Profitable Scalping for the Retail Trader

Please feel free to post whatever you like.
Looks like a great short off the central pivot point, after it had already shown some resistance, about 10-11 min before.

Exactly the stuff I look for!
Nice scalp!

Great job on your progress.

Every day is a different battle, I'm still fighting for every pip. Sometimes I just wait for price to get to a certain level, often 30-40 minutes, and then scalp it for only 2 pips.

That level on your chart was important even hours later, I took a short near there (about 1.3671-4). We had been trading lower. Your support, hours later, was my resistance. Kinda cool.

Thanks for posting the chart!

Sometimes I watch price go 30 or 20 pips and when it runs out of steam and stalls i get it.

I like your attitude, Intu.
Keep it up. And thanks for sharing your insight..
Tc..

Thanks for the kind words, King Singh...

Though I'm not the greatest writer,
I have tried to share the things that
have shaped my thinking lately.

Good Luck to You!

I pieced this together tonight, I didn't screen capture this morning.
I did trade this area, but not very well.
It is classic pre-London session close "stop-running".
Darkstar's market mechanics, and FTI's Technical Analysis Fallacy thread
touch on these ideas (as well as many other posters on Forex Factory).

Here's the first look, taking a peek at a 15 min chart.
This is from this morning around 8:30 EST Nov. 24th, EUR/USD.

Where is the resistance?

A little later, on the 5 minute time frame...

The next few minutes...
edit: The London session close is 12pm EST, this period is more near
the London Stock Exchange close.

A breakdown is imminent...
The dealer is probably getting more orders to sell EUR/USD, they could even been long at prices not favorable already.

Their only hope is to use the London session close, as people cancel orders and finish up buy orders. They take advantage of that period of low liquidity and push the EUR/USD as high as possible.... and SELL Euros ( to Stop-Loss orders, or to perhaps Buy Limit orders higher).
edit: This is actually more near the London Stock Exchange close.

But soon after... the overall down trend and weakness take over, and
it trades much lower.

I watch for these kind of moves. Are they easy to trade? No, not always,
volatility can be a problem. The fact that our equity markets (S&P, Dow, Nasdaq) were all positive today made it difficult also.

But that is what a stop-run might look like. Keep an eye out for strange counter-trend moves near 11:00am EST... through the London session close. You might be able to catch some pips!

P.S. I traded it horribly, I think I got a great price short... and made 1.5 pips . I'll get 'em next time though.

(as of Nov. 26, 2010 393 Trades Total)

I already knew that most of my trades are very short in duration.
I decided to take a look more closely.

This is not a post to brag or tout my expertise. I did some investigation into my trades, to confirm something important.

First, some days, I can do no wrong. I am in and out, quickly, at good prices and have a high percentage of winners. Basically, these are down trending days, with moderate volatility, AND easy to see support and resistance levels. On these days, I get clusters of trades that look like these-

I did some quick math and I had 219 trades less than 3 minutes in length.
Of those trades, 86% were winning trades. At this point, 55% of all my trades are less than 3 minutes in length.

I wanted to examine these stats in a way NOT to fool myself.
So, I looked at all trades 3 minutes or longer, and added the gains/losses in pips (because I have been compounding and changing my position size).

Basically, it is fair to assume that most of the trades held for longer periods of time were losing trades, while waiting for retracement for a less painful exit. And it's true, looking at my largest winning trades... most are held for less than 10 minutes.

Summing the profits and losses of ALL my trades held 3 minutes or longer,
I gained only 25 pips net profit! As I currently have +371 pips profit on this account, it is safe to say that most of my gains are made on the very short term trades.

I think the safest conclusion, without altering my methods too much,
is that any trade not in profit after 3 minutes should be closed.

The risk is not worth the reward after that. I have 170 trades that show only 25 pips net profit, and only a 53% win rate [3 minutes or longer].

Trades less than 3 minutes, have a 86% win rate, and a net profit of almost 350 pips for this account.

I've been somewhat lucky (or had favorable statistical variance) that the
few of my trades held for hours have resulted in less loss. The risk was immense, especially for the overnight position I held on Nov. 10.

The stats show I can make great money on trades 3 minutes or less. I can reduce my TRUE risk and drawdown by eliminating losing trades after 3 minutes.

During many of my in-trade drawdowns, I recognized so many more opportunities... that I couldn't capitalize on because I was "stuck" in a losing trade.

Wasting so much time in holding trades longer than 3 minutes is hurting my overall profits
and increasing my risk.

Interesting observation you have there about trades longer that 3 minutes. Plus NY session is volite so holding them longer can bring more losses.

You are right, that volatility can be a "killer".

I'm still thinking about these results. I did have some large
pip losses recently (Nov. 23) which affect the net pips gain/lost
number.

Even factoring out the largest pip losers and gainers on trades
over 3 minutes.... (less than 12 maybe)...

It is undeniable that my win % is still near 50% for trades
over 3 minutes in length.

Being very generous and taking out some
of the largest losing/winning trades, the remaining other trades would
have contributed a maximum of about 10% of my overall profits.

I need to take more frequent losing trades, minimize the risk, but also
be ready to "jump back in" when appropriate.

Thanks for taking the time to read my ramblings Google!

This is from another thread I was involved in recently, but it describes my trading experience very well.

I've always liked to counter-trend on the short time frames. My theory was ... it is well-known that trend traders win around 30-40% of the time, but with risk:reward greater than 1:2 or so, they make profits.
I wanted to scalp and have a high win% (win often) but with smaller reward and still be profitable.

I traded for 6 months on mostly 1 min time frame EUR/USD. Maybe I would look at the 5 minute charts for trend direction, but not often. I had periods of profitability...but when a strong trending day came, I would "blow up"... many losing trades, then anger, then trying to trade out of losses, and huge equity declines.

Eventually, I spent some time on longer time frame decisions (15 min charts). Studying 'The Dance' methods and hanging in the CHOROS thread, I finally learned/saw the strength/importance of confluence on multiple time frames. When things lined up on the 5 min, 15 min, and 1 Hour charts it was usually a strong signal.

Finding that survey, that I mentioned before, and seeing all the responses (a large majority) for "support and resistance being the most effective tool for trading forex" ... had a big impact on me.

I can't even remember where I first read the quote from daytrading-

Start buying when the price stops declining - start selling when the price stops rising.

Notice he doesn't say "Buy when price is rising...sell when price is declining." I felt that really supported my counter-trend style.

Finally, capitalist88's -
Identifying overbought / oversold conditions rather than trends are the key to profitability in shorter time frames.

The combination of these convinced me that what I was doing was OK.
I needed to "cleanup" the risk a little, set a maximum daily loss, AND
take counter-trend trades (on the 1 minute charts) near spots that had a high probability of success (near support/resistance).

You may not trade like me. But Marv's advice is very applicable. Take what you do best, refine it, work with it, fix whatever problems are present... then hopefully in the end... there is some "edge".

Congrats on breaking 100% for this style Intu! It's been a long journey but I'd say you're definitely onto something here.

Good sleuthing on the 3-minute discovery btw... I'd call that a breakthrough discovery.

Thanks so much!

Dusktrader is a friend of mine from MyFxbook.com,
he is up +13% from Nov. 5th himself. Check out his results,
there is a link to his thread there as well.

As for the 3-minute discovery, it was very hard to implement today.
I had 3 averaged-in trades (of 2 positions) which were net profitable. All of these were longer than 3 minutes.

I'm still debating the right balance between fixed pip stops, discretionary volatility stops, and time stops.
Every day is different.
Obviously, I want the best of both 'worlds', to reduce my risk and
increase my profits.

Thanks again for the support, keep up the good work!

I personally am trying very hard to be less rigid and more flexible with the "rules" of the game per se. I think it could be dangerous to have rigid rules that are too mechanical. Sure they may work for awhile, or in testing situations. But personally I want to be able to trust my discretion and use gut feeling to close a trade, if needed, rather than open or close a trade simply because of some hardcoded rule I've burned on my brain.

After all, the market is organic and not some kind of mechanical machine. One of the most interesting things I've been observing recently is watching price action inside a channel. Sometimes the channels are very obvious. But if you look closely... you'll see that price reaches the channel boundaries clearly once or twice, but then with each subsequent "touch" it becomes more of a faded memory (and eventually stops respecting the channel altogether). What I mean is... you can't just restrict your entry/exit to the rigid channel boundary because the market is smarter than that. In my mind, a better approach is to treat the channel boundary as a destination but watch carefully the tick of the developing candle. When I see it approach the boundary and pause, I will usually jump in without hesitation.