30 Days to Profitable EUR/USD Scalping....

from "The Way of the Turtle", Curtis Faith...

"...over the short term there is generally more movement against a trade taken at a breakout than there is in the direction of the breakout. This is one of the reasons trading breakouts can be very difficult psychologically. It is also one of the reasons you can make money using a countertrend trading style by betting on the breakout not holding and in favor of a bounce off of support or resistance. There is a positive edge for these strategies in the very short term."

That has stuck with me since I initially read it, almost 2 years ago.

After coming to Forex, intent on being a very short time frame trader, I've leaned toward countertrend methods.

If one of the easier styles, generally accepted, is longer time frames trading with the trend, then perhaps if you must trade short term, countertrend is the way.

I've been working toward what I want in a trading method throughout this journal. (Higher win%, short time frames)

Aside from my revenge blow-up trades distorting the account value, I have had some success.

Let's take a look at my mechanical entry as of late.

After much effort and screen watching, I found an indicator which offers trades similar to the exhaustion plays I was watching every tick searching for. I've been trading it for 6 days, through some of the most volatile markets we've seen this year. Honestly, I can't see how I could have worse markets for this kind of system than what we have had lately.
I'm hoping for improvement on quieter days, with less huge moves.
It's been good for about +5.5% over 6 days, with no losing days.

I'm generally in a trade for 4 minutes or less. My profits targets are half my stop losses.

You know when you analyze your chart, see whatever it is you see, and finally enter your trade with the trend? Then shortly after, price moves against you enough to take you out, and looks convincingly as if you were incorrect. I believe that is the dealer, with their order book, and perhaps low volume at that moment, they "trick" you out of your trade. Minutes later, price continues to move in your anticipated direction...but alas, you are stopped out. This happens often on 1 min timeframes. I'm trying to catch these moves.

I played with the Awesome Oscillator and found some settings which work for me. I've purposely "blacked" those out. I don't want to drag anyone down with me if this doesn't work over the long run. Play with it, find what works for you. You'll have more confidence in it.

I trade the crosses against the direction of the cross. It crosses down, I buy. It crosses up, I sell. The awesome oscillator lags a bit versus a moving avg crossover because it is built differently. Basically, price heads in a direction for awhile, after some time, perhaps it is due for a retracement or perhaps you are making money off traders who are entering this trend too late. Quick scalps.

Check out the charts below.

If everyone is a trend trader, where is the "edge"...
Some countertrend examples...

Here's a link to a custom starting date on my original account,
with these types of trades. I'm not perfect, sometimes my stoplosses are not perfect. The volatility this past week has been very high. I've traded various position sizes to accomodate for that. When I start seeing 10-20 pip 1 min bars on my chart, I scale down. Oanda hasn't had a normal spread for the morning session all week. That makes me wary also.
http://www.myfxbook.com/members/KJKr...lp-trial/31412

I've been struggling with this issue. Lately, I've been trading half sizes in the morning session (more volatile) and then double that in the afternoon.
Crude, but... it helped me conquer my fears of wild US morning session prices.

This new systematic entry has helped with that also. I've been more active in the mornings lately, which is quite an improvement of my mostly afternoon trading on this account, recorded in this journal.

After reading Chapter 12 (again) of Trade Your Way to Financial Freedom, by Van K. Tharp, I'm going to adopt a % Volatility Position sizing model similar to what he presents.

My settings (specifically thought out for my style):

1.5 % $ account risk (+- $500) let's say $7.50 per trade

ATR (20) on 1 min chart average true range for last 20 mins

so if ATR is 18 pips, $7.50 / 18 pips = .4166 or about 42 cents / pip
which is easy on Oanda, because they have units
4200 units should be position size

This will take some of the quesswork out of what my sizing should be on these crazy days. With only 3-4 trades per hour lately, I have plenty of time to figure this.

So, now I have systematic entry, and systematic position sizing based on volatility, my only discretionary methods are with trade management and momentum.

Today, in the afternoon, with the EUR/USD price ranging a bit between 1.2200, S1 (1.2235), and 1.2250; it was easy to ask yourself.. "If they were to run stops right now, where would price go?"

Though I didn't put on many trades today, I was very exact in my entries (4 trades/4 profitable). On the short timeframes with what I suspect low volume, the dealers could push price around to hit small range stops, then reverse.

I downloaded electronic copies of Alexander Elder's Trading for a Living, Come into my Trading Room, and Entries and Exits. I browsed them, reading chapters that interested me. The material seemed somewhat dated, though sound. Nothing really extraordinary though.

Scalp Entries

I've been using a mechanical entry for the past 8-9 days. I've come to the conclusion that how you manage your trade is more important than your entry for scalping. While random entries should not work, I really believe that entry is minor compared to momentum or initial movement of the trade in your favor. Don't get hung up on where your entry point is, the most important thing is whether or not that trade is making you money right now.

Holding a loser for a 20 pip move against you and being right, increases your risk. What if it hadn't come back? It also takes up time, which could have been used for more opportunities. Perhaps you could have cut the loss quickly, and put on another trade at a more favorable point and made more pips overall.

Once you are in the trade, the reasons for entry no longer matter, you need to maximize it's potential or minimize it's loss. You have many more scalps in the future.

Would you like to try to counter-trend scalp the chart below?
I had my largest pip loser in 14 days (since my "May Meltdown").
It will also be my first losing day in 9 days, but it's small... less than 1%.
Edited: Took some trades after 3pm (which I don't usally do), down -2%.

Oh well...definitely a tough day for my style.

On May 6, after revenge trading, swinging wildly in a wildly swinging market, I had a balance of $500.69. The “Flash crash” happened later that day. I had stopped trading at 10:00am thankfully. Since then, I’ve adopted a more mechanical approach for entries, and been able to adjust for volatility in a more measured way.

It’s been 136 trades since my May “meltdown”, about 70% winning trades and 30% losing trades, average win 4.23 pips, and average loss 7.34 pips. Adjusting position size for volatility, I’ve settled on a 2.5 x ATR(8) on a 1 min chart. With 1.5% equity stake per trade, an example $500 at 1.5% = $7.50, ATR = 4. $7.50/2.5x4 pips= 7500 units.

With this approach, I’ve enjoyed trading the morning session more than I ever have. I did 167 trades this month, the most I have done in 2010.

MyFxbook figures percentage gains and losses versus the original starting account value. In my case, that is $1000. So, a $50 gain is +5%. Realistically, as I scaled down my position sizing with the reduced equity amount after May 6, I‘ve gained $54 which is almost an 11% percent gain on my equity from that point. Starting the month with $852, I am down 29%, as it relates to an original $1000 balance. Hopefully, with the discipline I have had since then, next month will be better.

June was a difficult month as well. I made some errors, and some profitable bad trades (trades outside of system/methods but winners).
Starting the month with $555.00, ending balance was $652.92,
with 134 trades. Actual “screen time” was about 30 hours.

Mostly afternoons, I still need to become a bit more professional with a goal of 9am-2pm of “screen time” every day.
I traded 19 days, took 4 days off, and had 5 losing days.

I have more work to do in risk management.
There were two instances in June where I held trades over the week-end, incurring more risk than I should, as I’m predominantly a 1 min TF scalper. The news over the week-end and the prices at 5 pm EST open on Sunday are just ridiculous.

Interestingly enough, I did have a string of 13 profitable trades in a row after taking two days off mid-June. Perhaps a little time away from the markets helps clear the mind and refreshes you?

Happy to have account growth for the month and will continue forward. I’m still wary of volatility and try to adjust my position size accordingly. I still plot pivot points every evening before the next trading day. I’m more conscious of where “stops” may be run or taken out, with a quick price reversal following. I also watch the S&P futures to see how much correlation we have that day.

Just a reference point for myself...

I've been trading Forex since March 2009, with most of the activity in 2009 in October, November, and December.

Net results across a couple of accounts: - $1401.
I only actively trade the scalp account in my signature as of 2010.

I've experienced 177 separate trading days where I placed at least one trade, usually involving at minimum 1/2 hour of screen time.

I've placed over 1550 Forex trades in this time period, 99% short time frame trades.

Am I getting better? Perhaps. The experience is fantastic. The records and journals I keep are invaluable. I more easily spot trading days which are difficult for my style, and I am more cautious.

I hope the second half of 2010 yields some great trading.

From post #22 in this thread:

Likewise, about weaknesses... get a handle on them. If you don't know what you do wrong and can't admit it, figure it out. Yeah, it seems much more fun to scour Forex Factory for systems, indicators, or the latest Heiken-Ashi charts on the 13 min TF with Slow Stochastics and 6 Moving Averages... but I guarantee you will save or make more money just by fixing your mistakes in relation to basic trading principles.

From post #86:

Once you are in the trade, the reasons for entry no longer matter, you need to maximize it's potential or minimize it's loss. You have many more scalps in the future.

Though I do use mechanical entries, I exercise discretion often. I buy/sell pullbacks or retracements with and against the trend. As I believe a trading opportunity might be near, I am watching price constantly, nearly every tick on a 1 min TF chart.

I use a 1 min Oanda TF chart, and a watchlist from MB Trading which has the Nasdaq Comp, DJIA, and S&P 500.

Also used but not shown, I sometimes use a 5 sec line chart to time the creation of the next 1 min candle on my main chart. I also use ATR(8) on a 1 min chart to make volatility position sizing decisions.

The indicator on the bottom of my screen is the Awesome oscillator with (9,20) settings. I do not follow it blindly, and I sometimes trade against it when I think the dealers are creating a "shakeout" or "stop-run".

There is so much discretion in my scalping, I've tried to share some of that dialogue in this thread. As for now, I've used this same set-up since mid-May unchanged.

I've followed Kostas1's thread for some time and have thoroughly read his thread (twice) and the accompanying information about "The Dance" methods by eclayf.

After become so undisciplined this month, and somewhat in June also, I've decided to take a step back and look at higher timeframe decisions.

As of June 15th 2010, I will take my balance ($500) and start a new account and record my progress.

You can find Kostas1's thread here
http://www.forexfactory.com/showthread.php?t=236210

You are also welcome in the thread to share your trades. I consider myself more of the scalping kind (12-15p per trade).

Kostas