Profitable Scalping for the Retail Trader

In two days (47 trades), I lost about 80 pips trading with a small stop-loss.
I had 9 consecutive losing trades (not all at max stop-loss) during a sequence.

Compare that to 200+ trades previously with only 4 consecutive losing trades ever on the previous sub-account. I'll admit the liquidity was bad. But even still, I had 4 (-8) pip losses consecutively at one point as well.

Taking 4 and 5 pip losses when the market is in a 25-30 pip range all afternoon doesn't work.
I like my wide stop-loss better. Yes, eventually a large loser happens...
but you have profits built to help cushion the blow.

Oanda's spread average is still 1.2 pips. I've decided to make a broker change.
I'm going back to MB Trading. I have used them before for forex, futures, and stocks.
Their ECN platform has a fairly stable 0.9 pips... and often times it shrinks to less than that.

They do charge a commission though.. on both sides. ($2.95 per 100,000 USD.)

Unless....

you add a limit order that is NOT marketable at the time of entry...
you get PAID $1.95 per 100,000 USD if it executes AND no commission is charged.
You get paid to add liquidity to the ECN if your order gets executed with no commission.

The markets are fast, it's no "cakewalk".
The other essential point is you can sell on the offer and buy on the bid.
Your orders are represented on the ECN market depth (until executed).

I've been getting used to the platform. They offer MT4 accounts but it is too "clunky" for me.
I'm using their MB Desktop Pro, configuring it how I prefer.

So...this platform essentially defeats the notion that "true" scalping is not possible.
You can beat the spread (actually Buy on the Bid, Sell on the Offer).
You can trade with no commission if you use limit orders not immediately marketable
( and you get paid a small amount when executed). They are a true ECN.

I've been getting price improvements on demo, I'm curious to see whether this will happen as often live.
I had 2 of 10 trades fill better than my limit order.

Oanda is fast...but it feels "different" this year. Their integration of MT4 should've lowered spreads.
They have more US customer accounts than any other US broker by far.
I think, after trading daily with them for more than 18 months, their liquidity is actually worse.
Yes, it could be market conditions and the overall uncertainty in the world... but I don't believe it is.

There could be an introduction of high-frequency algorithms that have changed the landscape.

Like today, when the maket is in a tight range...
I'd like the opportunity to enter a trade and not have to fight a wide spread.

If I enter trades with a limit and exit with a market order,
I'm still beating Oanda's spread after paying commission.

Likewise, I have the OPTION to try to exit on the bid/offer with a LIMIT order as well
(beat the spread, and get paid an additional small amount).

I will update as I trade live with MB Trading.

I can't believe I hadn't given this more thought when introduced in February 2011.

More clarification about MB Trading and their "Pay for Limits" program...
Market orders executed on the ECN have a commission of $2.95 per 100,000 USD.
Limit orders (not immediately executable) pay $1.95 per 100,000 USD when executed
and NO commission is charged.

Their spread is a fairly consistent 0.9 pips with smaller gaps depending upon ECN participants.

Trading 1 mini lot = $10,000 USD... with EUR/USD at 1.3460 (as of today)

average commission > $10,000 x .0000295 x 1.3460 = $ 0.39 (each side)
average credit > $10,000 x .0000195 x 1.3460 = $ 0.19 (each limit order)
average spread > 0.9 pips = $0.90

If you use Limit orders to enter all of your trades... and exit with market orders and lose spread,
your effective cost is 1.1 pips.
Credit for limit order execution - commission for market order - spread = 1.1 pips.
(better than Oanda's 1.2 pip spread)

If you can use Limits on both sides, and flat the trade...you receive two credits
> .19 +.19 = .38 pips for a flat trade.
(impossible at Oanda, market must move 1.2 pips in your favor to flat any trade)

If you can use Limits on both sides and make the spread, sell on the offer and buy on the bid
> .19 +.19 +.90 = 1.28 pips (impossible at Oanda)

These implications are significant considering how I trade.
Let's see how the live executions go...next week.

Intu,

Nice thread. You are on the correct path to trading success. Trading forums are littered with false information, so keep seeking the truth as you go. Your post #99 is so correct.....that big move just might be totally against you. Thanks for sharing you journey & I wish you the best in your trading.

_____________________

Thanks for the support Acetrader, I appreciate it.

Just an update on MB Trading....
From June 15 until today, I've completed 35 real money, live trades.
Overall, I'm thrilled so far... executions are fast.
I've only had to pay commission on 1 trade and have used limit orders to
enter and exit all others.

Up 7% net, with 2.5% coming from the limit order 'payments'.
I'll admit, it's a tough switch from Oanda, though I am very familiar with the platform.
(I used it heavily in 2008 to trade futures).

It is definitely worth it. I get many price improvements on my limit
orders as well. This comes from fast moving markets and a lack of liquidity at
each 1/10th of a pip.

example: I Bid 1.45613 for 10,000 units.... I may get executed at 1.45610 because an offer appears that low quickly, and it's the only price that would fill my order. Before that offer appears... nothing is for sale at 1.45613, 1.45612, or 1.45611.

Being able to get inside the spread has been valuable, I've been able to 'flat' a few trades that would have been losers in another minute or two.

It is not easy though, and I am still cautious in this crazy market (Greece complications). I am still very selective when I enter trades. Overall, I think the broker conditions are very good.

One painful loss is not being able to use Myfxbook.com. I am not operating on a MT4 account. If I were, I could use Myfxbook.com. I think it's too slow. MB Trading and Oanda have had some complaints about their integration of MT4. It's not meant to be a 'scalping' platform, it was built to run EAs. I also tested free MultiCharts software which had a very cool DOM (depth of market) interface, but position handling and trading reporting were not adequate.

I'm using MB Desktop Pro and I'm exporting my trades to an Excel spreadsheet for analysis until I can find a workaround.

These are two posts from a trader, Trembling Hand.
He was a scalper active a couple of years ago, making up to hundreds of trades
a day scalping CFDs and futures. (You can Google him and read about his adventures).

He also maintained a blog for a short while as well. I paraphrased/edited the posts,
but you can read the originals here.

Discpline

You & your partner are captured by Somali pirates. They give you the opportunity to go free if you can shoot an apple off your partners head with a pistol from 10 meters. A genie turns up and grants you 1 of two things.
The mindset to perform the task calmly OR the skills to shoot an apple from 10 meters,

Which one will you take? Shootings skills or a calm approach to blowing your partners head off???

Its all bullshit, the discipline line. Its not your problem, its lack of skill, lack of proper planing, lack of an edge OR just lack of understanding of markets.

All three can be worked on by SKILL development and matching of your talents to your application.


Wasting time learning more??

Here's another great post from Brett Steenbarger,

"The Power of a Single Premise

Consider what your trading development would be like if you accepted the simple premise that, in some measure and on some occasions, you are already the trader you wish to become.

What if, at times, you already recognize market patterns, generate solid trading ideas, and manage risk well?
What if you don't need to work on your trading problems at all and, instead, simply need to harness the influences that enable you to trade well?

What if everything you need to succeed is already part of who you are and what you do?
What if the only change you require is to become more consistent with your strengths and competencies?

Would you still seek out advice from gurus? Would you still look for answers in the latest indicators and systems?
Or would you devote yourself to becoming the best you can be--enacting the best within you--confident that the answers you seek have been part of you all along?"

I cannot emphasise enough how much this post captures the basis of trading well, to me. That you don't need more stuff you just need to practise what you have. That the endless search for market knowledge is wasted time. You are better taking what you know and testing and practising that to death. After you have the basics everything else is just another layer of wasted complexity. What's required is working on your strengths - niche development.

And I bet if you take what interests you and what you know you can do well and test and practise and refine it with real honest review you would not need any more gurus or indicators. You would have enough to work on to stop you wasting time on the search for the holy grail.

-Trembling Hand, Feb. 2009

hello,

my main trading style is also scalping, i've been following this thread with interest..

i was excited after finding out from your post that we get paid for adding liquidity..

but after digging into MBT thread, i was kind of disappointed with their way of passing clients orders..

lets say i offer at 1.4200, and some bank goes 1.4200 bid, my order won't be hit by them. Instead, MBT will cancel the order and cross it with bank's order. therefore this doesn't guarantee that my order is filled unless bank's order stays there for a while..

so im curious to know how easy/difficult for you to get in and out during fast moving periods.. you mentioned that out of 35 trades, only 1 was market order.. thats amazing

by the way, i'm trading with Interactive Brokers and pay around 0.6 pip for every round trip trading EUR.USD. and the amount of commission has been significantly large compared to net profit, like many days i would pay 900 in comms for 200 net profit. This really hurts =)

thanks

this isn't a problem... if what you say is true. The market prices are fast (as you've probably seen on IB), I can only say that I've always been filled instantly if the liquidity provider "bids my offer" even for a fraction of a second, though most likely I'm completed before that. There are traders out there using market orders.
And remember, you still get paid to add liquidity...even if your order rests in the book for milliseconds. (that came from an interview with CEO).

This will sound ridiculous, but play with their MB Desktop Demo. If you feel good with your executions there, Live is easier. Why? Because on demo you only get filled from other demo participants or if the liquidity provider actually trades through your price (bids your offer, offers your bid, etc.)

There are many more participants in Live trading to get fills from.

There have been some fast markets where I placed my limit order and the market moved significantly and I had to pay commission. This happened Thursday when I went to close a winning trade... the result was a much better price improvement (a couple pips) with the insignificant commission attached to that one side of the trade.

I'm up to above 50 trades, I have had a work schedule change and I had to work during the day twice this past week. So far, I've paid commission on probably 4 sides total ( 1/2 a trade, entry or exit). It's real, they pay you instantly for your executed limit orders...and I don't expect it to last forever. I think it's the best opportunity to scalp PERIOD (right now).

It reminds me of rebate trading stocks on ECNs that pay when you add liquidity.
Though, I'm not trying to trade flat, I'm shooting for the spread plus 7/10ths or 8/10ths of a pip (plus the Limit Order payment).

I hope that answers some of your concerns.

Like I've mentioned previously, it will take time to get used to their platform, setup your 'hotkeys' and generally be fast with order entry... but I think the environment (for scalpers specifically) is the best around. Very, very good spread and the opportunity to pay nothing for each side of a trade (and get a small payment), and get 'in-between' the spread.

I'll post a recap of my trades after 200 or 300. Win%, Average loss, etc.

edited: (some exact stats)
so far 55 trades, or 110 sides (entry or exit)...there were a couple partial fills but I'm simplifying.
I paid commission on only 10 'sides' so far... of 110. I have entered every trade with a Limit order,
so these come from exits.

I have varied my position size (larger this week)... and recently took a 20 pip loss, which is rare.
Trading profits= 16 pips on 55 trades. Limit order payments = 12 pips on this same group.
Positive 28 pips total so far... about a 50/50 split (trading profits vs limit payments).
...Up 9% so far.
The first few days I was trading about one half the current size.
Let's see what it looks like after a couple hundred trades.

edited:
Reading some of your previous posts, I will bet that you trade quite a bit larger than I do.
Liquidity might be a problem for you, if you are trading 10 lots or more?
My scalps are generally targeting 2-3 pips spread inclusive. Once I get my entry execution,
I quickly offer, considering the momentum, if I have a good price, and if price turned very near my entry.
You may scalp differently.

Drwho has also traded with MB trading.
You can read his short thread here, considering ideas on how to take advantage of 'negative commission'.
Ignore my posts, I hadn't changed back to MB Trading at that time... so I didn't consider it as good as it really is.
http://www.forexfactory.com/showthre...21#post4548921

Feel free to PM me if I missed something.

thanks a lot for your answer.. things are going well for you good luck

i can see that commissions (paid or credited) are quite significant for both you and me compared to total PNL.

i used to trade 5M per trade, paid about 5k every day in comms but then i got too cocky and inevitably had a big blow up

im back to trading 500K for the past few weeks until i can be consistent again..

so yes liquidity, execution, spread and commission rates are my main concern. i use a lot of limit orders as well in slow markets (sell in up bars, buy in down bars, similar to your style) but when it moves fast, i'll have to hit market very often too..

im trying to negotiate for lower rates for market orders though, if its reasonable enough i'll give it a try...

thanks and good trading to you

It's been over 200 trades live with MB Trading within 22 trading days.
I peaked at +25% on June 28th, and have lost ground since then with many trades.
July has been crazy, I have had some large losses.
I'm up about 16% net, with gross trading profits at -3% and commissions paid to me contributing 19%!

I've been trading at about 10 pips equaling 3% of the account.
My win trade % has been around the 70-80% area.
As always, I have had some large losses compared to my small gains.

I need to calm down, shrink the losing trades a bit,
and concentrate on finding more reasonable trades throughout the day.

Liquidity may be a problem later, (as I grow my trade size) but for now...in real live execution if you:
1) enter your trades with limit orders
2) exit winning/flat trades with limit orders (~70%)
3) exit losing trades with the closing side as a market order (~30%)
[paying commission on these trades]

Doing an average of ten trades per day (at 3% risk per 10 pips, scalping),
you will net about 3 pips per day in commission.
If you can trade at least FLAT trading P/L you make almost 1% per day!

Don't forget you also have the spread to work with,
you can sell on the offer and buy on the bid (which is much easier when you are with the trend).

It can be done... and I can do better.

I've tried MT4, and every add-on, plug-in, or script/EA to make it faster...
but nothing exists right now to make it fast to enter and cancel different limit orders with an ECN style broker.
('OneClicker' is good for fast market orders)

So... I'm stuck with their MB Desktop Pro... and honestly, I'm still learning new tips/tricks (even after a month) to get "quicker" with order entry, stops, and canceling orders. NinjaTrader would be good... but I'm not ready to pay $60/month for trading such a small account size. (I used it for futures in 2008.)

I miss my Myfxbook.com, that's why I was looking for MT4 options.

I don't spend too much time browsing FF lately,
what I am doing is very specific short-term scalping directly related to MB's "Pay for Limits" program.

I'll update after another couple hundred trades.

Boris Schlossberg and Kathy Lien.
Both directors of currency research at GFT.
Kathy Lien completed NYU's business school at a young age.
Both have 'impressive' resumes.
They both get to be on TV often.

I was looking at their advisory service. BK Forex Advisors.

Initially, I examined the 51 trade recommendations for 2011 thus far.

Their largest losers are around 120 pips. If they were using 2% risk per trade (~120 pips loss = 2%),
they would be up about 7% for this year, with a maximum peak-to-valley drawdown of 8%.
They made recommendations across +10 different currencies, obviously looking at many opportunities.

For $199 a month, I'm not impressed.

I think they use even lower 'gearing' than 2% risk per trade.
Their own chart advertising their performance vs the Barclay's Index,
shows only a 17% gain total for almost three years (Jan '08 through Nov '10)

Again, I'm not impressed.

I’m taking a break from Forex Factory. It’s the two year anniversary of my membership.
While continuing to trade, I am looking for ways to spend less time in front of the computer each day.

Let me first thank the forums for teaching me so much, I’ve learned the majority of what I know about FX trading…right here. The posts by Acumen, TheFool, Xaron, Bemac, Chicky, Darkstar, Hanover, Craig, FXPetra, MACDoug and many others taught me valuable lessons.

Likewise, having the support of friends in my threads… Google, Dusktrader, Richy, Rooicol, Sam0182, and Kostas1...helped me through the best and worst of my trading.

I am still scalping actively. Currently with MB Trading, I find it a slightly better value than Oanda.
I’ve updated the first post in this thread and may continue to update it. Unfortunately, I can’t offer my results as Myfxbook.com is not available to me at MBT because I don’t use MetaTrader. I’ve been painfully using Excel following an example that Rooicol once showed me (Thanks Rooi!).

My scalping approach was developed over many trades (and disasters) and I still trade similar to how I traded in September 2010, almost a year ago. Slight modifications and better risk management to take advantage of the MB ‘Pay for Limits’ program are my current focus.

The greatest challenge for any FX trader, short or long term, is to make educated guesses on liquidity and volume. Most predictive measures (price action, technical analysis, etc.) can be completely invalid if you don’t have some “sense” of possible volume in a candle, action, trend, breakout, etc.

I still lurk ‘in the shadows”, as I check Forex Factory for news events and times to avoid trading. I’ve become comfortable with early morning (5:00am-6:30am EST), European/US overlap (9:45am-2:00pm EST) and Asian session (8:30pm-10:30pm EST) scalping. I plan to spend less time posting (and checking my posts for replies) and more time trading.

If you are an old friend, or have questions, send me a PM… I will try to reply promptly.
You can re-check the first post in this thread…as I grow (and add to) my account balance.

As a famous ‘Turtle’ once said, “The first $2 million is the toughest…”
Now… let’s all go out and earn it.

I'm still at it, about 3 days a week during prime-time (9:00am-11:00am EST).
I've been taking a pair of courses at university this semester...
not necessarily trying to get a Master's degree but I wanted to get out a little more.

A couple of notes:

Oanda finally finished their data sharing API after 11 months...
You can now directly connect FXTrade and FXManager accounts again with Myfxbook.com

The same opportunity is available with Trade Explorer here at Forex Factory.

iPad and Trading-

I was recently gifted an iPad (32GB) from a friend who was upgrading.
I downloaded the apps for Oanda FXTrade and MB Trading's Mobile.

It seems as if they are just an extension of the iPhone apps. Very minimal.
Oanda's "one-touch" trading capability is not available nor is MB Trading's "level 2" or quick order entry available.
The connection and quotes seemed fine...
but I think a separate iPad app could be programmed to use more of the computing power available.

I don't think I could scalp "on-the-go" with either as they are at present, still too 'clunky'.

As a fellow scalper I'd like to make a suggestion that might help you out.

The majority of the pro scalpers I know (including myself) use LCG (London Capital Group) on the Currenex platform. Spread on EUR/USD is usually about half a pip, and the comissions start at $15 per million and go down from there.

You should look into it.

Happy hunting.

Thanks for the insight into LCG, PipJaeger... I will definitely keep them in mind.
For now, with my small account... I'm going to stick with MB Trading.
The last six months have been profitable...though I haven't traded very much.

Though I have traded only lightly these past few months, this is the end of the forex year for me.
I will start back cautiously in January, becoming more aggressive in February.

I have a new thread in mind, and have been writing in preparation for it.
Nothing incredibly fancy... but rather something to track results in 2012.

I have been playing around with Currensee.com, I find it "buggy" and slow to update.
http://app.currensee.com/forexpert/f.../profile/KRKZN
Today, there is apparently a possible "server" error with my connection to MB Trading (Live Chat Support suggested),
so my results from this morning are not displayed (sigh).
I am hoping to use it to show my progression next year.

Happy Christmas Intu!

The new thread sounds interesting, i'll be watching out for that !

Take care,

Rooi