Folks, the first thing you must understand is that if you’re trading in a mini-account (<$25K) and you are using a non-ECN broker, you are vulnerable to getting wiped out real fast.
First - mini-account trades are ALWAYS aggregated at some point to a 1 lot $100K trade if they ever get sent to the ECN. Most of the time the broker is basically acting similar to a bookie - taking your trade and others and aggregating them and then laying off the risk by trading against you.
So, what you must remember is that in this case the broker is your enemy, so if your trade goes too far your way, there will be a reversal and a sweep or two (see my previous post) so that the broker can quickly recover their money (and you loose yours).
My strategy is to capture my 15-25 pips, and consider re-entering on the next low bid in the next sweep in a decent uptrend.
Next - a bit about broker stop sweeps.
It took me a long time to find a way to get a handle on the sweeping of stops. Here’s what you need to know and do.
Open a tick chart on your currency pair and watch it during different trading periods - ranging, trending and news. You should be able to take notes on the average ranges during these time slots and pre and post news items or events. This will give you a feel for the internal pip range.
What it will NOT do is show you the ranges that are occuring internally in the broker’s system. (I’m assuming that most of you are trading with bucket-shop, non-ECN brokers with mini-lots). You can safely assume that the broker’s internal ranges are 2-3 times the ranges you see on your tick chart. They can get away with this because; the CFTC is asleep at the wheel and they have no idea how to ban and then enforce a ban of this crap, so they do nothing; and the price (bid/ask) data feed the broker provides you is filtered by the broker.
If you don’t believe me, go invest a few bucks on an eSignal FX feed and open a parallel tick chart on the same pair. In trading FX, what you see is NOT what you get.
Now, don’t feel too bad. Just remember that your best trading opportunies are going to be in news/event driven trending markets. On good days, I get 5-10 trades of 20pips each in each of the three world markets (USA, Japan, Europe.) That’s 200 to 600 pips/day. A bad day for me is losing 50 pips - BTW, that’s my daily limit and if I hit it I simply quit for a few hours and re-calibrate.
Soon I will be publishing my ebook on this trading strategy, and my guide to setting up charts and alerts using my techniques.