Hello… Anyone still up for learning how to scalp on the lower tf?
Not me. Too much work. I have beer to drink.
What happened to your myfxbook accounts?
-Adrian
Those accounts are long gone. Removed due to margin call. Taking risk which one should not take (trading against your system) is what causes accounts which spike quickly, to fall just as quickly. So now with that said, I would like to start this thread up once again, along with trades to see if you guys can grasp the essence of the system which I am using.
I don’t think I will be able to. I gave up scalping when the NYSE went to full decimalization back in 2000. Now I can only comprehend trend following on daily and weekly charts.
- Adrian
It is funny you would mention that, as speaking about the higher tf is where I was going to begin in order to understand the lower tf much clearly.
Have a look at the chart above, and tell me what you think the dotted lines are… From there we can begin the lesson.
This is fun. Those are daily pivot levels.
-Adrian
Very good. Now what you will notice on the higher tf is that the price ALWAYS touch the daily pivot, at least once a day. Which of course means that if it touches the daily pivot, then it also touches the daily pivot on the lower tf.
Now we will move on to the lower tf, and then make our way back to the higher tf in order to show why the lower tf is much more preferred by those who scalp.
I tried scalping / daytrading on the 5M chart for three months over Dec-Feb. I just couldn’t beat the spread / transaction costs.
In my opinion, the only way to win at the lower TFs is to aim for home runs, or follow trends. If you try to scalp for small rewards, transaction costs will eat up too much of your profit. But if your reward is large, it’s not too much of a problem.
I also learnt that time is more influential on the lower TFs. Markets will tend to turn during certain times of the day (for example, for Asian pairs like the USDJPY or AUDUSD, I know that there’s a ~50% chance that the day’s high or low will be established during the first 4 hours of trading).
OK, I am still on board with you.
Before we get into transaction cost, etc We should focus on the actual system. What we hope to identify here would be that if you scalp on the lower tf, you will gain “Accurate entries”. If you entries are accurate, the transaction cost + spread will be covered, and dwarfed by light years.
Although going for the “home run” is what everyone would love to do, the reality is “home runs” are much hitter to hit, compared to 2 or 3 “singles” which would give you the same result "metaphorically speaking; a run.
Many people focus on expected R:R (risk to reward), WHICH is totally different from your “REAL R:R” which of course is what truly matters. As we move on with the listen, you should be able to identify formations which will give you 10 pips profit, before you lose 10 pips. So expected 1:1 ratio which should be at least be your REAL R:R.
OK, go on.
Having a look at the chart of EU on 5m.
1)Look at the GREEN candle with the red arrow under it. (That ended up being the trigger candle. The candle which informs us to watch for the next candle of that very same candle in order to take our position.
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You then see 25 mins later that a bear candle ENGULFED the BULL candle which was mentioned in number 1. Well that is the first signal which is to SELL EUR/USD…
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The high of the candle which caused us to enter on the sell would be the SL for the sell, and a reverse order to the buy side. The only trick is to wait for a green candle to CLOSE across the high of the aforementioned candle. In other words we must wait for a close of the bid ACROSS of 1.06283 … Should that occur then you are to enter into a buy, and close the sell. Your take profit would be the nearest pivot level.
Let us allow EU to finish it’s move to see how this move ends up playing out. As of this moment EU has not closed acrossed 1.06283 on the 5m thus making it a scalp sell.
Please NOTE. After the sell was taken, look at the amount of “fakes” to close across the 1.06283 price. Had you have a pending order to buy, it would of been filled, and you would be in red at the moment, which of course would mean you would be in green at the moment following the sell recommendation.
What I have so far:
- Go short at the break below the tall upward candle with the arrow pointing up below it.
- Put a mental stop just above the entry candle and get out if/when a candle closes above the stop.
- Put a take profit at the nearest pivot level. (I don’t see that marked on your chart).
Right?
-Adrian
The trade which you see with a red is the very same trade which you see I advised for you NOT to take. Being that EU had not closed across 1.06283 on the 5m it then resulted in a drop to the nearest daily pivot as I said it would. So now you can see that the loss was that of 22+ pips. Had i TAKEN the short, my spread and commission would of been covered by more then 15x. So the spread and commission isn’t an issue at all, especially when you aiming to take profit from pivot to pivot. The sell position on resulted in a Pip-drawdown of 11 pips. So my REAL R:R was 1:2 I risked 11 pips to make 22+ pips. Now that the pivot has been attacked on EU. I would simply wait for a recalculation and then enter into the scalp once again.
My first question is what did that upward green candle mean to you? Why would you go short on prices falling below it? Was it doing something relative to a pivot level? If so, what does that mean? Perhaps you should take a step back and simply explain the philosophy behind this strategy. Without getting into specific techniques, talk about what you are trying to accomplish and why you think it will be profitable.
-Adrian
You are correct… So the candle which should of triggered me to sell is the candle with the red arrow pointing DOWN on her. Which of course means that the very next candle is the candle which I enter on. Yet the stop loss is the TRIGGER CANDLE. You see that I took the long, and although we had several fakes to the upside of the 1.06283 none of those candles closed across it. Then we got the drop all the way to the daily pivot of 1.05918
Before I get into the WHY of that specific candle, I would like to demonstrate how it works live. This way we can start to take steps back wards in order to see how the actual trade develops in relation to the use of pivots.
If what you want to demonstrate is how to manage the stop loss, I understand completely what you are doing. The method is a time honored one and I completely understand how to manage a mental stop that is executed upon the close of a candle rather than on strikes of the stop price by wicks.
If you want to demonstrate how to take profit on the trade, you can just tell me the exact tactic you use (order type, where to place it in proximity to the pivot level, etc.)
-Adrian
You can see in the picture above, that I was able to gain a very accurate entry into EU , which happened to be the start of the breakout to the main pivot. It is always sad to see a perfect entry which we trail to tight, when the target ends up being attacked.
Sometime this week I will be sure to continue sharing the entries, and the why.