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  • #161
  • Apr 1, 2007 7:40am Apr 1, 2007 7:40am
Quoting mathematician
Can you explain why a broker would not like a scalper? Is it because some brokers hold positions against (some of) their traders as a means of "making the market?"
That's my general understanding...

Somewhere within FF, I've seen a broker's definition of scalping. And it's not that tough to get around. It's largely a function of time, meaning trades of a very short duration - like 5 minutes or less. And then it's got to be a substantial portion of one's overall trades - either 30 or 50%, as I recall.

So if it takes you 10-15 minutes to earn 5 pips, you'll probably be okay.

But if your specialty is to continually grab 2-3 pips in 30 seconds, that's when they seem to have a problem with it - for the reason stated above.

I don't live off of scalping. But I sure like to do it from time to time. And I've never had a broker-related problem. But I get very few victories in less than a minute.
  • #162
  • Apr 1, 2007 8:16am Apr 1, 2007 8:16am
If a broker have something aggainst scalping then they are not honnest.
They will make profit when you loose.
Spread isnt enough for them, blid greed.

"With such a high frequency of trades shouldn't the brokers love scalpers? I mean they will be generating so much revenue from the spreads (which is the broker's main source of income), plus the scalper provides more liquidity."
  • #163
  • Apr 1, 2007 6:58pm Apr 1, 2007 6:58pm
My humble experience in Scalp is in CFD's metals (Copper, i'm from Chile, of course!!!) ... my max time in a operation is between 1 to 5 minutes... well, more time it's more risk... and my strategic is to take the more opportunities that the market can give me

My favorite hour is when NY open... the really action is for.. maybe 3 hours... uuhoo!!!!!! (give me money!!!!!)
Market is mine! * Das Geld Machine * =================
  • #164
  • Apr 1, 2007 8:36pm Apr 1, 2007 8:36pm
Quoting mathematician
I hear people talking about how many brokers hate scalpers and will not tolerate it. But, that's what I don't understand: With such a high frequency of trades shouldn't the brokers love scalpers? I mean they will be generating so much revenue from the spreads (which is the broker's main source of income), plus the scalper provides more liquidity.

Can you explain why a broker would not like a scalper? Is it because some brokers hold positions against (some of) their traders as a means of "making the market?"

Nevertheless, I don't think it will be a problem for me for now because my account is small and I will not be trading huge amounts.
I heard someone on the forum said that brokers dislike scalpers because scalpers buy/sell are sometimes too fast that the brokers didn't have enough time to hedge the scalper's position. In other words, scalpers "steals" money from broker's account. Not sure how valid this point is.

Your logic about scalping is interesting. I think, the traditional trader probably has more time to relax and maximize his return potential by trading multiple markets. For a scalper, it's quite hard to trade multiple markets since scalping is very fast paced. If this is the case, scalpers and traditional traders are on the same level.
  • #165
  • Apr 2, 2007 2:59am Apr 2, 2007 2:59am
Quoting luqmanz
Your logic about scalping is interesting. I think, the traditional trader probably has more time to relax and maximize his return potential by trading multiple markets. For a scalper, it's quite hard to trade multiple markets since scalping is very fast paced. If this is the case, scalpers and traditional traders are on the same level.
Yes I am noticing that. It's very hard to catch the move if you are following multiple currency pairs on such a short time frame. Often I will find a valid setup that has already passed when I come back to look at a particular chart.
  • #166
  • Apr 2, 2007 1:15pm Apr 2, 2007 1:15pm
Quoting Pip Rage
Your logic is impeccable but have you ever been able to find a scalping technique with a 90% strike rate(irrespective of the RR ratio) that gives you 4 set-ups in a couple of hours? If so, I would love to hear about it.
In fact, I'd settle for a far more humble result than that if it was reliable AND frequent.

cheers
Ken
Yeah, good question.
  • #167
  • Apr 2, 2007 8:22pm Apr 2, 2007 8:22pm
Quoting mathematician
Yeah, good question.
Answer: key is to spot the active market condition and scalp - you will get more than 4 setups... LoL
  • #168
  • Apr 2, 2007 8:49pm Apr 2, 2007 8:49pm
Quoting mathematician
I am really starting to see why scalping can be a great strategy. I used to think it was foolish but now I think it's actually the perfect trading style, for me anyway.

I used to think that having a reward/risk ratio less than 1 was a bad idea...I mean you have to win more than you lose just to break even. When I was studying for the level 1 CFA exam, in one of the readings they mentioned how a strategy with many small wins and the occasional big loss is like "picking up nickels in front of a bulldozer." Haha, I thought that was funny.

But the truth is: It's not your reward/risk ratio that really matters, it's your reward/risk ratio combined with your win percentage, combined with the frequency of trades you make...all of these things must be considered. Here's an example:

Say one trader has a traditional style, he's not a scalper, and his reward/risk = 2/1, (e.g. maybe he chooses his lot sizes so that he is risking 3% of his account on a loss, i.e. he is risking 3% to potentially make 6%). But maybe he only wins about 50% of his trades (and 50% is usually considered pretty good for a non-scalper). What's his expected return?
It's (0.5)(6) - (0.5)(3)= 1.5; so he is expected to make about 1.5% per trade on average.

Compare this to a scalper who might have a reward/risk = 1/3 (let's say he is also risking 3% of his account per trade, but to potentially make only 1%) ...but his trades are winners about 90% of the time. What's his expected return?
It's (0.9)*(1) - (0.1)*(3) = 0.6; so he is expected to make about 0.6% per trade on average.

The scalping sounds worse so far but we don't have the whole story yet: We need to know how often these two traders make trades. Maybe the traditional trader makes a trade about once per day; he's a day trader. And maybe the scalper makes 4 trades per day. Now at the end of the day, even without compounding after each trade, what are the results?
The day trader made his 1.5%, the scalper made 4*(0.6%) = 2.4%
Doesn't sound so bad now, eh?

What's more is that because a sclaper makes trades much more frequently, he has more opportunities to compound his earnings meaning he could achieve much greater growth.

Also if we're talking about a very short-term strategy, the scalper might be able to find 4 or more setups by looking at different charts in a very short time. Maybe it would only require a couple hours a day, rather than sitting in front of the screen all day.

Making more money, saving more time...hmm this sounds like the way to go. Only thing is, you need a strategy that actually has such a high win percentage. But let's face it: It's easier for price to move 5 pips in your favour than it is to move 12 or 15 pips against you (reward/risk = 1/3)... of course it depends on the details of the strategy but it should generally be more likely to have winners than a situation where price has to move 30 pips in your favour vs. moving 15 against you (reward/risk= 2/1). So yes, a high reward/risk ratio means that you don't have to have winning trades as often, but it also makes it harder to get a winning trade.

Sorry for the long post.

-mathematician
Why would you come to that conclusion. All you have to do is up your trade size on the higher probability system. You should never assume same leverage on different probability systems. That is flawed logic.
  • #169
  • Apr 2, 2007 10:00pm Apr 2, 2007 10:00pm
Quoting zarni
Why would you come to that conclusion. All you have to do is up your trade size on the higher probability system. You should never assume same leverage on different probability systems. That is flawed logic.
I don't follow. Are you saying the trader who has a 50% success rate should trade smaller positions because he loses more frequently?...or larger positions because his expected value is higher?
  • #170
  • Apr 3, 2007 8:24am Apr 3, 2007 8:24am
Quoting mathematician
I don't follow. Are you saying the trader who has a 50% success rate should trade smaller positions because he loses more frequently?...or larger positions because his expected value is higher?
I was saying that you made the assumption that the scalping system with let's say 0.6 win/loss ratio is better than a system of let's say 0.8 (these are just assumptions for sake of argument - not sure what your exact numbers were), would be better as the trades are much more frequent hence the total profits are better.
ALl you have to do is up your trade size on the higher probability system and you will compensate for this difference and with a lower drawdown at that.
  • #171
  • Apr 3, 2007 5:05pm Apr 3, 2007 5:05pm
Hi everyone!

I am very interested in scalping techniques and there are very many interesting ideas here on this thread. Today I created an MMA indicator (EMAs from 3 to 235 on my Oanda account and tried to learn any patterns on the 5 sec chart. However I am really puzzled, can you guys give me any ideas at what to look for? According to LinuxTroll posts, he can be about 90% correct in his entries, so there must be some very reliable patterns there?
For example, when you say "ride the wave", how can you be sure that wave is going to last long enough and will not end right after the entry (especially on 5 sec chart, it looks totally unpredictable to me). Same thing with the reversals.

Also, when you scalp, do you only look at 5sec chart or you base your entries on higher time frames also and additional indicators?

I tried to google for Guppy MMAs, but most links I get describe very long time frames. I can understand that on long time frame long MAs represent "investors" and short MAs represent "traders", so you can see the overall market behavior, but it is obviously not true on 5 sec chart, where even 235EMA is not long enough. SO interpretation should be different... It would be great if anyone knows and could post a link on anything on MMAs and its patterns on short time frames like 5 minutes and less.

These are a lot questions but I would really appreciate if anyone could answer at least some of them.

Thanks a lot!!!
  • #172
  • Apr 3, 2007 8:46pm Apr 3, 2007 8:46pm
Quoting linuxtroll
Jump in and ride the wave on Rainbow chart... I do not need EFX to scalp... I can scalp all day... eurusd 5 sec chart at Oanda... LoL

Linux,

would you be able to post link for a bigger image, and more chart examples pls?

tks.
I'm just moving clouds today - tomorrow I'll try mountains.
  • #173
  • Apr 3, 2007 8:47pm Apr 3, 2007 8:47pm
There's a ton of entry techniques and you need to decide which is best for your psyche.

http://www.dacharts.com/articles/Buf...ice_action.php

http://www.dacharts.com/123.htm

http://www.dacharts.com/2b.htm

http://www.dacharts.com/inside.htm

Good luck!
  • #174
  • Apr 3, 2007 10:35pm Apr 3, 2007 10:35pm
Thanks for those links Poocher.
Quoting Poocher
There's a ton of entry techniques and you need to decide which is best for your psyche.

http://www.dacharts.com/articles/Buf...ice_action.php

http://www.dacharts.com/123.htm

http://www.dacharts.com/2b.htm

http://www.dacharts.com/inside.htm

Good luck!
"Every battle is won before it is ever fought." - Sun-tzu, The Art of War.
  • #175
  • Apr 3, 2007 11:30pm Apr 3, 2007 11:30pm
Hi there Linux troll or anybody,
This probably sounds like a dumb question, but how does one get to choose the colours for the MAs on the Oanda platform? (for the rainbow MMAs!)
  • #176
  • Apr 3, 2007 11:41pm Apr 3, 2007 11:41pm
Quoting starfire
Hi there Linux troll or anybody,
This probably sounds like a dumb question, but how does one get to choose the colours for the MAs on the Oanda platform? (for the rainbow MMAs!)
Right click the MA line and it will let you pick the new color.

GF
  • #177
  • Apr 4, 2007 12:10am Apr 4, 2007 12:10am
Scalping is by far the best trading method in the Forex market. Trade like the banks do, large positions for small gains.

I trade 20-80 positions a day with a 2 - 4 pip TP. And I increase the position size with every trade. 93%+ win rate. Losses are double the gains.
Keep it simple stoopid....
  • #178
  • Apr 4, 2007 12:54am Apr 4, 2007 12:54am
Quoting DrainBamage
Hi everyone!
For example, when you say "ride the wave", how can you be sure that wave is going to last long enough and will not end right after the entry (especially on 5 sec chart, it looks totally unpredictable to me). Same thing with the reversals.
Thanks a lot!!!
As Linux said if it doesnt go your way just cut it. I think you really need to sit and wait as he said trade when its active. Price moving and how far its moving should help you know if its active, along with the time of day as a general guide.

Before Linux posted his gmma chart I was doing some similar kind of scalping, waiting for price to get active (by the speed of its movement) and it would start to go in one direction, wait for a pullback/retrace and then enter back in the direction of the new move it started. Using the GMMA helps show this visually. It would be interesting if anyone wanting to do this live (as in demo) and watch some charts together. Tradingrooms has free rooms to post charts and share them live, something to consider as quite a few ppl seem at least interested. I can by no means trade this successfully Just very interested in it.
Attached Image
  • #179
  • Apr 4, 2007 1:00am Apr 4, 2007 1:00am
Kurka Fund, whick broker do you use? With so many trades and this great win ratio, your broker should be the best of all I guess. How about slippage?
  • #180
  • Apr 4, 2007 8:15am Apr 4, 2007 8:15am
  •  dado26
  • | Joined Mar 2007 | Status: Plan your trade and trade your plan | 180 Posts
HEY!
I have one question for you scalpers here. I am trading brakeouts on a 15min chart and I go for 10-15 pips with a bulk of my position ( 80% ) then I leave 20% to ride a posible biger move.
Cause timeframe is 15min do you consider my strategy-Scalp?

Thanks for your awnsers...
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