Paradigm Shift

Jan 2012-June 2012
Cumulative Return
(with MBT "Pay for Limits" credits) : -6.2%

Winning Trades: 69%
Max Drawdown: 38%
Losing Days: 16%


Edit: These performance returns are being abandoned due to MB Trading changing the nature of their 'Pay for Limits' program'.
The PFL credits mentioned here http://www.forexfactory.com/showthre...88#post5309588 are no longer available.
Commissions have been reduced by 15%, but PFL credits have been reduced by 75%!

Cumulative Return – The ratio of money made or lost whether realized or unrealized relative to the amount of money in the account.
The Cumulative return also takes into account any deposits or withdrawals to present the true ratio.

Maximum Drawdown represents the maximum percent drawdown (peak to valley) over the life of the account.

“Think of a Paradigm Shift as a change from one way of thinking to another.”

...My most current thread (2012) to show how profitable scalping can be with the right skills,
experience, broker, and market conditions.

You can read my previous two threads, both failed attempts.
Hopefully, you can see my progression from complete “hack”, who thought he could just “sit down and outsmart the FX market”,
to someone who develops a method with a real “edge” and manages risk appropriately.

This thread's performance is the culmination of two years experience of scalping nearly every day (>3000 trades).
A constant refinement of techniques and adjustment to market conditions was necessary.

While you may not trade exactly like me, I hope to offer motivation.

I hope to do extraordinary things with a relatively small account and
produce peerless results.

You will not be able to build an EA from what I present here.

The main purpose of this thread is to:

-prove that “scalping”, or short-term trading,
can be very profitable for the retail trader.

-track and analyze my progress in 2012.

I don't use the MT4 platform for trading. I use MB Trading's Navigator Pro.
I can't use the publishing capabilities of MT4 with my broker's order execution platform.

Therefore, until this is changed, I can't use TradeExplorer here at Forex Factory or Myfxbook.com to track,
analyze, or verify my results.

I recently found that Currensee.com has a partnership with my broker and can track/publish my results.
I am not endorsing the use of Currensee.com, but this is the only independent third party
(without trading with MT4) that can verify my performance.

Currensee.com only publishes live, real money account performances.
Their performance metrics are professional and they showcase multiple CTAs and investment companies as “Trade Leaders”.

One drawback is that the site is sometimes slow to update. It has taken 24-48 hours sometimes to “catch up”
and have all the trades filter through the Trader Performance and Risk to Date sections.
Another minor flaw is that it doesn't compute my Pips Gained/Lost in my profile's Closed Trades section
(due to the broker information sharing API).

Lastly, the profits accumulated from the “Pay for Limits” program are not considered
in the Cumulative % Return or the Monthly Performance percentages at Currensee.com.
(Neither TradeExplorer nor Myfxbook.com tracks these correctly either, they are considered additional, small deposits.)

With manual updates to the first post of this thread, I will have my own chart,
“2012 Monthly Change - Trading P/L + Pay for Limits credits”.
These credits have varied from 8% to 20% of overall profits during the previous six months.

Except for a few months in 2010, I have been mainly a 1 minute TF “scalper”.
My trades are somewhat discretionary, lasting from seconds to minutes.
I have primarily spent my “screen time” trading EUR/USD.

While there are many posts in my previous threads, I have tried to compile a short list
to introduce you to my beliefs, goals, and “style”.

Unfortunately, this list does not include my disasters, “blow ups”, and other mishaps.
I have made a lot of mistakes.

Likewise, this list does not include my friends' posts which have been critical, supportive, and instrumental in my development.
Many of these are more valuable than my own writings.
Please take the time at your leisure to read my previous three threads for their contributions.


“Nevertheless, my belief is that the largest profit percentages are made by short-term traders who really have their psychology together. I've seen short-term traders who could make as much as 50% or more per month
(on small amounts of money such as a $50,000 account) when they were in tune with the market and themselves.”
-page 85, Trade Your Way to Financial Freedom, 2nd Edition, Tharp


http://www.forexfactory.com/showthre...75#post3114675
What percentage per day is possible?

http://www.forexfactory.com/showthre...50#post3460850
Scalp trade management

http://www.forexfactory.com/showthre...66#post3483466
My early weaknesses

http://www.forexfactory.com/showthre...39#post3745839
Countertrend entries

http://www.forexfactory.com/showthre...63#post4170463
Influential ideas

http://www.forexfactory.com/showthre...40#post4174340
(posts 16-19) Simplified chart examples


http://www.forexfactory.com/showthre...76#post4202176
(posts 33-34) Time Stop Loss

http://www.forexfactory.com/showthre...39#post4203439
What you do best...

http://www.forexfactory.com/showthre...95#post4258495
Another entry technique

http://www.forexfactory.com/showthre...14#post4455814
Forex gurus

http://www.forexfactory.com/showthre...30#post4596730
Retrospective

http://www.forexfactory.com/showthre...26#post4721026
Trembling Hand

MB Trading's Navigator Pro software is very good. Execution reporting is fast.
You have access to currency “level 2” quotes on the EXN.

They have the “Pay for Limits” program.
read about that here -
http://www.mbtrading.com/pricing.aspx

If you'd rather not do the “math” for EUR/USD:
when using Limit orders I am credited approximately ¼ of a pip per trade execution (open or close) immediately in my account.
If I use limit orders to enter AND exit, I gain approximately ½ of a pip total just for adding liquidity to the EXN.
It is a skill. It can be learned with practice.

With Navigator Pro, you have access to many order types and can place and cancel Limit Orders in 1/10th of a pip increments in a second or two. You can “click” a Price Level in the “level 2” quote display and place an order at that price with another click.

Nothing free exists for MT4 that let's you place Limit Orders quickly in 1/10th of a pip increments, then Cancel
and enter a new order 4/10ths of a pip lower.

That is the sort of thing I do when I scalp, “fight” for the best possible price.
MT4 is not “current”, it was not developed with “level 2” quotes in mind.

Recently (the past six months)... because of the speed of Navigator Pro, the nature of the EXN (formerly ECN),
and the “Pay for Limits” program, I am able to routinely “scalp” profitably with profit targets of 5 pips or less.
The low spread is a factor as well. (Usually 0.9 pips or better on EUR/USD.)

Even if you choose MB Trading and must use MT4 (perhaps you run EAs), open up Nav Pro, use the “level 2” information.

While you will not glean an “edge” solely from trading the quote montage, there is more information available.
It can be subtle. Liquidity provider algorithms are constantly changing their quotes... and they can “bounce” around erratically,
but there are customer Limit Orders out there too, there are price levels which appear to “slow” a move upward, etc.

Try to use all of the information available to you.

I am not a Zen Master. I am not an unemotional robot.

I do get angry when my trades move against me quickly and I am elated after making 3% in under an hour.

There is a lot of “talk” on the forums about people trying to fix their own “psychology”.

“I was too greedy.” = lack of an actual trade exit plan.
“I shouldn't have taken this trade. [loss]” = lack of entry plan or outcome bias
“I missed this trade, it would've been 100 pips.” = lack of entry plan again, or outcome bias again

Generally, what I see, after a couple years on our forum:

People don't really know if their method/strategy has any real “edge”.

They think that if they become like a Zen Master, eventually they will cut losers perfectly
and hold winning trades to their maximum. (...not going to happen)

Make some rules. Follow them.
(If you don't follow your own rules, then...yes, fix that!)
Have an Entry plan.
Have an Exit plan.
IT DOES NOT MATTER WHAT HAPPENS AFTER YOU EXIT THE TRADE.

My own example-
I trade for a small amount of pips every time.
Do you know how many trades I exit which continue to go farther in profit?
A TON. (many, many)

It doesn't matter to me anymore. It's not part of my scalping plan.
I make a good return, I have many chances to trade in a day.

My risk is reduced because I am in the market a short time.
I have a high win% and rarely face a prolonged drawdown.

I get angry. I verbally abuse my monitor.
But... the things I look for make money.
I've trained myself to take my entries and exits as dictated by my methods.

Your chances of success will not be determined by your mental state,
find something that makes money... do it over and over again.

I don't look at chart patterns (dojis, hammers, etc), pivots, or fibonaccis.
I don't try to correlate. (EUR/USD vs S&Ps or EUR/USD vs GBP/USD)
I don't use MT4 or expert advisors.
I don't chase price. (“breakouts”)

I do have a R:R less than 1.
I do have infrequent losses larger than my frequent gains.
I do mainly use the 1 min TF candlestick chart. (I do glance at 5min and 15 min TFs)
I do use a Time-Stop. (generally, trades never in profit within 4 minutes are exited)

I do use a “trend” indicator. (2 SMAs)
I do use a “heads up” indicator. (overbought / oversold indicator)

Simply, my trend indicator is 2 SMAs, one fast, one slow... on a 1 min chart.
When the fast is below the slow, it's a downtrend.
When the fast is above the slow, it's an uptrend.

After months of using my settings, I can tell you the most valuable thing I have learned.
There is more risk and greater loss possible when trading AGAINST my short-term trend indicator.

I use an overbought/oversold indicator as a “heads up”.
Meaning... a possible trade might be near, so I should pay attention
when we are oversold in an UPTREND and overbought in a DOWNTREND.

I do look for support and resistance areas as well, hopefully in combination with the above two indicators.

I trade 30 second charts in a similar fashion, have traded for nearly 2 years. Looking forward to hearing more about your trading this year!

Hi Intu,

I will pay attention to ur trading journal

I am in 1 min TF too

tq
belajarfx

Oanda's spreads seem to keep increasing. It seems like spreads over 1.2 have become the rule not the exception. I am going to have to re=engineer my strategies or change brokers.

Hi Salestrainer and belajarfx, thank you for your support.

I will post more insights into how I trade at the end of the month.
Currently, I trade the European/US overlap approximately... 9:45am-12:45pm EST.
I also watch the Asian/Tokyo session from about 8:30pm-10:30pm on Sunday and Monday evenings.
Unfortunately, because of my job, I do not trade on Friday.

Salestrainer: I traded with Oanda for almost 2 years and I loved the speed of
their FXTrade platform. But...higher spreads in 2011 caused me to change.

Thinking about it for the same reason ...

Many green pips to you!

RS

Subscribed!

Do you have some kind of rough mean value for your total trade cost per trade? (spread+commission+mean slippage+swap-payment for limit orders-affiliate rebate if any)

I usually won't trade on the PFL EXN if the spread is higher than 1.1 pips.
Let's assume it is generally 0.9 pips.

I really, truly only use Limit orders to enter.

There are a few instances (less than 3%) where I pay a commission on the entry side of a trade because I use a Limit price very close to the actual market and the market moves in a fraction of a second.

I receive 1/4 of a pip payment from each SIDE of a Limit execution (entry and exit), so 1/2 pip round trip from the "Pay for Limits" program.

Honestly, I used to think that I didn't "pay the spread" but so many of my executions only happen when the BID on the EXN actually becomes my offer or higher (or vice versa). That being said, I do receive slippage in my favor, for fractions of a pip (sometimes higher in a very fast market).

Let's use that slippage to offset the commissions I rarely pay, though the slippage in my favor is far more common. I never receive slippage against me, because I always use Limit orders.

So...
with LIMIT orders... I pay 0.9 spread but receive back 0.5 pips.
Effective cost about 0.4 pips.

I noticed you have been trying the free ECN program, and I do MISS alot of entries because I can't get filled.
If they get Navigator Pro working for the FREE ECN, I will definitely be trying it out.

Hmm... I see, quite a lot of variables in your calculation, sounds like you are getting a competitive deal.

Yeah, i tried the Free EXN on MT4, but was a bit scared off by those issues they have been having with their server, also spreads vary quite a lot from one day to the next, some days mean spread can be around 0.8 pips during london, but more often it is 0.9-1.3 pips.

With my current broker (Pepperstone) i'm getting quite a good deal, London spread averages a very consistent 0.3-0.4 pips. Commission is 0.7 pips, and i get an affiliate rebate ~ 0.1 pips. Mean slippage on market orders (all my entries are market orders) is about - 0.05 pips, slippage on pending orders (about half my exits are TP/SL) is practically 0. Never hold positions over rollover so swap is 0. Overall i'm getting a total trade cost within the range of 0.95-1.05 pips per trade

February brought large drawdown, volatility was high.
Honestly, my position sizing wasn't terribly different from January, but the losing trades were more frequent.

With multiple Bernanke testimonies and the Fed funds rate decision, I traded lightly in March...
about 10 hours of screen time.

My Currensee cumulative return is -19% but doesn't reflect my gains from the "Pay for Limits" program...
which stand at +10% year-to-date. I'm down about 8-9% net.

I'm trying to broaden my "repetoire" for different market conditions.
Breakouts and strongly trending markets require different tactics.

With solid support and resistance (and/or ranging markets), my countertrend entries fair a bit better.

After April's negative P/L, I committed to keeping my position size smaller throughout May.
My best month (January) didn't result from larger positions, but my worst losses this year have.

Very little screen time overall in May (about 11 hours)... but I did trade nearly every day,
even if for only 15 minutes or a half-hour. I still do not normally trade on Fridays because of a work conflict.

MB Trading's "Pay for Limits" aren't represented in Currenssee's evaluation of my performance,
but I've updated the first post in the thread with that information.

I will share everything (spreadsheets, documentation, etc.) at the end of the year.

It's been more difficult lately. Price movement is faster.
As I generally aim for small, quick profits, I miss many larger movements because my limit orders are already placed.

This is not happening often any longer-

The liquidity providers on MB's "Pay for Limit" platform are more efficient, I rarely get price improvements on my limit orders anymore.
It could also be the result of more high-frequency participants (or less retail 'market' orders on that platform).