Amherag's Scalping System

Hello everyone,

I just want to share a 1-Minute Scalping system I developed. It isn't something new, probably a lot of you trade in a similar way, and I didn't develop any new indicator or anything like that. Actually, I borrowed some indicators and ideas from other systems.

The point of this thread is to share what I think about the market, how I trade it, etc. If you have a "better" system, congratulations!

The History

I've tested this system using an Oanda live account of ~20 dlls for one month.

 

1. The first week I made 28 PIPS. The second week I made 33 PIPS. The third week I made 54 PIPS. The fourth week I made 91 PIPS.
2. The most I lost with a single trade was 12 PIPS.
3. The most I made with a single trade was 20 PIPS (that was my in-case-of-a-violent-move Take Profit).
4. The average of profit with a single trade is around 5 PIPS.
5. The average of lose with a single trade is around 5 PIPS.
6. The most I lost on a single day was 0.8 PIPS.
7. The most I made on a single day was 28 PIPS.

The Basic Rules

 

1. You need a way to find out the direction of the market: uptrend, downtrend, non-directional.
2. You need a way to know when's a good time to enter the market: a low risk point to maximize profit and minimize loses.
3. You need a way to know when's a good time to exit the market: when is it highly probable that the market has changed direction (stop loss) and when is it highly probable that the market could change direction (take profit).
4. Don't trade more than 50% of your account. If you have 20,000 to trade, make trades of 10,000-max.

The Tools

 

1. 3x ATR (THV4 InfoPanel).
   1. It helps us determine the nature of a trend (up or down).
   2. It helps us determine when a trend has changed of nature (from up to down and viceversa).
   3. It helps us determine our Stop Loss.

2. Stochastic Oscillator (5,3,3).
   1. It helps us determine when we should enter the market.
   2. It helps us determine when we should exit the market (as a Take Profit and sometimes as a Stop Loss).

3. Pivot Points (optional, I recommend THV4 TzPivotsD).
   1. It helps us determine critical points that we should take into consideration. The interpretation is relative to each person and not critical for the system to work.

4. Linuxtroll's Rainbow (optional).
   1. It helps us have a clearer picture of the market. The interpretation is relative to each person and not critical for the system to work.

The Usage

 

1. First of all, I recommend you to trade only with a 3x ATR of more than 10 PIPS. I highly recommend you only to trade on the beginning of the London session and up to 2-3 hours.
2. Identify the last highest or lowest point on your chart. Use the close price of each session as a "point".
3. Count how many PIPS has the market risen or fallen from that lowest or highest point to the current price.
4. If the number of PIPS you've obtained is greater than your current 3x ATR, and you counted the PIPS from a lowest point, the current market is most likely on an uptrend. If the number of PIPS you've obtained is greater than your current 3x ATR, and you counted the PIPS from a highest point, the current market is most likely on a downtrend.This satisfies the first of our basic rules, we've just found out the direction of the market.
5. If you're on an uptrend, you need to wait for the Stochastic(5,3,3) to reach the 20-level to buy. If you're on a downtrend, you need to wait for the Stochastic(5,3,3) to reach the 80-level to sell. This satisfies the second of our basic rules, we've just found out a low risk point. IMPORTANT: You should check first if the market hasn't changed direction since your last analysis before your entry, using the procedure explained on the previous step.
6. If you're on an uptrend, count the PIPS that the market has moved since its last highest point to the current price. If you're on a downtrend, count the PIPS that the market has moved since its lowest point to the current price. Your stop loss will be equal to the 3x ATR minus that movement you just counted. This partly satisfies our last basic rule, we've just obtained one of our exit points, our Stop Loss.
7. If you're on an uptrend, you should exit your trade as soon as the Stochastic(5,3,3) touches the 80-level. If you're on a downtrend, you should exit your trade as soon as the Stochastic(5,3,3) touches the 20-level.

The Exceptions

Just like any system, you should use that sixth sense you've developed while trading to predict when's not a good time to follow the rules. Here are some examples:

 

1. You've identified an uptrend. The Stochastic Oscillator has reached the 20-level. You enter the market as a bull. After 5 minutes of holding that trade, you notice that it hasn't moved that much. You start to feel that it isn't any longer a good idea to hold that trade, so you exit your trade with a profit of 0.5 PIPS.
2. The market starts to move VERY wildly. In just 2 minutes, you've got a movement of ~20 PIPS. This is most likely a downtrend. As your experience tells you, you're not going to wait for the Stochastic Oscillator to reach the 80-level, and you're just going to enter the market as a Bear to make a quick profit. You execute an order with an improvised Stop Loss of 8 PIPS, just because that's a number that made you feel comfortable, and with another improvised Take Profit of 10 PIPS, just because, again, that's a number that made you feel well. At the end, you exit the market with a loss of 5 PIPS.

The Theory

The following is just my point of view of the market.

If you were to buy a market, with a Take Profit of 10 PIPS and a Stop Loss of 10 PIPS, without seeing any chart and without knowing anything about that market, you'd have a 50% chance of winning (forget about spreads, please). But what would happen if you knew that, in general, that particular market is moving downwards? Wouldn't it sound logical to change your bull position to a bear position? Well, I don't know what you think, but I would change my position.

This means that by knowing, by any means, what's the general direction of a market, you can raise your probability of winning by at least a little. Say that now you have a chance of winning of 60%. This means that if you trade 10 times, you'll win 60 PIPS and lose 40 PIPS (using a 10 PIPS TP and SL), you'd be clearly winning on the long run.

But, unfortunately, this isn't enough, due to the chaotic nature of the market. You don't only need to know what's the general direction of a market, but you too need to know when is the correct time to enter the market. Maybe you're currently on a downtrend market, but entering just now will make you start losing money. Only after several sessions you'll start to only recover from the loses, and after many more sessions, you'll finally start to make some profit, just to realize that it isn't anymore a good idea to hold your trade.

Those are my basic principles for making money on the market (which aren't new). But I still feel important to mention them, as I see that a lot of systems out there forget about this.

I've seen that successful systems follow these basic principles. One example is the THV system (which is an EXCELLENT system, by the way). If you know how to trade with it, you'll know that they use the Coral to know what's the general direction of the market. Also, you'll know that it uses the TRIX to know when to enter/exit your trades, at a low risk point.

But what I like about my system, is that I (think) have discovered a flaw on the majority of the successful systems out there. Let's assume that your system consists of the following indicators:

ADX - Find out the direction.
Awesome Oscillator - Entries
RSI - Avoid a trade
EMA(20) - Stop Loss
Pivot Points - Take Profit

This is a bit exaggerated example, but it could be this complex. What I want you to notice, is that in this system, you use one indicator to accomplish one task, instead of using one to accomplish several tasks. What I believe is that if you can manage to successfully accomplish each basic rule of a successful system using a very small quantity of indicators, the system will work better. The reason behind this is that, retaking our example, when the ADX was created by Welles Wilder, he wasn't thinking that it would work in together with the Awesome Oscillator created by Bill Williams. It's like having a car with parts from different manufactorers. It may work, but the chance of failure increases.

What I like from my system is that you can only use the 3x ATR and the Stochastics to determine all the pieces needed for a successful system. Have a look:

 

1. Determining Direction: 3x ATR
2. Avoiding Sideways Markets: 3x ATR + Stochastic Oscillator (try to trade a sideways market using my system. You'll rarely enter a trade, because one cancels the other. As soon as the Stochastic gives you the signal to trade, you'll notice by checking the 3x ATR that the trend has already changed, thus forcing you to wait for the next Stochastic signal)
3. Determining Stop Loss: 3x ATR / Stochastic
4. Determining Take Profit: Stochastic
5. Avoid Trading: 3x ATR

Harmony

Final Note

 

1. If you don't like it, don't trade it.
2. If you reply with an offensive post, I'll simply ignore you.
3. If you reply with a constructive post, I'll try to reply.
4. You can find the indicators and template at the end of the post.
5. The indicators that have THV somewhere in the filename are, obviously, from the THV system.
6. Thanks to Linuxtroll and 4xq for their threads about the Linuxtroll Rainbow.
7. Thanks to Cobra and all his crew for the excellent THV system.

Amherag, any chance of some charts for us to view?

Thanks

Sure, let me take some screenshots and I'll try to explain them.

Thanks for taking the trouble to start this posting. Let's hope it does not degenerate into destructive criticism and insults as many others have done.
You are on the right track for scalping , guerilla style , rapid trades, hit and run. As a matter of interest, did you know that traders at Bank trading rooms trade anything up to 200 trades a day ?

I'm attaching two examples of last friday's London Session. You can check it out on your favorite charting software. Just attach the ATR(20) to check the value at that time and multiply it by 3.

On the first picture, we sadly lose 3 PIPs. But after a long waiting, we make 17 PIPs, giving us a 14 PIP win for that day, assuming we only made those 2 trades.

If I see more curiosity and interest from the FF community, I'll gladly share more analyses tomorrow.

Good night/day!

Hello puppet,

I appreciate your interest and willingness of keeping a constructive and useful thread.

I wouldn't be surprised about those numbers. Some days I've traded up to 10 times in 2 hours. Those guys must work at least 8 hours, so that would sum up to 40 trades a day. But, why attach yourself to just one market when you have tons of forex markets at your disposal? One person could easily monitor 5 different forex markets, making 40 trades on each one = 200 trades a day!

Thanks for your contribution!

glad to see this, now I know I'm not the last trollman addict on Earth from my own experience I know such methods as yours are definitely viable. a lot of screentime is mandatory. the idea w/ATR is interesting, will try to incorporate in my system (my scalping chart looks very close to yours).. Keep going, and I also wish this thread will keep free of any unconstructive nonsense.

Cheers, Tom

PS. Try out 30-4-4 stoch, pretty accurate & less false signals on M1 chart ;-)

Amherag...nice thread....may I ask, have you tried this on any other timeframes? I am curious as to how it would do with the 5 min timeframe...

Hi Amherag,

interesting system. What pairs do you trade?

Cheers,
Oliver

I believe the Rainbow is like the next generation of charting techniques at least for scalping. You can see at a glance what has the market done in a very intuitive way.

I tried to develop a system based on probability. I vaguely remember a post here on ForexFactory where someone mentioned that you could use the ATR to get a 95% secure Stop Loss. This meant that you had a 95% probability of the market not touching this point. After thinking a little bit about it, I thought that if the market actually touched that point, it meant that it had also a really high probability (maybe also 95%, I'm not a specialist on stastistics & probability) of the trend to have changed of direction.


I haven't tried it, but the basic principles should be effective on basically all the markets. Find the direction, find a low risk point, find a highly probable Stop Loss & Take Profit.

My guess is that you only had to change the Stochastic's parameters. Try playing around with it until you see that it gives the best signals.

The 3x ATR(20) should work the same on all timeframes.


Oh, I'm deeply sorry, I never mentioned the pairs I use.

I usually trade the EURUSD, but any high volatility (3x ATR >= 10) pair should be fair.

Thank you all for your contributions.

absolutely. i get the best trades after the rainbow breaks out of a tight range (all MMAs are squeezed to a pip with ranging spikes to both sides) and then playing the first pullback to the (already clearly formed) rainbow spine.. have a tick chart / 5sec chart (w/rainbow too) overlay on my chart to see the momentum clearly.. then jump in, close 1st half of position for a few pips, move stop to b/e and let it run.. free trade.. nearly every week some 100pip move can be caught (with initial stop of some 6 pips).. i have done visual backtests randomly thru last decade, the behavior is still the same or very similar on <=M1 timeframes.. those who say rainbow is only an eye candy don't know how to use it imo..

I also have been trading this way (rainbow trading) using different indicators to pin point the entry/exit. On the one minute chart.

I've tried, macd with different settings, awesome indicator, accelator indicator and osma with no real success. The stochastic indicator is my
favorite indicator but it seems to lag. The market will turn on you before
the stochastic indicator turns. I think the settings to the stochastic is
very important but I havent tried liquidating when the stoch hits the 20 or 80 line.

I believe you (we) are on to the right way to scalp and look at the market.
We just need to perfect the system and get 100% comfortable with it.

Count me in...

snarlyjack

I've tried to let run my trades but it's not my style I'm more the type of hit it, make some pips, close, hit it, make some pips, close... I get anxious very quickly and feel the urge to celebrate my PIPing victory.

I found interesting the idea to check on the 5sec chart to see the momentum. I'll try that today.

Thanks tritom

I was thinking today on using the very same ATR to calculate the entries and exits too... I will need to test it, and to be honest, I don't feel comfortable about the idea, since I'm the type of trader that thinks we shouldn't rely only on one indicator. Nevertheless, the idea seems attractive at the same time.

I'll try to make some videos of my trading so you all can see how my system works. Taking a lot of screenshots isn't my style

Thank you all for your interest!