Thoughts on Scalping?

Beginner Questions
21

And you [U]do know[/U] what you are talking about?

Your comments that I quote above are a violation of the Babypips standard of replying to posts.
Courtesy is required on this forum.
There is an important post on that by the Admin.
I cannot find it just now, when I do, I will show you.

I do not understand why you, being new to this forum, go from thread to thread, picking arguements with the posters.
Is there some ego problem here?
Nothing better to do?

For the benefit of [B]Kenneth Lee[/B], I must apologise in that I am using the terms ā€œscalpingā€ and ā€œvery short termā€ trading rather loosely.

I have done very short term trading and it appears the [B]Kenneth Lee [/B]and [B]bkr1969 [/B]are doing the same thing.
Even here the risk/reward needs careful vigilance.
But I see scalping as something very different.

It is far better to be a steady incremental player who wins than one who goes back and forth.

I would totally agree with you here.

Tymen tell me why you think scalping is unsustainable?

Answer : scalping (not very short term trading) :

  1. You need a very high level of accurate reaction speed and this is very difficult manually.

  2. You really need a computer program or ā€œtrading robotā€ to do the job.

  3. You need money management - very difficult with scalping. Do 10 of 1 pip scalps and get a 5 pip loss and you have just wasted a lot of time.

  4. You need a huge sum of money to trade the appropriate leverage and lots.
    Losses will hence be very savage and in the end, take out your account.

  5. From my reading I understand that statistics show that scalping is an activity where some 97% of traders fail to survive more than just a few months. On this basis alone, I feel justified in advising new traders to steer clear of scalping!! :frowning:

But I am not going to argue with you.
I have a reputation of helping people on this forum and I do not need to defend myself.
[B]You[/B], [B]Andrewunknown[/B], and I agree that money management is important in trading.

And I submit that the less pips you take in a trade, the more difficult this money management becomes.

No wonder that since I have been on this forum, which is longer than all except Dale Paterson, FX Honorary Member, that every veteran has always said to the Newbiesā€¦

ā€œtrade long term, nothing less than daily or 4 hourā€

[B]Wise counsel, donā€™t you think?[/B]

22

Tymen, you are correct. ā€œScalpingā€ has different meanings to different people and what I am talking about is very short term trading. I have even ā€œscalpedā€ on daily charts even though it wasnā€™t what I had set out to do. I have no animosity for anyone here, and everyone is entitled to their opinion. I will say though, that I value thoughts from people like you who have ā€œprovenā€ themselves in some way. I began reading your candlestick post last night and am completely enthralled! (FYI, to those of you who have been harsh with Tymen, he ā€œscalpsā€ using this ā€œsystemā€ so he does know what heā€™s posting about). I only got halfway through it but am going back to finish now. I am certain I will have questions as I explore this fully and I look forward to being able to ask you and, knowing I will get an honest, intelligent answer. Thank you for all of your work in helping to educate us. I hope that I may do the same for others someday.

23

Excellent - use it to test your limits, make all mistakes and find out what works. :slight_smile:

Is it me or does this method tend to be frowned on. If so, why?

It is not you.
In very short term trading, such as what you are doing, it is very difficult to maintain a correct risk/reward ratio.
Forget about the gibberish posted on your thread - have a look at this :

Posted by CBarnett808 on my candlestick threadā€¦#325, page 33 :

[B]Risk/ reward would be a wonderful next topic.[/B]

This is the only major shortcoming ā€¦ I have a hard time scalping for 10 pips when my stop loss (the high point of the formation) could be 20 or more pips away. In fact, I have had great success trading,ā€¦ but Iā€™m actually at a net loss due to big stop losses (Yes, I realize big risk/ small reward breaks a prima facia rule of trading- ā€¦

[B]The point of this post is this:[/B]

We have a very solid system here- better than any iā€™ve seen yet. We might need some solid money management ā€¦, and here is why:
If we assume the 27:7 win-loss ratio (which seems unrealistically high) and we gain 10 pips from each win and lose 20 pips from each loss, we donā€™t even clear 100 pips for six weeks after we pay the spreads.

True enough, we havenā€™t lost any money, but we certainly havenā€™t expanded it much either. Plus, I should add that many of the 27 wins were just barely 10 pip gains (another achilles heel), and that ratio is certain to decrease sooner or later.

I know you will agree that a correct risk/reward ratio is at the heart of correct money management.
And, as you can see from the above quote, it becomes more difficult to do this as you trade less pips.
This is not me speaking - it is the words of someone like you, who is experiencing the same things as you. :slight_smile:

But the thing I seem to be finding, is that even if my signals are all correct, If Iā€™m going for a larger gain (i.e. 20-30 pips) I tend to get about halfway there then it turns on me.

Every trade will turn around at some point.
If it does so before time, that is OK.
It is time to close the trade at that point - the trade has reached its end point.
And you have 15 pips instead of 30!
But a profit you have!! :slight_smile:

Am I missing something

Every veteran trader will tell you - long term trades - less randon noise and more steady price action.
The daily and 4 hour timeframes are recommended for ideal learning.
If you are indicator trading I commend those timeframes to you.
I see 2 exceptions :

  1. Experienced in trading (obviously)
  2. Special candlestick strategies - high reliability with candlesticks.

[B]So finallyā€¦[/B]

Keep trading with the demo - that is safe.
If you strike difficulties - do not be afraid to back out and return to longer term trading.

All the best!! :slight_smile:

24

Thank you [B]Bkr1969[/B], for you very encouraging reply.

With you clear open mind, and your obvious humility, you have all the right attitudes to become a very successful trader.

I am sure that if you persist on this forum, you will grow in knowledge, as I have seen others here, including myself, grow.

There will come a point where you will be able to answer questions posted by newer traders. This is excellent practice, it makes you check yourself to see that you are accurate.

After some 500 posts here, a change starts to take place.
You develop a desire to specialise, and you open your very own thread that deals in your favourite topic!! :slight_smile: :slight_smile: :slight_smile:

25

I know Iā€™m new here but I make my living by short term trades on the 1 and 2 minute charts. I think there are a thousand ways to make money and just because one cannot make money with a particular stategy doesnā€™t mean they canā€™t with a strategy more suited to their personality. I probably differ from most because I scalp everything. I have actual trades, fills, orders online for verification. Iā€™m new to this forum but have traded since BC (before computers) I enjoy the insights here.

26

Lets start this out. Im new to this forum not to scalping. I have no Ego issues.I have a problem with someone saying scalping wont work when I do it 4 days a week. Arbitrage and scalping is not interchanging terms. Thats a price feed delay that you are using not short term trading.
1 Reaction speed is not really needed its good entries just as in other trading styles.
2 I do my scalping not a robot, you mixing arbitrage and scalping.
3 money management still applies again 1 pip gains is associated with arbitrage
4 no large account needed its not large position you need to take. You need to still follow trends.
5 Scalping is frowned upon where are these stats coming from?

SCALPING(FOREX)= SHORT TERM TRADING

Dont argue discuss. I agree that you have been helping people but to determine scalping is horrible not worth looking at, avoiding like it has the coodies is wrong. Being in the forum loner doesnt make what your doing the best. As for me being talking down to you is baseless. I was refuting your point, you dont see the difference. The error started with you mixing the meaning of scalping and arbitrage. Scalping (stock exchange) is when the sell is lower than the buy price or difference on different exchanges. Oranges on the London might be 4 1/8 and in new york its 4 3/8. Thats the difference. If I was to tell you Perth is onthe East coast of Oz you would say the same thing.

If scalping is unsustainable how come so many people are profitable this way how come the more people have made a living this way.

You dont know the difference between scalping and arbitrage. So you didnt know what you were talking about. You were a teacher so what did I [B]violate[/B]. Do you feel bad about being a teacher? I gave you courtesy as in I dont tell people how I feel about trading on 4 hour charts using PP, fibo lines and fundamental trading. I think you have a ego just because you feel like you have senoirity in a forum. I think just because you have a way that might work you have become close-minded to others trading style.

27

If you are going to scalp then you need an ā€œedgeā€.

One edge I have is using statistics to alert me to trades.

Another edge I have is using a progressive position entry size.

Another edge I have is knowing how to use indicators properly.

Another edge I have is using an ECN MBT instead of a FIXED SPREAD BROKER. I can sell on the ASK and buy on the BID. But if you are using a FIXED SPREAD BANDIT, I mean broker, then you are forced to buy the ASK and sell to the BID. My orders will be filled ahead of yours every time.

To do this successfully, you must be MECHANICAL. You must follow your rules and system, otherwise you lose the edge.

I know, statistically, where the support and resistance lie. If I see any resistance in the path of my trade, Iā€™ll exit if in a trade or I wonā€™t enter a trade at all. I know that when I see a big ā€œ3ā€, itā€™s an indication of a potential entry. Note is said INDICATION OF A POTENTIAL TRADE. I didnā€™t say it was the entry trigger. THIS IS AN IMPORTANT DISTINCTION.

You have to be quick and not hesitate. There is no time to think twice. Actually, my style of scalping is like playing a video game. You just sit there and rack up points(pips).

28

True then there is no emotion with it.

29

I see some one wrote Im misrepresenting scalping tell me how I am and who wrote it apperently isnt a scalper because they dont know what scalping is.

Im asking How/What did I write that was misrepresenting.

30

Could you please explain how you do this? I use them and am not able to do this. Are you talking about slippage? Iā€™ve seen times where ask was lower than bid, but thatā€™s it.

31

I trade with MB Trading Direct Access Brokerage Firm

MBT is an ECN. THERE IS NO FIXED SPREAD IN FOREX.

You can google and find out what I really think about ā€œFIXED SPREAD BANDITSā€.

Iā€™ll leave it at that so I donā€™t get banned.

How do I avoid the spread?

I explained this to someone yesterday in an IM.

With MBT you pay a commission rather than having a ā€œFIXED SPREADā€.

Itā€™s ā€œapples and orangesā€ so donā€™t try to compare. ā€œTHE MATRIX HAS YOUā€ and you need to ā€œFREE YOUR MINDā€ to understand what I am about to explain.

Letā€™s say the current bid/ask is 1.5010 x 1.5015

The current spread is 5 pips.

You want to SHORT.

You SHORT at 1.5010.

You set a TP at 1.5005.

Bid/Ask becomes 1.5005 x 1.5009 and the current spread is 4 pips.

At MBT, you will get filled if the bid is 1.5005 and someone TAKES your offer.

Bid/Ask is now 1.5004 x 1.5009 and YOU HAVE YOUR PROFIT.

Note: the ASK never reached 1.5005. THIS IS IMPORTANT!

If you entered this order at a FIXED SPREAD BANDIT, whoops I mean broker, your order is STILL OPEN!!

The bid/ask must become 1.5000 x 1.5005 and your order HITS the Ask.

DO YOU GET IT?

If not, then read this over and over and over again until the LIGHT BULB goes off!!

The day I found out about MBT is the day I opened an account there and stopped trading with FIXED SPREAD BROKERS.

The simplest thing to do is to load up a demo account at MBT Group and see it with your own eyes.

When you place your TP Bid offer at 1.5005, your bid is displayed on Level II.

The point is with MBT your offer gets hit.

With FIXED SPREAD BROKERS you have to wait to hit their offer.

Maybe this might help:

First:

1.5010 x 1.5015

and price dropsā€¦

1.5009 x 1.5014

1.5008 x 1.5013

1.5007 x 1.5013

1.5006 x 1.5012

1.5006 x 1.5011

1.5005 x 1.5011 You may get hit

1.5005 x 1.5010 You may get hit

1.5004 x 1.5009 YOU COVERED 5 PIP GROSS PROFIT

AND LETā€™S CONTINUE

1.5003 x 1.5008

1.5002 x 1.5007

1.5001 x 1.5006

1.5000 x 1.5005 YOUR FIXED SPREAD BROKER FILLS YOUR ORDER.

Does that make it clearer??

What about the commission cost?

The commission varies depending on the pair trading.

It is $.50 per 10k minilot on USDJPY. So if I gross 2 pips, I am making money.

From the MBT site:

Commission Rates

Fixed spreads are a way for FCMs to markup or markdown the best bid or offer. FCMs do this to hide their fee into the price of the currency pair instead of displaying their best quote. Common sense tells you that no one works for free, so when you see an FCM claim they have ļæ½no commissionļæ½, that should be a red flag. So how are they getting paid? Its simple: they are making money with the built-in markup/markdown in the spread.

Our FCM, MB Trading Futures, has nothing to hide. They offer tighter spreads with no markups/markdowns and openly display a low commission rate.

Commissions are based on total dollar amount traded: $5 per $100,000 traded.

32

I think the issue is there are people who dont know, afraid of, or never tried scalping before. They go off these people who have a losing system to sell or some hustler. Or they dont fully understand short term trading. If they wanted to understand it they could have asked someone .But here try to discourage others from scalping. Which is a perfectly useful and profitable trading routine. I guess they know it all and what they say is right and everything they dont believe is worthless. Rather than respect others trading style they down right say it worthless. Maybe its me but I dont get it how they dont see what itis they are saying like I am lying about what I do.

33

I think everyone needs to keep in mind the big picture on scalping vs. longer-term trading.

Letā€™s look at transaction costs.

If you can earn a 100 pips in ONE trade, then you have paid your transaction fee (whatever that may be) only ONCE. If it takes you 20 trades at 5 pips each, then you will have paid TWENTY TIMES more transactions fees than the longer-term trader. This to me is enough to side with longer-term trading.

Everyone is too focused on deciding which is profitable. Iā€™m sure theyā€™re both profitable, but one trader is working a lot harder to get those profits. I believe they do that so that they have the comfort (read security blanket) of knowing their profits every day, at the end of the day. It is just as easy to be consistent trading 4hr and daily charts, it just takes a larger perspective that I guess some people just canā€™t handle.

34

I agree with you long term trading with scalping it would take 119 pips to make 100 pips(at least with Oanda) to equal that. I feel scalpers intend to be slow and consistent. It was the turtle who won the race. Also scalping you are not subject to unexpected events. I.e. earthquakes, storms, coups etc. Long term trades dont ā€œworkā€ as hard and dont look at charts every 10 min. You can trade either way and I wont knock it. Unlike some other people.

35

After I choose a broker, I donā€™t let the commission influence my trading. I donā€™t care. So long as I make money, nothing else matter.

If I make a net 100 pips, I donā€™t care if I paid 1 commissions or 20. My focus is my net profit. I am better at making 5 pips than 100.

36

RumpledOne,

Maybe you missed where I said I was already using MBT. Iā€™m familiar with their costs and platform, and I do like them.

So you are talking about Level2 trading then? Or slippage? Regardless, Iā€™m contacting them on Monday morning to ask about this, since I wasnā€™t aware you could have your buy order filled with bid, and sell with ask.

37

I use both strategies, I like longer trades but in my time frame eastern USA. When I have the time to be undivided to trading SHORT term trades or usually what is available. Also I feel they are in ways safer. Your in and out not worrying about some news that comes out and turns your pair against you. Plus Money management is easier as with this type trading it is in your favor or not, normally no guessing required.

I agree you do make your broker more money, but that is your choice Plus as is always taught on almost every system. Trade your styleā€¦ So we canā€™t force people to trade what they are not comfortable doing. I like both styles but during different trading times.

Begining of European session open Breakouts ( longer trades ) At the end of sessions when they start to consolidate short term is the ticket. Look at any pendant or flag pattern and think in 5 - 10 pip gains and you easilly see the profits available. As the pendant narrows you move onā€¦ or it breaks and another long trade.

I think that with skill there is a lot money available that many over look as they think in singular fashion. But there are always different possiblities for extra income. Just like the examples above some people would be waiting on the breakout of the pendant or flag. While others are increasing there ballances. Neither is wrong but if your comfortable doing both why would you not. Kinda like not bending over to pickup a dime, but will for a quarterā€¦:slight_smile:

Anways I think this horse is good and dead now LOLā€¦ Good trading to allā€¦:smiley:

1 Like
38

Be my guest, but no need to contact them.

Use LIMIT ORDERS.

Letā€™s say the current bid/ask is 1.5010 x 1.5015.

If you want to buy at 1.5010 enter a BUY LIMIT 1.5010.

Hereā€™s what can happen:

If someone enters a MARKET SELL, you would be filled at 1.5010.

If someone enters a SELL LIMIT at 1.5010, you would be filled at 1.5010.

If a big SELL LIMIT order comes in at 1.5009 or lower, you may get a price improvement.

There is NO SLIPPAGE when you use a LIMIT ORDER. Either you get filled at your price or BETTER or you do not get filled.

39

I second VulcanClassic asking.

As far as i can read, you and some other guys here, know how this works. I donā€™t.

Is there anyway that this discussion raise a little. I mean, can you or anyone who is aware about scalping explain the method ?

If not then forget about answering and iā€™ll also definitely forget about reading these kind of comments that are spread in every thread. Otherwise I would be happy to learn.

Make the thing usefull.

40

Does that mean that in the worse case the spread, for those who are under spread system, is taken twice (entry and exit) ?

When MBT (or whoever) take his commission ? Each trade ? After the sum of a volume of trade ?