very short term trading strategy?

Hello everyone,

Firstly, A Happy New Year to everyone and may the pip goddess smile on you this year.

I have decided to take portion of my fx account and apportion it to scalping/very short term trading. I prefer to allocate different amts to different strategies, rather than put it all in one strategy/system.

After all the reading, I find the concept of scalping/short term trading very appealing, and wanted to see if it fits in with my personality.

I have been trying different things in a demo account. I found the idea of Guppy Moving averages, and using linuxtroll's rainbow MA template quite appealing. I have speant a few weeks just experimenting and observing how price moves etc, rather than trying to go for profit straight up.

My initial strategy was to go trade gbp/usd, eur/usd, usd/chf, eur/jpy, usd/jpy. Mainly because of relative low spreads on these. I traded off 5 min chart, in the direction of the 15 min chart (tried the 1 min chart, but just could not keep up with the whipsaw). TP was anywhere between 3 to 5 pips + spread, sl was b/w 8-10 pips, and I was only going for trades that I felt met the criteria 100%.Unit was Account balance x10 As soon as my daily target was met, I switched off the computer.

My observations were as follows:
- Target hit quite often.
- Price usually kept going further in my direction after the tp was hit
- SL was also hit quite often, but that was usually on the trades where I "read" the chart as showing a reversal, with the short term MA crossing the long term MA.

I am sure there are people on this forum who are very good at this type of trading. I have met some in internet forums, but there trading is totally discretionary, so hard to learn, discuss etc.

I would love to discuss in public or private with anyone who is willing to help me develop this/better system or strategy. eg. is there a particular time of the day that is better for this to work, is there any particular pair this can work better with etc.

One of my modifications to this was going to be was to move my sl to be as soon as the pair has moved to my mental tp, and then follow it with a manual trailing sl (as oanda does not have trailing sl feature) as the pair keeps moving in my direction. I might have lots of be, but the ones that do keep going, should make up for the be trades, and I might end up with my per mth average aim.

All suggestions and criticism welcome.

Regards,
K.

I can't comment on your proposed method for generating trade signals as I look at a different approach, however the only word of caution I can provide from my experience of trading very short term trading systems is that slippage really needs to be tested and factored into your p&l calculations. With short term trading systems I find myself dealing with only about 3 and 8 pips per trade, which can very easily erode when slippage is factored in. I have found that these systems need to be traded on small amounts before you can get a true feel for slippage and what your actual profits are likely to be.

Scalping always best just before and after London and US opening - I try to avoid chop-chop in Asia. The Eur and GBP will very often mimic each other from 5 min upwards, except for country specific announcements. watching 1m, 5m and 15m charts, trade only when all 3 line up in the same direction -Use Bill Williams/chaosfractals for stops and only trading when volume is up should net some nice Pips, i.e. move stop along with trade as indicated by fractal until stopped out or direction changes.

Happy New Year and good Pippin

question: what is slippage?

With regards to financial instruments, slippage is the difference between estimated transaction costs and the amount actually paid. Brokers may not always be effective enough at executing orders. Market-impacted, liquidity, and frictional costs may also contribute. Algorithmic trading is often used to reduce slippage.

ok and the transaction costs are . .what the intrest u pay??

Transaction costs consist of mainly:

1) Bid/Ask
2) Slippage
3) Interest you get / pay depending on which side you are on

Unless your broker also charges you a commission; most FX are commission free, just bid/ask'ed by the broker..

I am very new to forex trading and don't really know how to read charts etc. Still in the learning process. I would like to hear what the old timers say about this seemingly easy strategy.

As you all know, EURUSD and USDCHF are two pairs of opposite pairs. If you buy both at the same lot size, you will more or less cancel out your profit/loss. What if I buy 1 lot of EURUSD and 1 lot of USDCHF right before a big event, say tonight's US Consumer Confidence report. The event is supposed to move these pairs big time. After the initial impact is past, when the dust settles, I can see a clear direction of where the new is taking the pairs, I will quickly dump the losing pair and keep the other one.

Do you see any flaws in this strategy and why?

Thanks in advance.

Yes I see an obvious flaw:
- you say you buy 2 pairs because you don't know the direction then you drop one when the direction is known
- if at some point you are able to know the direction (I say if...) then why just not wait before and just enter with one pair when you know the direction. You will end up with the same thing : one pair in one direction but would have save costs, like spread...

And of course if you intend to use that during news there are a lot of other problems that are explained already in so many posts: large spreads, slippage, requote...

Your point well taken. Thanks.