I know this is a bit far fetched but Ive been working on a strategy with a 2 pip SL. Of course many times i get stopped out and other times the trade can go instantly in my favour. However, the game changer of whether im profitable or not is when the trade gives me a drawdown towards the 2 pips. It can sometimes drop to 1pip or 1.5 for example and the spread is knocking the stop loss early of course.
Im trying to find a way or a broker where I have the lowest chance of this happening?
I currently use ICMarkets which does have low spreads but for my “wishful thinking” 2 Pip SL the spread ranging from 0.1 - 2.5 roughly obviously isnt the best.
Does anyone have any suggestions possibly? Or do I need to stop being ridiculous and accept that a 2pip stop loss with spreads its near on impossible?
The spread problem is compounded by the fact that spreads are seen changing every few seconds.
Whether 2 pips is the right measure only experimentation would tell, but there could be a grain of a winning strategy. Assuming a 2 pip price move up or down is random, this is effectively a coin-toss. But imagine a coin-toss game where its heads you lose £1 and tails you win £10. That £10 would pay for a lot of losing tosses…
This is what I was hoping to hear. So its possible for spreads to sort of be “nothing” and I just pay a commission every trade instead, but guarantees my SL at the exact level I set it to?
Also as its scalping I could be doing a fair few scalps so is the commission really going to take a hit on the account do you know?
Yeah the SL is normally very small and you pay a commission for that tight spread. Or look up core spreads, they say they have fixed spreads on their platform.
Commissions add up but if you make more than you lose it’s worth it.
I used to follow a guy (for some months) that had such a tight strategy, and he concluded that the practical minimum was about 5 pips. I have no direct experience of that myself, but one approach may be to start with a higher number of pips and a lower TP as a % of funds at risk. If that generates an acceptable win/lose ratio and a positive expectancy, gradually reduce the SL pips from 5 down to 2 and measure the impact on the frequency of being stopped out. You may also wish to talk to the broker (or another broker) about whether this is a practical strategy and ask them whether their bid/offer granularity is in fact 0.1 PIP, 1 PIP or something in between.