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Thread: Scalping?

  1. #21
    Join Date
    Jul 2011
    Empty: didn't say it requred less money...I said the cost of doing business is lower. But it DOES require more money.

    Not too familiar with ECN...but here's some USD/JPY futures math for ya:

    I sometimes scalp the U/J futures. On that contract, a single pip is $12.50. Lets say I take 20 trades a day on average, with a win rate of 60%, and my average winner makes me $112.50, my average loser: $100. This is a realistic number, and a typical day may end up exactly like this for me.

    Now, that's 12 winning trades, at a total profit of $1,350. Minus 8 losing trades at a total loss of $800.
    This leaves a net profit of $550. Not bad. BUT...we have comissions, at about $4.50 per trade (I generally trade 1 contract)
    $4.50 X 20 trades = $90 comissions.
    SO.... $550 net profit minus $90 comissions = $460 in total profits. Not bad.

    Now...lets take USD/JPY spot with an average spread cost of 1.5 pips. And to compare apples to apples, lets compare as if we traded on Oanda, and therefore could get exact position sizing....exact enough that a single pip change in USD/JPY would be exactly $12.50

    So, same numbers, same results..only change is our average comission per trade, so lets start there:
    $550 = net profits before spread (aka: comissions).
    spread = 1.5 pips per trade, or $18.75 per trade.
    20 trades at $18.75 spread cost per trade = $375 spread cost... or, as it really is comissions.
    $550 net profit minus $375 spread = $175 per day...less than half.

    To put this in the bigger picture. Say 48 trading weeks a year, with 5 days in each week = 240 trading days a year.

    yearly profit after comissions to trade yen futures - over $110,000 per year.

    yearly profit after 1.5 pip spread to trade exact equivilent amount usd/jpy spot - exactly $42,000 per year

    Thats scalping, and thats with a 1.5 pip spread, and targets averaging 9 pips.

    If you scalp anything other than USDJPY or EURUSD...depending on the times you trade, and your broker... you may easily average more spread per trade.

    TO put it another way... my EUR/USD and USD/JPY and USD/CHF futures trades cost me literally 1/3 of one pip in spread. It never changes. It never fluctuates... it is always exactly 1/3 of a pip, news or no news. Furthermore, it is only 0.45 pip spread on AUD/USD, USD/CAD. It's about 0.65 pip spread on GBP/USD.Furthermore, I get GBP/AUD cross for about a 1.3 pips. I get EUR/JPY for about 0.7 pips...etc...etc.

    If your going for 20+ pips, and doing it only once or twice a day... this isn't the biggest issue.

    When you add that extra...say... pip, over the course of small scalps that are taken 15 - 30 times a day... that could literally be over half your entire profit for the year, gone, based on a single pip lost per trade.

    Nevermind if much of my trading happens to be in AUD/USD, USD/CAD, or some cross pair.

    hope this clears things up....


    P.S. I tend to smile a bit when folks say "ya..but futures have comissons... spot doesn't". A spread IS comission...and in almost every case I can think is double, triple, or quadruple the comission cost in the futures markets... dollar per dollar anyway. No idea about ECN's...lemme know more, like spread size...etc. May check that out sometime.
    Last edited by eremarket; 07-31-2011 at 10:40 AM.

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