size would be 110,000.
Same applies in the other direction In futures you can't trade < 1 contract but you could trade a cash forex size of 90,000.
Scalability with cash forex is one of the benefits to position size flexibility relative to account size limits and personal account risk percentages.
Brokers charges may not be scalable accordingly; eg IB charges $2.50 up to and for subsequent 100K increment and they round up to the next 200k, even if its 150k its $5. However other brokers scale commissions directly in as low as 1K "micros" units
Likewise there are Micro Currency Futures, which are actually tenth size standard contract typically 12.5K EUR,10k AUD, 6.25K GBP (like forex minis except for the Sterling) there's a little more spread..... but fine for swinging, position scaling / building and small account scalping. Clearing is typically tenth cost as well.
The odd ball is the JPY Micro...its illiquid...next to nothing trades, where as the spot is very liquid.
There are also mini Currencies which are half size contracts for JPY J7 and EUR E7 typically with the same clearing cost as the full contract
So there are options...too bad all futures contracts weren't micro or mini scalable
In futures you can't trade < 1 contract but you could trade a cash forex size of 90,000.