Euro / CHF scalping idea - what do you think?

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1

I’m posting this in regards to a trading idea that I’ve been using for the past two months on a live account.

Success rate and personal experience -

My account growth in that two month window has been 300% (500 capital to 2000) on approximately 3 hours of trading Monday � Thursday. Win to loss ratio is 100 � 0 on approximately 90 trade.

Concept -

This trading idea involves scalping euro / chf during the tail end of the New York session (14:00 GMT-6) through to the end of the Sydney session (0:00 GMT-6). The concept is to scalp the euro / chf during these low activity hours when volatility is rock bottom (allowing for more generous leveraging) and there is a sideways trend formation. Because the markets close early on Friday’s and open late on Sunday’s, I only use this system on Monday’s to Thursday’s.

Method -

When the US markets are closing at approximately 14:00 GMT-6, I open my trading platform and look for these characteristics on the euro / chf chart.

-Movement needs to be low, within the 10-15 pip range.
-There must be a slideways trend.
-A definite support point must be forming. I define this as a point where the currency hits at least twice.

Most days these three characteristics are there. When you do see these characteristics, place a buy entry order 1 pip above the support point (on the ask chart). Set the profit limit to 2-3 pips and the stop loss at 15 pips. When the target is hit, rinse and repeat. Do not trade after the Syndey session.

Goal -

My personal goal is 5-6 pips daily, or 2 trades. I often make 3 trades a day, though rarely more. At week 9, my projected weekly profit is 400 dollars with 200k lots on a 2k account. It’s approximately 3 hours of work a week, setting up orders and stepping away to do other things. As my account grows I hope to double, triple, and quadruple the lot sizes.

Rules and challenges -

It’s very important not to over-trade with this system. You only ever trade when the three characteristics are perfectly matched. If the currency pair is volatile during the Sydney session, do not trade. If there is no support point, do not trade. If there is a positive or negative trend formation, do not trade. Perhaps most importantly, do not open new trades if the Sydney session closes. When the European markets open the zigzag pattern that is the basis for this trading idea goes away � that stable support point.

Lastly, because these are off trading hours you it not uncommon to see both wide spreads (5,6,7 pips) or erratic spreads (quick changes from 1 pip to 5 pips). Depending on how erratic these pip changes are, it is advised that you place your entry orders on the bid chart 3-4pips above the support point (as opposed to 1 pip above the support on the ask chart) so that you can catch these shifts at the most opportune time.

Pictures -

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This snapshot is for the ask line first two days of the week. The blue line represents the support point while the letters are the trade opportunities. I did not capitalize on all of these opportunities but did manage to make 8 pips, or approximately 160 dollars.

I’m posting this so that I can get some commentary on it. I’ve had great success (so far) but I am inexperienced compared to many folks on here and I am sure I could use some advice. I’m not a professional trader � I trade part-time but am very enthusiastic of this art and want to pursue it as career at some point in my life.

2

I’m a little concerned about the fact that you’re risking 15% of your account per trade.

While you may have gotten a 100% win rate so far, you will get some losses eventually. When the market conditions change and you get 3 or 4 bad trades in a row you’ve just lost half your money.

I’m not saying the system is bad and won’t work in the long-run, I’m just saying that I think you should tone down the risk so you can survive a losing streak when (not if) it comes. I suggest 2% per trade, but anything under 5% is usually considered safe.

3

Try to make your r/r more favorable.
Risking 15 pips to make 2-3 pips is not a good ratio because, sooner or later, your stops will be hit and wipe out all your profits.

4

Over leveraging is definitely a weakness I have as a trader, and I certainly see that as a definite risk in the future. I believe that in this particular case I’ve risked more generously because of how safe these off hours have seemed (in terms of low volatility and movement). The Euro / CHF is a cross that I picked because of how little it moves to begin with; there isn’t a currency pair that I’ve researched that is as docile as this one.

I’m reluctant to tighten my stops or widen my profit limits, simply because the margin on the euro / chf is often higher than most mainstream currencies. Whenever it’s larger than 5 pips, there’s always a fear that a tighter stop will be eaten almost singularly by the margin. Also, placing anything more than even 3 pips on a profit target could be dangerous, as this pattern doesn’t often shoot above 3 pips potential profit. Holding on to these positions for too long could very well push me into the euro session, leaving me extremely vulnerable to an active market.

So far as hitting a string of bad trades, I feel that it would be hard for this to happen if I remain disciplined and follow my own rules. If conditions don’t reflect a stable, sideways pattern with a support, I just don’t trade. I’ve only seen this pattern break once after it forms after the US session. If it does break, I stop trading for the day (this hasn’t happened yet, though it has happened once over the course of a 7 month back test).

I’m wondering what people’s opinions on the Euro / CHF are, so far as it’s activity and future in relation to scalping (or any trading). Does anyone think that the conditions that are helping me thrive as a trader now will continue, or will trading of the Euro / CHF open up perhaps, leading to more volatility?

I started as a Euro / USD guy but found that it was just too active for my style of trading, especially this past year which has been uncharacteristic I feel of forex.

5

One idea that I’ve been muling over that could provide a stronger potential profit to loss ratio would be a breakout strategy when the euro markets open. Looking at the pictures I posted - you could place two entry orders, one to buy, one to sell, 10 pips above the support and resistance for the Sydney session. Whichever way the market moves, run with it. Put a 15 pip stop loss and maybe 20 pip limit. The movement after the Sydney session is consistent enough that this might work with proper tooling. I think Phil posted a similar idea in a different thread.

What do you think?

6

July and August markets have been exceedingly thin this summer so be careful after the U.S. Labor Day holiday as the activity should, but who really knows, increase dramatically. I don’t know if your backtest shows this but keep labor Day in mind. Good luck. d.