A lot of new traders try scalping against the advice of seasoned traders. Scalping is the way I make most of my profit.(and loss) I wanted to share this spread sheet and my thoughts on risk and MM when you try scalping. I know you will try it:D
I risk less than 2% per trade often less than 1% most of my wins are about the same as my losses with a few big ones. No big losses with a tight stop, quite a few small losses that’s fine. I set a TP but its farther away than I expect a trade to go. I used to set it close at a predetermined R/R point but when it got hit by a big spike I saw a lot of pips get left on the charts. Now I close the profit side of my trades manually. If a spike happen in my favor I get to take advantage of it. I set a goal for the day I set a when to quit from loss point for the day.
That is what my sheet looks like. The green cells are input. I adjust the current balance after every trade. I adjust the stoploss amount depending on the trading scenario, time frame, pair, and current range. The # of stop hits is how many times my stop gets hit before I reach my daily loss limit.
The sheet tells me the position size and pips needed to reach my goal.
I will reset the sheet if I reach my profit goal. That limits my loss sort of a trailing stop on my account equity.
The sheet is set up for Onada units, and pip value is approximate.
I kept my daily risk at or less than 2% every day this week. I started with a goal of 1% per day hoping to average .5%. I met that, reset the sheet and kept trading. I ended the week with a 22% gain. I had a really good week:D. I kept my exposure to a minimum My trades are quite small you can see that with a 1% total loss allowed and 3 chances thats about a third of 1 percent per trade risk. Money management is the most important aspect of scalping( I think.) Any one that tries scalping should know this and any one that tries scalping with a small account needs nano lots or flexible lot size!
This is the last 7 days of trading about 85 trades. You can see no big whammy. losses are small most wins are small but their is a lot of them. This is a 44% account balance increase in 7 days:eek: on a live account. At any one time no more than 2% of my daily starting balance was at risk. 7 days is not nearly enough time to judge any system a success. I credit this smooth line to the MM I laid out above. Its funny I post the one thing that has made me the most money and not one person has replied:rolleyes: I guess MM is just to boring.
nice results. congrats
hope you keep getting those results for a long time.
unfortunally i can scalp because my heart conditions:D and i thing only brave people have the emotions control to do it. i´ve already tryed… big and fast gains, alot of stress and a lot of time spent in the computer… not for me. i really like to sleep a lot. my bigger wish is that forex allow me to sleep 15h a day:D
I guess the attached indicator is the one you use for entries is it? Means I can’t really see it but any profits are great and I wish you good luck with it. I managed to be about 700 pips up from the start of October until mid-November when everything seemed to go wrong and I’ve lost nearly 800 pips since then so have taken a break and spent hours and hours and hours reading things.
I’m always tempted by scalping systems as I prefer to feel like I’m proactive in the trade rather than just waiting for what seems like forever for the perfect trades to come along
So you trade with small losses and Your losses are small. I believe you hit some runner runner to gain more profits.
So i believe you have not lost 2% on 2 days in a row, totalling to 4%.
I think you have not encounter that. You probably stop at 1.5% and call it a day. A very controllable money management.
Hope to see more posts and thoughts on your current discussed money management. thanks
When scalping, which charts do you use and what TA’s do you utilize the most?
I have one chart with just candles, and one chart with the set up from my scalping JPY pairs thread. I look at all time frames from the daily down to 1 min.
I trade of the 15min 5min and 1min. I look for action in any pair with a low spread preferably less that 2 pips.
unfortunally i can scalp because my heart conditions and i thing only brave people have the emotions control to do it. i´ve already tryed… big and fast gains, alot of stress and a lot of time spent in the computer… not for me. i really like to sleep a lot. my bigger wish is that forex allow me to sleep 15h a day
I get stressed when I have a trade open the way I work this if I am not at the computer I don’t have to think FX at all. I am trading for less than 2 hrs most days thats a lot more than some but less than others.
I guess the attached indicator is the one you use for entries is it
Can you attach your spread sheet?
The MM spread sheet is on the first post.
So i believe you have not lost 2% on 2 days in a row, totalling to 4%
not yet, I try to stop at break even for the day and take a break if I start to lose trades.
I will try and explain what I am doing.
I looked back over my trading to see what I was doing that was causing losses.
I found many things I was doing that were bad. I tried to change my habits with some success then I would inevitably revert and blow some equity. I got thinking how can I make these bad habits work for me?
The key is money management. I need to be disciplined enough to honer my 2% daily cut out that’s it. I can do that. I start with a few small trades along the lines I laid out in scalping JPY pairs. If all goes well (it usually does thats a great way to look at PA thanks R Carter) once I get some buffer built up I can try for one or two pip trades. I can see people shaking their heads. let me ask how hard is it to make 1 pip over spread if your spread is less than 2 and you have a 10 pip or so stop? Its not that hard, it gets even easier if you have some wiggle room and can average down. I see more head shaking:D. Anything goes as long as my equity stays above a 2% loss. All my bad habits come into play.
I look at the 15min and 1hr to see any trends and S/R that I should watch for I try to go with the flow. The only candle pattern on a one minute chart that’s worth anything is a vertical line, a big green one or a big red one. I don’t have a set of rules for entry I buy when I think PA is going to go up usually after a big red line. I sell when I think its going to go down usually after a big green line. I use the longer TF charts with BBs to help me decide when the price might turn, I look at a short TF chart zoomed way out sometimes to. I barely look at pips when I trade just my equity and floating PL.
I traded GPY/USD tonight the spread is a little high but there was a lot of movement. I caught 2 10 pip trades late in when I was going for 1 or 2 pips so my lot size was big I did 6.5% on my balance:D I called it a night.
[B]
None of this works with out the MM I am using[/B] You cant trade with a 1 pip goal and a 10 pip stop or average down to save a trade unless you have some rules that save the profit and cut the loses! Risking a straight 2% per trade will kill you trading like this. I don’t recommend anyone try this with real money, if they don’t understand how my MM works. I don’t really recommend this to anyone. I am just sharing what is working for me. Its a combination of a bunch of bad trading habits, fast clicking on the buy and sell button, and 1 rule.
I heard averaging down was a bad thing but after reading some chapters of Million Traders i might change my money management process.There are few there that do average down methodically knowing the limitations of there trading pct.One Roland Camphell(last name misspelled?) who will dive in up too 4 times.Boris (wont try last name)who wrote the book put out a article defending that type of trading.He says newbies do it wrong by putting 2% percent per trade which is putting up too 12 percent at risk of capital.Putting it in at intervals that had up too 2 percent is a better way like .3/.6/1.1 i will see if i can find the article and post it.A person who wrote a review on that book says he started using that method a year ago and said it took some getting use too but now it is the only way he trades.
If I am following a strict system I wait for a set up, examine the charts and my indicators and jump in with 2% when I see a set up. If it starts to go bad I hang on until my stop gets hit. I am out 2% I repeat I have to have faith in the system and [B]each trade[/B] if the next trade does the same thing I hold it again those losses add up quick. If I risk much less I am not so focused on the out come of a single trade. Its much easier for me to jump out of a bad trade if it was a best guess to begin with. As the session moves forward to profit and I increase my risk I may be risking 4% or more of my balance on a trade but I am really watching my floating PL as the trade plays out I don’t want to give back my recent gains. I cut out of a trade when I start to pay more for the trade then I want. If the trade goes well I don’t feel the need to hang on to a predetermined TP point I am happy with a few pips on a trade that has 4% of my balance at risk. I use stops! I keep the stop right around my daily loss limit. It almost never gets hit. I close out a trade way before it goes that far against me.
Food for thought:quote
Scaling in – Not Averaging Down
Although fading the trend may not be the rule most retail traders wish to follow, it is the dealers’ second trick that can be of tremendous help to retail speculators. In his very informative book, The Market Makers Edge, Josh Lukeman writes, “Successful market makers have controlled the ego-based need to be absolutely correct. Because markets are constantly in motion, it is almost impossible to be exactly right on (in your entries).” Such a probative approach to the markets is at the heart of most successful professional trading. Dealers know full well that their first foray into the trade is often wrong. They rarely commit the full position amount on the first try.
One of the key differences between professionals and amateurs is that professionals scale into trades while amateurs average down. This statement may seem like clever wordplay, but it’s not. Let’s assume that both the professional and the amateur decide to risk two percent of their capital account on a particular trade. The professional knows full well that he will not be able to hit the exact entry point on his first attempt. Therefore, he may allocate only 0.3% of his capital to the first entry, 0.6% on the second and 1.2% to the third – and stop himself out at -2.7% away from original entry price (-2% risk).
On the other hand, the amateur will plow in with a full two-percent position, and then when the trade goes against him, he may decide to “double down again” and then average in yet a third time. At this point, the amateur has committed six percent of his capital to the trade, and if the trade continues to move against him, he will throw in his towel with a massive -12% loss (sum of -6%,-4% and -2% losses). Five disasters like that and the amateur loses 60 percent of his account. In a zero-sum game, he has just moved much closer to zero.
Over-Leverage and Diversification
This example serves to illustrate one of the greatest pieces of trading advice ever given. When asked by Jack Schwager what is the one act most traders must do to become successful, Bruce Kovner – perhaps the greatest hedge fund manager ever and a man who has beaten the markets for more than 30 years and to whom other hedge fund managers entrust their savings – simply said,” Undertrade, undertrade, undertrade.” Prodded further by Schwager, he explained, “Whatever you think your position ought to be, cut it at least in half. My experience with novice traders is that they trade three to five times too big. They are taking five- to ten-percent risks on a trade when they should be risking one- to two-percent.”
:o I had to add another line to my spread sheet one that shows exactly how many pips I can lose to keep my MM based on my exposure. I will use it to place stops. I had a situation where I had a stop placed to far but I was watching the trade as I described. I left the screen for a few seconds PA spiked and knocked me back a few days. The worst part was how I jumped back in. I stopped before to much damage was done. The system works I just messed up some MM. In order to trade like this requires concentration and no distraction, a situation I did not have around me when I was trading Friday.
I can see what I am doing works if I follow the rule(s).
If I can average .5% or 1% or 2% a day with a reasonable risk whats to say that if someone could live with the drawdown they could increase the risk and up the average? I ask this about any profitable system. I have a good idea that any average much over 1 or 2 percent would be considered unsustainable. but why?
I am using Oanda I have a 20:1 leverage I can see at that leverage level and the way I am trading I am about at the limit of risk I can take on with my small stops and still have the ability to average in or down as the case may be. Even if I up the leverage to 50:1 the max with Oanda I would not see much gain, in the short term with more risk. however the difference between .5% and 1% in the long run is very big.
I did some experimenting today. I maxed out my margin (within my stops) I tried to trade the same way but with max lot size. I went to far and it changed the way I traded. I was not comfortable. I am trying to find the ideal risk to take on each trade and keep from giving myself a hart attack and have the best possible return. At one point today I was up over 12% I am right back at my starting point for the day as I write this:D.
EDIT>>
2 hrs later back to original risk plan up 2.77%
If I can average .5% or 1% or 2% a day with a reasonable risk whats to say that [B]if someone could live with the drawdown they could increase the risk and up the average?[/B]
If someone is able to manage that by staying within their psychological comfort zone and can tolerate it without negative impact on their discipline and trade excecution then by all means go for it. Nothing speaks against it.
[B]But[/B] can someone deal with it over longer periods of time without increased stress levels?
I doubt it.
I ask this about any profitable system. I have a good idea that any average much over 1 or 2 percent would be considered unsustainable. but why?
Lack of trader discipline will mess it up sooner or later.
People don’t realize how important it is to maintain discipline in trading without exception so you can stay profitable.
That’s why this ONE rule is so important: [U]DO NOT BREAK THE RULES.[/U]
and
WHAT DO I DO IF I BREAK THAT RULE?
That rule has protected me from doing some really, really stupid things in my trading.
