Advice - New to trading diminishing account balance

Beginner Questions
1

Hi all,

Ive been looking through the website and completed almost all sections of the school and I am looking for a little advice.

A little about me:

My demo account was started at £500.00 with Oanda.
I operate using 3 indicators, Stochastic RSI, MACD, and Bollinger Bands.
I tend to apply a quick trade, and look to exit within 10/15 mins dependant on whether ‘any’ pips are made (in and out so to speak).
I use the 5m, 1m, and 30sec charts.
I trade roughly 1% - 10% of my total units per trade.
I trade evenings for about 2/3 hours per time.
I trade the GBP/JPY.

I have been working on a 50:1 leverage (which I know is massive, however im getting a feel for certain gains / losses as I wish to reduce it through experience). I have a 5/10 pip stoploss, and 5 pip take profit set.

I suppose I dont currently have a clear ‘system’ per se. But tend to use the indicators for the ‘right’ setup i.e macd crossover, bollinger noise, and overbought/sold, and then enter the trade in the 30s / 1m chart.

I tend to find that more often then not as I trade, the price tends to move against me, and eventually hits my stop loss.

I understand that there are many factors which will decide the profitability of my trading such as Money management (which I have little at the moment but understand that this is critical when learning the basics) however please understand that I am Demoing, and therefore, having a look at the system and so just enjoying learning (I know overall its a serious business when it comes to the real thing).

Is there any advice that anyone can give me if they have been in a similar suitation. My account is now down to £380 and feels like its slowly bleeding money.

Should I increase my stoploss slightly as im not accounting for noise within the market for such a short in/out trade?.
Is my trading style incorrect for the limited time I can apply?
Have I got the ‘right idea’ regarding a trading plan, is myself using the indicators and looking for uptrends effectively ‘a trading plan’?
Has anyone else experienced this slow bleeding effect?
What major things are wrong with the way I trade (if pertinent to the actual problem of a bleeding account)?

Many Thanks from another newbie, so much learning, but itll be worth it in the end.

Edited for currency used

2

Can’t really comment on the strategy you employ as I’m not sure what it involves really but they’re all lagging indicators and you might be better off putting a bit of study time into S&R levels and price action. I think ICT’s thread would be a good place to start. It’ll help you maybe define a framework for your trading as well which is something I’m trying to work on too.

Also, GBP/JPY is a pretty jumpy pair. I don’t really trade it myself but I think it would easily bounce 5 pips for no particular reason at all and 10 pips quite possibly the same fairly often. If you’re using very tight stops you might be better going with one of the majors instead. Personally I prefer to go with slightly wider stops (20-30 pips) but that’s just for the way I trade.

3

Sincere thanks for your reply, all advice is welcome.

I mainly choose the GBP/JPY as was lead to believe from reading forums that this would be best for the in / out quickly kind of trades due to the votility as you say, providing more oppotunites for trades for the short time frames. What tend to be the less volatile currencys for short time frame trading?

I will take onboard your adivice and look into studying further the support resistance levels, would you say that the 5m chart is best to determine any support resistance levels? or can it be done on a smaller timeframe?

Noting your advices re stoploss, what sort of take profit would you apply, or is it dependant on the market at the time?

Many thanks

4

I’d say going with any of the majors would be better (EUR/USD, GBP/USD, etc.). They can have good moves throughout the day but I don’t think they’re quite as twitchy as GBP/JPY. USD/JPY is usually a pair with a smaller range throughout the Euro & US session - it typically won’t bounce around much quickly for no apparent reason.

But even then if you’re trying to scalp off the 5m charts it’s pretty tough for a new trader in my opinion. Assuming a spread of approx 4 pips for GBP/JPY you’re instantly only 6 pips away from your stop loss after entry which is very tight. Unless you really have an eye for it I think misjudged entries will result in a lot of trades getting stopped out. In my opinion you’d be better off moving up the timeframes a little but I guess you just need to find what works for you and go with it.

Re S&R check out: http://forums.babypips.com/newbie-island/36328-what-every-new-aspiring-forex-trader-still-wants-know.html

That thread will help answer your questions in relation to what S&R levels to use, what timeframes, setting entry and exit points, etc.

5

Brilliant stuff, thanks for all your help.

6

The important thing is to not give up. Persistence is the key in this game. It took me over a year to just learn how to turn a small profit, but you are hopefully smarter than I. Don’t give, and don’t put any cash in until you are confident in your trades.

7

If your trading GBP/JPY you should trade with ATC brokers they are true ECN 2.7-1.8 spread on this pair.

8

Hi Edenworcester, welcome to BP – I had a few comments on your new trading interest. I think you’re on the right track btw.

First, glad to see you found Oanda. I think it will be perfect for what you want to start with. Second, I’m of the belief that once you get a basic trading strategy under your belt – that you should consider using real $$ and stop using demo altogether. Oanda lets you trade with miniscule units (even fractions of pennies) so you can get some benefits of real-trading psychology while limiting your actual account equity to a hobbyist amount, if needed. Also, I think doing it this way promotes a focus on percentages instead of dollars; in my opinion this is a really good idea that will enable you to scale your account later when your method is perfected.

The “bleeding” of the account is normal. That just means that you’re still riding the bandwagon – you haven’t quite figured out how to get AHEAD of the bandwagon yet. It will come with time, just keep trading. It’s actually really satisfying to track this day over day and watch your results improve.

It’s good that you describe 50:1 leverage as “massive” – a lot of newbie traders do not do this. Take notice that most professional traders use lower leverage settings and they also do not come close to reaching their margin limits.

I agree with Pipbandit – sounds like your problem could be the spread. The majors will have a lower spread and EURUSD in particular has 0.9 on Oanda (that’s pretty excellent by most standards).

I also agree that you should be careful about indicators. They can be really glamorous but at the same time they usually paint a picture in retrospect. So a better plan might be to master the price-action (ie naked charts) first, and then figure out which indicators, if any, can assist.

9

Something with GbpJpy nowadays can cross +120pips in one H4bar and back 100p in the next, spread default 7p (like 30p SL getting hit for short while what you see is price isnt halfway to it, or a trade experiencing temporary drawdown & by looking at bars its not that big a gap oly 10p but looking at floating loss you wonder WTF its 21p!); thus even the ol’ 140p SL with IKH wont work on it no more thus no longer can be favourite? Adapting to new mkt volatility, looking a little harder at s+r price action (remember great bars at great locale? hehheh) while underthinking about it reveals 30-50p max SLoss opportunities with better R:R. Then concentrating on only one (or two pairs) strictly H4 timeframe & above then you’ll know them like the palm of your hand with more time for even complex technical analysis. Try to take only indicator-less methods to brew your own blend. Welcome to piprockers’ paradise wishing you better days lol.

10

you had been told all :slight_smile:

dont try to scalp a pair for 5 pip TP when you have 4 pips spread…even half makes it expensive on the risk/reward.

be careful not to overtrade…thought i would worry that you use so many indicator+ BB that you might not even get into some trade. in my experience for such in-out trades/scalping with small TP/SL the best to use is price action/candles. i sure would not rely much on MACD, since it lags a lot, maybe only on 5 min chart for divergences, and i would get rid of either Stoch or RSI, since the have very similar qualities. ( i would keep RSI myself).
and definately would add support/resistance lines to decide on the quick entries. could use pivot lines as well, or both, really.

and lastly, i would try to squeeze out a few more pips from the trades, by being maybe a bit more selective at entries…if you could avarage 6 pips TP vs 5 pips, it would already be an extra 20% gain in your pocket. i say avarage, it could mean 4 pips one trade, and 8 on another, you can be a little flexible. i am sure you yourself would think that some signals of yours seem to be better quality than another…so, maybe tryt o use those times to shoot a bit higher TP.

anyway, happy trading!

11

The replies thusfar have all been very illuminating i’m sure. But the fact remains scalping is one of the hardest trading methods to get right on a consistant basis. Personally I think its a mistake to try this style of trading as a newbie. Don’t say you were not warned. :wink:

12

I don’t know why new traders goes for this style of trading… Either they are under capitalize or afraid of taking risk.

13

Dear all,

Thanks for all the replys, it certainly is an eye opener.

As an update, last night I took on some of the advices (little by little as they say). I stopped using the indicators and looked soley on the price for EUR/GBP currency, and jumped to the 5m/15m chart.
I left the GBP/JPY currency alone.
I applied the support resistance levels. It was an interesting trade as throughout the day the EUR had been on a downtrend with some heavy bearish candles and the currency was at its lowest all day.

I looked at the support resistance levels, and they indicated a slight (if not choppy) uptrend which seemed to stay with the support resistance triangle. I thought, hmmm, itll go 3 ways, itll drop like a sack of stones, or slowly climb the triangle, or bullish breakout, so a 2 in 3 chance of a trade succeeding. I entered the trade, made a 8 pip stoploss and guestimated that by around 11ish it’ll break past my take profit of 5 pips further along the triangle. I placed the trade and switched off for the night (no point in watching it as the trades on and I had S/L and T/P).

Had a look in the morning, stoploss was hit and went past by 3!, it then made a very large bullish trend up around the 30 pip mark.

Taught me a lesson, Im too conservative on my stop loss / pip gain. Tonight I intend to increase the stoploss to around 15, and take profit 10.

Re forex hood, your probably right, it may be to do with risk and not wanting to be in the market for a set period of time.

Also im thinking about dropping the leverage to 20:1, it will still provide a meaningful gain but should make my demo account balance last a bit longer if not.

Onwards for another night!

14

There’s a risk / reward problem however with risking 15 pips to gain 10 pips. I don’t know the win % of your trades but if, for example, you win 50% of your trades and your losing trades lose you 50% more money than your winners your account is steadily going to bleed out unless you are able to up the win rate to compensate for the bad R/R ratio.

Personally, I think that if you’re ready to risk 15 pips on a trade that you should be looking to target 30 pips at a minimum assuming that you have an average win rate to begin with. A win rate of 50% then gives leaves your account nicely in profit. Keep a track of your trades in an excel sheet and start to work out what your win % is over time - it’ll give you an idea of what sort of targets you’ll have to hit to be profitable based on how much you’re risking.

15

It’s all about risk/reward. I usually risk 30-45 pips depending on the pair and I aim for 1:3-8 risk/reward.

16

I would never take a trade at less than 1:1 R:R. As others have said, there will always be losing trades, with risk outweighing reward you will be too open to drawdown on your account. Even experienced, successful traders still place losing trades. I know that you acknowledged early on that you need to put more work into money management but seriously, my first step would be never to take a trade at worse than 1:1.

And I would echo what some other posters have said, for what it is worth: never scalp Forex, particularly as a rookie, it won’t work over time. There are far easier ways to trade yourself to Forex success!

Sorry to sound negative, that is not my intention, there is a lot of positive in what you have outlined, I just wanted to make the 1:1 point.

17

You just cannot say that as a statement of fact, that is only your opinion, my opinion is totally different.

18

Sorry, I meant that you shouldn’t as a rookie, I know it can work better when more experienced, but I appreciate that I was unclear. Trying to give the kids tea while posting clearly means I should proof read more! Apologies for what appeared a sweeping statement, not my intention.

19

LOL, lucky children, you feed them!! :smiley:

20

They’re only six, four and nearly two. It just doesn’t feel right sending them out to forage for themselves until the eldest is at least eight.