Trend Scalping

Hi all

I would like to start journal on my scalping practice runs. At the moment, I use demo account but I assume to have $25 to practice on. This is my actual account balance at the moment. I will use purely price actions at critical levels.

Rule:
1. Only trade pairs with spread < 3 pip.
2. Never trade in horizontal ranges.
3. Identify established trend channels in 4 hr/1 day chart.
4. Wait until the price approaches the boundaries of the trend channel.

Entry
5. If the trend is steep entry along the trend bias only. If the trend is shallow, either directions will be okay.
6. When I see price reaction near the boundary switch to 5 min, 15 min charts.
7. When I see bounce, enter. The SL placed 2 pips above the bounce extremes.
8. If there is support/resistance too close, making rr ratio near 1:1, don't enter.

Exit
9. Enter 0.02 lots and exit 0.01 lots at 1:1 RR point. This ensures the b/e at stop loss.
10. Remaining 0.01 lot follow the price until sign of curling up appears on next support/resistance level.

Monitoring

1. USDCAD: Creeping up to H4 trend, market bias downward, price action ETA 3hrs.
2. USDJPY: Breakout upside from downward trend channel, but I don't think this break out will last because the price already tested the monthly resistance twice and falling. Wait for falling price soon.
3. GBPUSD: In an downward channel but the price is at the middle of the channel. Need to wait for it to reach boundaries. The channel is relatively steep. ETA to the bottom 4hr.
4. EURUSD: Retracing from giant upshoot from yesterday. Possible small scalping opportunities.
5. EURGBP: Market confusion now. Good place to lose money. Stay out until something happens.
6. AUDUSD: H4 chart showed range for 3-4 oscillations and broken down to another flat range below recently. Wait for the breakout downside.
7. USDCHF: Good downward trend formed on D1 chart due to the price bounce from upper MN channel boundary. The price bounced from the bottom of the D1 channel.

Entries
Short EURUSD for 3.9 pip. 0.02 lot.
Long USDCHF for 4.9 pip. 0.02 lot.

Exit
EURUSD: became range because of the flat bottom support. At the moment, there is not enough volume to break this support. Wait for London. Profit: 0.85 pip. Waiting for Breakout downside.
Major CHF News coming up in 25 mins. Need to look for opportunity to exit USDCHF.

Monitoring

1. EURGBP: trying to breakout to the bottom. Europe volume is kicking in now

Result

1. EURGBP: Entered short and got lucky. Exit at turning point. win 2.05 pip
2. USDCHF: could not find proper exit point. Trend reversed. loss 5.6 pip

Lesson

1. I entered USDCHF more or less followed the rule but as London volume kicked in, the trend reversed from what was established during Tokyo session. Now the USDCHF is going back to channel boundary to retest the level.
2. During this London market hour, volatility is really great. Small fluctuations formed in Tokyo session can easily be thrown out by this volatility. Do not consider small Tokyo session fluctuation pattern as basis for trade decision.

Interesting triangular squeeze channel formation spotted in USDCHF @ 1 min Chart.
Wonder what will happen when this channel squeezes to the end.
Overall bias is downward.

Of course breakout-pullback-continuation pattern afterwards
But the price will encounter many major support before breaking free.

95 minutes of agony

At 1 min chart, breakout occurs frequently. I saw a breakout and followed it emotionally. It paid me back with 95 minutes of agony.
It was a fake breakout and I had to spend my 95 minutes in agony trapped in the horizontal range.
At the end, win 0.2 pip. I got lucky with this one too.
Right after the rescue, the price bounced up again! Very dangerous.

Lesson

1. Never trade the first break out. Wait until you get confirmation of pull-back and continuation.
2. Even at 1 minute chart we see prices respecting support and resistance. Amazing!

One day of experience

Well this is it for today. Starting from $25, the profit for today was $0.49 (2%).

4 trades; 3 WIN 1 LOSS
EURUSD 0.85 pip WIN
USDCHF 5.6 pip LOSS
EURGBP 2.05 pip WIN
EURGBP 0.2 pip WIN

Good that I used smaller lots for unsure entries.
Next time I will not gamble my entries and enter sure ones only.
Gamble in Forex is waste of my time and effort.

Better to have peace of mind studying other charts and strategies.

It is pretty difficult to find a good trade setup than I anticipated.
Hope I get to fish out more pips next week!

I think using price action strategy at 1 minute chart is not so profitable, because of the spread cost.
To earn 2 pips and pay 2.4 pip as commission that is a bit much!
Perhaps I should move to 15 minute chart to get a decent profit-to-spread ratio.
There I may be able to shoot for 5-10 pips per trade.

Hi guys

The broker I am with is XM.com they have variable spread and typical spread is 1.9 for EURUSD and other major pairs lies somewhere between 2.2 to 2.8.

To be a scalper, I felt the need of better spread and researched further.

I just found out that there are two types of forex dealers, Market Makers and ECN brokers that scalpers to think about.

My fellow novice scalpers! Educate yourself about this distinction. Many market makers will hinder your progress if you are on the track of making consistent sums of money from scalping. Metatrader 4 and 5 provide the plug-ins for brokers to fully control the trades. Brokers are able to play with longer-than-5s slippage, price rejections, re-quotes, artificial spread enlargement, temporary account blocks and deliberate disconnections. These have several pips of impact but for us scalpers, they make huge differences. People report these kinds of activities over and over from the brokers in the Broker Discussion Forum. Go there if you are new and be aware of this situation. I was very surprised to learn this fact today.

Watch the youtube clip below and get introduced of this issue.
Not all Market Makers do this but we need to be careful. Especially be careful of those brokers who are not regulated by government. High probability of doing this "bidding against client".

Most standard accounts belong to Market Maker account and very few are true ECN brokers.

Market Makers do not give us direct access to the true global market.

ECN brokers do and give us much better spread but with commission. These commissions are often cheaper than usual broker spread.

Typical ECN commission is around $7-$15/lot round trip, which equals to 0.7-1.5 pip commission. Typical spread in ECN ranges around 0.0-0.8 pip for EURUSD.

This gives us 0.7 - 2.3 pip spread, which is decent. Most of the time the ECN spread stays very low. One downside of ECN accounts is that they typically have higher initial deposit requirements, because the traders are exposed to real danger of true market.

Lesson Learnt

1. If you are serious about scalping, find a true ECN broker or an honest & regulated retail broker, who offer very tight spread.
2. ECNs take commissions but give us true direct access to the global forex market.
3. ECNs typically have lower spread even after you include commissions.
4. We can say accounts that do not receive commissions places traders at an insulated environment, which can be easily manipulated if they are willing.
5. These insulated market environment do not like to you profit because of the conflict of interest.
6. They will lose money if you win, they will gain money if you lose.
7. Some retail brokers ban scalpers from this reason.
8. Insulated market environment does not allow you to place SL and TP lines within certain ranges to market price making scalping dangerous. This is a way for them to keep scalpers away from their system.
9. True ECN providers do not care about those and you will be able to place SL and TP anywhere.
10. There are counterfeit ECN providers who still place SL/TP restrictions. Stay away from them.
11. If market makers are honest and genuine, you will be okay with them. Read the reviews of non-ECN accounts before you jump in live. Make sure they do not trade against you or have history of hindering traders from making profit.

Brokers I will investigate are:
ECN: FX Open AU (not the NZ counterpart)
ECN: IC Market
Retail Broker: Oanda



I will test out ECN broker DEMOs from now on and see if I really get smaller spread overall. See you next week~!

Market Makers: not your friend

ECN: your true access to interbank market with commission.

I find renko and range bar techniques attractive because they remove all the noise from the charts.

Two promising Trend Scalping strategies

1. Thread called "Simple High Probability Trading" gave me a useful technique utilising the range bars. I briefly tested this strategy in trending pairs (did 8 test runs) and gave me 75% win ratio. Definitely worthwhile experimenting with this strategy.

2. A very simple renko bar strategy appearing on youtube. Post #153 in the above thread introduced this video and I attach the video here again, for a quick reference.