Steroid Scalping

Trading Systems
242

With regard to the scaling, I really think this is a key to this method (at least the way pip-siphon trades it). Pip-siphon himself said somewhere that this is where he makes his most money.

At first, I was looking at scaling situations as “get out as soon as it breaks even” but I found that it usually roars back when it finally does bounce, so by the time I can close the trade I’ve already made some hefty pips. Btw for trades that have been scaled, I’m constantly focused on the Oanda “unrealized P&L” figure to determine when it will return to profit (that way I can see all legs of the trade in a single figure). I’ve noticed that frequently the breakeven is approximately at the point of the last scaled trade entry. So for example, if I am on scale trade #4, then when it retreats back to #3 I’m usually somewhere near breakeven. For scaling, I do try to only scale at resistance areas like pip-siphon teaches.

I’ve pretty much figured out how to gear the units to control the worst-case scenario. What’s difficult for me, though, is the fact that this worst-case-scenario rarely happens. Should I board up my windows to avoid tornadoes because I live in Kansas? Or should I try to find a balance that allows sunshine but responsible protections from the tornado? I can gear the units so that a worse-case-scenario only impacts the account minimally. But doing this restricts the growth somewhat severely. I’d like to find a happy medium.

243

I completely agree with your tornado analogy but the balance you are trying to find is the problem I ran into and couldn’t perfect so I decide to do away with scaling for the time being and see if my results change. I do feel scaling is a huge advantage and I also had it figured down to be that the move only had to re trace 20-30% , on average, from where ever my last scaled position was to my initial position in order to reach a break even point. The problem I ran into is sometimes the market just doesn’t want to retrace until it’s made a jump that is beyond what I can continue to scale into and had to through in the flag. But I’d calculate that 90% of the time my scaled positions end positive or at break even but it still was those 10% that would kill me.

I think the key to scaling is to be selective and pick and choose carefully which ones to hang on to and which to cut the cord. But scaling is still in my tool box but I’m going to try with out it for a little while. Good luck with your trading and good to know someone else who’s trading is very similar.

244

I’ve been revising my leverage for this strategy and I’ve come up with something that I think is working now. It’s difficult for me to wrap my brain around the money mgmt sometimes, but I know this is critical to overall success.

Part of the problem with this strategy is that (since I depend on scaling into losing trades) there is a possibility of a huge move against me which could accelerate losses quickly if I keep scaling. To avoid disaster, I’ve tried to structure it with risk boundaries while at the same time using “enough” leverage to afford a modest growth rate. The possibility of the monster move against me seems somewhat rare, given that I’ve never experienced one yet after hundreds of trades. Also, I trade this method only in the dead hours, so I would think that also reduces the possibility. So I’ve tried to also take that into account when restricting leverage.

For me, my goal is to maintain an average account growth of 1% a day. I allow up to 4 additional legs of scaling into a losing trade (5 legs max) and the max stop loss is 30 pips. The maximum damage I’m willing to sustain in the event of disaster is 10% of my equity. Again, I’m basing this figure on the likelihood of total failure.

So here is the method I’m using to calculate Oanda units to trade with each morning. I’d love to hear your feedback on this. I’m sure everyone deals with risk a different way, and I’m still learning:

Step 1: Determine max pips at risk
Determine total # of units for all legs, until the first leg reaches its stop. If there are 5 total legs, then each leg would share a portion of the total 30 pip stop move. Therefore total pips would be roughly: 30 (leg1) + 24 (leg2) + 18 (leg3) + 12 (leg4) + 6 (leg5) = 90 total pips at risk

Step 2: Get a reference value for this many pips
Using Oanda PIP/Profit Calculator, 90 pips at 1000 units = $9

Step 3: Solve formula to get # of units I should trade with


 1000 units                x units
--------------    =   ------------------
$9 max loss             $___ max loss
 @ 90 pips           (% of acct equity)

x = 1000 * $___ max loss / $9 max loss / 5 (1/5 of total loss shared on each leg; first leg is more, but last leg is much less)

Example: max 10% loss on entire trade setup (worst case scenario):
(assuming $2500 equity so max $250 loss)
x = 1000 * $250 max loss / 9 / 5 = 5555 units to trade on each leg

245

Your math seems correct but I think a 10% drawdown on one trade is pretty steep. You’re aiming for 1% a day and if you hit your max loss 10% of the time you would lose all profits made in basically 2 weeks in a matter of minutes and ultimately break even (from a mathematical stand point). Personally I wouldn’t be able to stomach a 10% loss; the max I risk is 2% on any one trade. I feel no single trade should make OR break you, just my 2 sense.

I’ve seen a 50+ and even a 90+ move during the quite times within the past 3 weeks and I happened to be on the wrong side during a scaled position and I got stomped. I usually trade between 7pm-12am EST which I feel is quite but maybe it’d be safer to assume later on into the morning (EST) that the market is even quieter? I don’t know I live in the EST zone and that’s past my bed time. The market does what it wants and even in quite times it can make a swift move.

But I also don’t feel I’m no where near the greatest at picking market direction yet and if per chance you feel you are and that 10% occurrence I mentioned for myself seems more like a 2 or 3% for you then id say your 10% risk would seem a lot more feasible. I like the idea and I love the math but a 10% loss for me would just mentally weigh me down knowing I wiped out 2 weeks worth of trading in 10 minutes.

246

You’re right dude, 10% drawdown on 1 trade is just crazy.

247

One thing I’m trying to work on is finding that intuition to close trades that are not gonna work. Pip-siphon mentioned this a little bit too. He said that usually he would not let trades go to the 30-pip stop, because he would’ve already taken a stop before then.

I think hitting the disaster stop is not supposed to be something you just sit-back and let happen. That is for things like power failure, terrorist bombing, etc.

So far I am only closing about 2% of trades at a loss, and in those cases it is really accidental/negligible. But that is because I’m following my scaling rules and getting bouncebacks on all the trades going against me.

I’d like to learn how to spot the activity that indicates a trade is not going to develop like I had originally thought. Then I could just close it when it goes against me by 3-5 pips, without the need to scale at all.

The net effect of that, if I could figure it out, is that I could recalculate my units and take an even stronger position to begin with.

248

“I’d like to learn how to spot the activity that indicates a trade is not going to develop like I had originally thought. Then I could just close it when it goes against me by 3-5 pips, without the need to scale at all.

The net effect of that, if I could figure it out, is that I could recalculate my units and take an even stronger position to begin with.”

Exactly where I am, I have found > 70% of the time I am right on picking the direction, for a 1-5 pip move and then I cant take much credit for what happens next. But it was those other 20-30% scale ins that made me nervous and the few I had to let go that would destroy my capital. Pip siphon did say he would pick and choose which ones to scale into and which ones to just take the loss. I guess it comes with experience and screen time.

So what I am now trying to do is establish some stop loss rules, All depending on moments price action, and the hard rule I made is 3-5 get out. But there are some few times where I “best guess” to stay in slightly longer because of what the charts are telling me, If you take the time to listen they talk, and also why I started to scale out of my positions so I can take the small profit from the start and be in a free trade and let it ride. That is of course if I feel it’s going to continue and if not I’ll cash the whole thing out at 1-5.

Just looking back on this trading style the only times I have ended the night of trading with a loss is when I was scaling. So it just does not seem like scaling has worked so well in my favor. It would have been ok if the scale positions were small loses but they always were at or around 2% and when I have been averaging .30-.45% a night a 2% loss is a swift kick in the balls!

249

Hi crashtriple and dusktrader,

I see you’re looking for an envelope indicator in FXCM’s platform, and I believe you may be referring to a moving average envelope. This indicator is available in Marketscope in the “Channels” section of the indicator list. I circled the location in green below:

If that’s not what you need, let me know and I can see if the programming team can create a custom indicator for you.

-Jason

250

Crashtriple, I was wondering if you could explain a little more specifically how you (used to) scale-into the losers. Reading through this thread, seems like there was some confusion about how it should be done. I myself was confused at first, until I finally established some “ground rules” for how I would accomplish it.

Here is how I do it:
First, I take all legs of the trade (up to 5 total) using the same units value. The main reason I do this (vs. say doubling up on scale trades) is for simplicity. I keep a pad next to my keyboard that has the unit values I’m trading for that day so I can quickly scale back out in a jiffy when it’s time to close the trade. I always close all legs at once and (so far) always at a profit (sidenote: I need to suggest to Oanda that they create a one-click close all button. They have a menu feature to do this, but I’d like to see it in a button.)
1234
2468
3702
4936
6170
Those would represent the # of units to close out, depending on how many legs were active. Each leg would be opened with the same 1234 units.

Second, I only enter trades at levels and I only scale at next-levels. The levels are either a Bollinger band or a trendline I’ve drawn. I do not enter trades based on candle patterns, for example.

So it works like this: Enter trade when price touches the level. Wait. If price keeps going, then at next level scale into another leg. Repeat up to 5 legs. When it’s snapping back, I’m looking at the “unrealized profit” section of the account. I’m aware of the value-per-pip and so I’m targeting a close that equates to 3-5 pips, which usually happens just beyond the entry of the 4th leg (headed towards the 3rd leg).

So far for me, it has always snapped back. Although I admit the 5-legged trades scare the crap outta me. I’m hoping by studying these 5-leg scaled trades, I can spot some sort of pattern to avoid them.

251

dusktrader

Is that the envelops indicator you use and the one that was referenced in this thread? Also what levels are your BB bands set at?

I did the same thing with a note pad and paper. But I kept it simpler as Im still practicing on a small account I used 100 units as my general position size then scale ins as follows:

200
300
600
1200

Basically doubling my total passion size that was in play, I never scaled on a set number of pips only at support/resistance. The easiest way to explain how I would scale in is simply act as if I was trading a normal trade size and tried not to let the losing trade force me to jump into another trade in hopes of a retrace. I looked at each scale in as if it was a normal trade of 100 units and it was at a point where I would enter.

I only used 4 scale ins, and the biggest rule I was forced to establish was due to greed. The rule was when in a scaled position exit ASAP. Going back to no one trade should make or break you. Being that’s it’s a scaled position once it passes break even your going to make some nice profits BUT to much equity is at steak to risk it turning again because even though its going positive you have to remember your probably still 30 + pips away from your original entry and you have a very hefty trade in action. 1-3 pips at this point can be a big gain/loss as I’m sure you have noticed.

I hope that helps but I am leaving now for the airport and spending the next four days in sin city, let’s compare indicator setting next week.

252

Yea, would be interesting to see a short clip of a few trades. If not ۞PIP-SIPHON۞ maybe someone else would be kind enough to.:slight_smile:

253

I had some incorrect logic in my post above regarding calculating Oanda units, so I want to try to correct it here. I’m trying to find a balance between what I feel is “safe” and also allows for reasonable account growth. My goal is to average about 1% per day. Based on what I’ve seen so far, I think this is possible.

In the formula above, I divided the units by 5, which is incorrect because the total number of pips had already been accounted for. You can see the total units are the same, but the actual account risk is only 2%, not 10%.

Here is my new calculation:

Step 1: Determine max pips at risk
Determine total # of units for all legs, until the first leg reaches its stop. If there are 5 total legs, then each leg would share a portion of the total 30 pip stop move. Therefore total pips would be roughly: 30 (leg1) + 24 (leg2) + 18 (leg3) + 12 (leg4) + 6 (leg5) = 90 total pips at risk

Step 2: Get a reference value for this many pips
Using Oanda PIP/Profit Calculator, 90 pips at 1000 units = $9

Step 3: Solve formula to get # of units I should trade with

 1000 units                x units
--------------    =   ------------------
$9 max loss             $___ max loss
 @ 90 pips            (% of acct equity)

x units to trade = 1000 reference units * $___ max loss / $9 reference

Example: max 2% loss on entire trade setup (worst case scenario):
(assuming $2500 equity so max $50 loss)
x = 1000 * $50 max loss / 9 = 5555 units to trade on each leg

254

Dude, you doing a PhD in Mathematics or something?

255

LOL!! Actually would you believe that math is one of the things I struggle with the most. I am no expert BY FAR and you should definitely check and understand yourself anything I post regarding formulas, etc.

I do believe that understanding and controlling risk is one of the keys to succeeding at trading though (money management). To me it’s always been a necessary evil. You could be a superstar gathering pips but if you don’t control the leverage and risk then you’d have no consistency.

For me the hardest thing has been finding that personal point where my stomach starts to feel sour and my heart races. That’s how I know I’m getting close to my risk tolerance level.

256

Yeah, when you get butterflies in your stomach, then you know something’s not right with your math, lol!

258

dusktrader

What settings are you using for you BB bands?

How has your scalling been going for you?

259

I personally find that the best are 20 and 2.

260

Hey crashtriple,
so far so good. I’m hoping to post my live account stats soon. I just started today so I’d like to get a few days going (make sure I’m trading same between demo and live).

These are the settings I’m using (should be same settings mentioned by pip-siphon above):

Bollinger Bands on the 1min chart:
200-period using 1 deviation
200-period using 2 deviations
200-period using 3 deviations
200-period using 4 deviations
20-period using 2 deviations
20-period using 3 deviations

Envelopes:
30-period

Trendlines I draw before each session:
Daily (red), 4hour (orange), 1hour (pink), 15min (yellow), 5min (white)

Psychological S/R lines:
horizontal at every .xx50 and .xx00 level

Pivots drawn on the Daily chart

(I am trying to use a color-coded system to train my brain to quickly recognize which levels and S/R are more important. It goes from red-hot (important) to white (less important) based on the timeframe. My theory is that while I’m looking at all these squiggly lines on a 1min chart, if I’m seeing a confluence or a hot color, I’ll know it’s stronger.)

So far the thing I struggle with the most is knowing when to cut losses and stop scaling into a losing trade. I got caught on the wrong side of one of these this morning. I sat in that dang trade for 1.5 hours. It did eventually bounce back so I could close net-positive on the day, but it was not fun. I figure I missed out on about 15 other trades I could’ve taken had I known to close the first loser.

261

dusktrader

Color coding is a great idea and might have to steal that one from you if you don’t mind.

But I’m having trouble setting up the envelopes indicator, I have it set to 30 periods but the lines are so far away they seem completely irrelevant. I also have a setting for “percent” and the default setting was .500000 and if I adjusted it the lines would come closer or farther apart. Do you have this setting as well? If so what would you recommend for it?

And when you say your pivot points are drawn on your daily chart are you using the daily pivot points? Because I don’t know about MT4 but on trading station for FXCM you can plot any set of pivot points (1m,1h, 2h, 4h, Daily….etc) on any time frame chart. Example: I have been using 4 hour pivot points plotted on my 1 min chart.

262

I took a screenshot of the MT4 envelope settings. Make sure you are applying these to the 1min chart. On mine, the price is ranging between them and they are not too far away.

And when you say your pivot points are drawn on your daily chart are you using the daily pivot points? Because I don’t know about MT4 but on trading station for FXCM you can plot any set of pivot points (1m,1h, 2h, 4h, Daily….etc) on any time frame chart. Example: I have been using 4 hour pivot points plotted on my 1 min chart.

I use the Daily pivots only. I haven’t bothered to figure out how to get them added on MT4 yet (there’s probably an indicator I need to download) so I just use the built-in Oanda ones. I believe Daily Pivots are calculated the same way (although they may be based on the time of midnight).