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A couple questions to all the scalpers out there

  • #1
  • First Post: Feb 6, 2014 3:50am Feb 6, 2014 3:50am
How do you justify your transaction cost?

Suppose that you take momentum trades on break outs or you scalp within a trading range and aim to make 10 pips or so. And suppose that you pay a 1 pip spread on every trade (assuming no slippage or requote). In such case, your transaction cost would be 10% of your profit. Why do you think it is worth it? Is it because the high win rate of your system? Scalpers out there please share your insights!

-Paul
  • #2
  • Feb 6, 2014 4:24am Feb 6, 2014 4:24am
Eh? The round trip on an FXCM trade would be closer to five pips on average. And that's not accounting for slippage/poor fills.



Quoting pletokyo
How do you justify your transaction cost? Suppose that you take momentum trades on break outs or you scalp within a trading range and aim to make 10 pips or so. And suppose that you pay a 1 pip spread on every trade (assuming no slippage or requote). In such case, your transaction cost would be 10% of your profit. Why do you think it is worth it? Is it because the high win rate of your system? Scalpers out there please share your insights! -Paul
  • #3
  • Feb 7, 2014 12:51am Feb 7, 2014 12:51am
Squeeze,

Thanks for your input. Like you said, the actual transaction costs can be much higher in reality. That just got me even more curious about scalpers. If one is to scalp as a retail trader, they must have a very high win rate to justify such trading methodology. Are you a scalper or have you ever scalped yourself?
  • #4
  • Feb 7, 2014 2:24am Feb 7, 2014 2:24am
Scalping carry less risk but it compensates with transaction fee (1 pip as you said). Nothing we can do. Sad but true.
  • #5
  • Feb 7, 2014 7:59pm Feb 7, 2014 7:59pm
There are more trades available for the time.
  • #6
  • Feb 8, 2014 8:57pm Feb 8, 2014 8:57pm
Why limit your gains to "10 pips or so"?

A better way to scalp is to try to catch breakouts. Try scalping into large moves and limit via sl your loss, not your gain.

As the old saw goes, take care of the downside & the upside will take care of itself.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #7
  • Feb 8, 2014 9:28pm Feb 8, 2014 9:28pm
scalping, if done properly can make you a nice amount of money. The key is your R/R ratio. Forget the pips.....the R/R is more important!!!
Only Scalping can offer high R/R and in quick time. On a good day, scalpers can make up to 6-10%(inclusive of spread) in a day. This is something day traders cant do.

I am happy to incur transactions costs if the returns are this good....wouldn't you?
  • #8
  • Edited 10:59pm Feb 8, 2014 10:40pm | Edited 10:59pm
1. Scalp only during high volatility sessions like London and NY, because during Asian Session it's rather unpredictable how volatility will be like.

2. Make sure you pick a pair with high Average daily range, I personally like GBPJPY. My broker has ~1.5pip spread so it's manageable in terms of transaction costs.

3. Be aware of the context, daily chart, 1hr chart - what is the trend and what are the levels. As much as possible you want to stay out of trades that are against the 1hr trend to avoid your stops being hit. Also, favour trades taken at key levels like daily pivot, whole numbers and half numbers, higher TF support and resistances.

4. Have a good system. Test it thoroughly and make sure it works before trading live.

5. Avoid trading counter-trend into moves that enter extreme OB/OS regions on the 1 min chart; the best counter-trend trades are those that get into slight OB/OS and either displays divergence OR simply loses momentum. The stronger moves are RARE but when they happen they typically don't end until the session is almost over, so you'll be in deep drawdown if you keep trying to fade those moves! (in fact it can be a good idea to learn how to spot these moves and get in to ride them for ~50 pips)

6. Patience. You may get 5 entries the entire London session (8-5pm) but you'll have to stare at the M1 charts the whole day. Can be draining.

7. Have a stop-loss, but try to close losing trades before the SL gets hit. Keep in mind your AVERAGE win size, and when your loss gets to that number, decide quickly if the trade is worth keeping. Have confidence in the system. The winners > losses in the long run.

8. Whenever possible, WAIT for the retrace no matter how slight - don't rush into your entries.

9. Forget about trying to catch large moves - never let a scalp trade turn into a swing trade/position trade. If you want to do that then don't scalp, just trade on a 5 min chart or 15min chart and try to catch the daily moves. When trading counter-trend, always consider reversing your position when price gets to a good retrace zone (and for example loses momentum).

10. If you haven't traded successfully on the daily or any of the higher time frames then you probably shouldn't be scalping because you are likely to lose all your account balance. (but that's just my view)
Build good relationships with others.
  • #9
  • Feb 14, 2014 9:33am Feb 14, 2014 9:33am
Thank you all for your insightful inputs!

And especially Shellsnail, thank you for your advice. I do not intend on scalping myself but it's really good to hear your experiences and insights.
  • #10
  • Feb 14, 2014 9:48am Feb 14, 2014 9:48am
Quoting pletokyo
Thank you all for your insightful inputs! And especially Shellsnail, thank you for your advice. I do not intend on scalping myself but it's really good to hear your experiences and insights.
you might wanna check "scalp scalp scalp" journal by William...this guys show exactly what he's doing.

as for me I'm a demo trader using intraday/scalping method which to me has the advantage because of so many opportunities that even if you are wrong you can end the day profitable.

R:R I can't see huge R:R in scalping?? I'd say it's about the pips not R:R!

still learning though..
  • #11
  • Feb 16, 2014 12:34am Feb 16, 2014 12:34am
Quoting Vitez
{quote} you might wanna check "scalp scalp scalp" journal by William...this guys show exactly what he's doing. as for me I'm a demo trader using intraday/scalping method which to me has the advantage because of so many opportunities that even if you are wrong you can end the day profitable. R:R I can't see huge R:R in scalping?? I'd say it's about the pips not R:R! still learning though..

If you cant see huge R:R in scalping then you are blind (no offence given). Its the only reason I scalp 5 min charts and cough up large transaction costs.
If you want pips then go trade daily or weekly charts.
  • #12
  • Feb 16, 2014 11:12am Feb 16, 2014 11:12am
Quoting shripsfx
{quote} If you cant see huge R:R in scalping then you are blind (no offence given). Its the only reason I scalp 5 min charts and cough up large transaction costs. If you want pips then go trade daily or weekly charts.
none taken, as said I'm still learning..

so you are loking at 5min chart to catch that big move right? I assume you are wrong many times or at least BE many times?

They way I see it you catch the big move and scale in to make it a fat one. However you can simply take many trades (of that same move) for a quck but more probable profit.
  • #13
  • Feb 17, 2014 4:31pm Feb 17, 2014 4:31pm
If you're going to attempt to scalp, I highly suggest steering away from Forex entirely (and this is being brutally honest). It might not be what you want to hear, but odds are skewed against you when you start factoring in PIPS for cost. That's not to say it isn't possible....but it's going to be one wild ride trying to consistently pull a pip or two for profits. It's much easier and efficient scalping futures imo (and is what I do for a living). Not to mention you have access to the tape and book with futures...where with the FX, orders are still masked.
  • #14
  • Feb 18, 2014 3:55am Feb 18, 2014 3:55am
Quoting Vitez
{quote} none taken, as said I'm still learning.. so you are loking at 5min chart to catch that big move right? I assume you are wrong many times or at least BE many times? They way I see it you catch the big move and scale in to make it a fat one. However you can simply take many trades (of that same move) for a quck but more probable profit.

No not looking at big moves. I trade divergence on a 5 min chart and target a minimum of 1.0 R/R on most trades. A move of approx 15 pips gets me that with proper stops placed behind swing highs/lows. I do this 3-4 times a week and I am done for the week. I do not trail my gains as there is a lot of noise on 5 min charts. I leave my stop where I originally place it. Either its a winner or a loser.

Because there are so many set ups on a 5 min chart I can afford to pick and choose only top quality set ups.

My advice is to keep it simple and don't be greedy.

Scalping is not for everyone and therefore you need to work out if its for you. I like it because I am in and out of a trade in a short time, don't care about fundamentals of a currency pair and don't feel comfortable holding positions overnight. The other major benefit is the ability to quickly compound your gains in a short time.
  • #15
  • Feb 18, 2014 8:22am Feb 18, 2014 8:22am
Quoting Benevolent
If you're going to attempt to scalp, I highly suggest steering away from Forex entirely (and this is being brutally honest). It might not be what you want to hear, but odds are skewed against you when you start factoring in PIPS for cost. That's not to say it isn't possible....but it's going to be one wild ride trying to consistently pull a pip or two for profits. It's much easier and efficient scalping futures imo (and is what I do for a living). Not to mention you have access to the tape and book with futures...where with the FX, orders are still...
May I ask which futures do you scalp?
  • #16
  • Feb 18, 2014 8:23am Feb 18, 2014 8:23am
Quoting shripsfx
{quote} No not looking at big moves. I trade divergence on a 5 min chart and target a minimum of 1.0 R/R on most trades. A move of approx 15 pips gets me that with proper stops placed behind swing highs/lows. I do this 3-4 times a week and I am done for the week. I do not trail my gains as there is a lot of noise on 5 min charts. I leave my stop where I originally place it. Either its a winner or a loser. Because there are so many set ups on a 5 min chart I can afford to pick and choose only top quality set ups. My advice is to keep it simple and...
I see.
  • #17
  • Edited 8:46am Feb 18, 2014 8:35am | Edited 8:46am
wonderful thread started.. according to me scalping is extremely profitable it can make you millions in month if done properly but on the other hand a huge risk... should never go with broker with high spread (you will make no profit otherwise ha ha ) in my opinion ONADA is the best broker for scalping, instant execution and very low spread however scalping is profitable but first do demo for at least a year to be able to trade with any market condition without loss.....
  • #18
  • Feb 18, 2014 8:55am Feb 18, 2014 8:55am
Quoting Vitez
{quote} May I ask which futures do you scalp?
Sure. I mainly focus on notes (5 and 10 year), and equities (Es, ym, nq, russel)
  • #19
  • Feb 18, 2014 11:13am Feb 18, 2014 11:13am
Quoting Benevolent
{quote} Sure. I mainly focus on notes (5 and 10 year), and equities (Es, ym, nq, russel)
with $2000 one can already scalp ES and other futures that don't require high margin, so it's something to think about at least for me!

what about ECN FX brokers that offer level 2? still not the same?
  • #20
  • Feb 18, 2014 11:21am Feb 18, 2014 11:21am
Quoting Vitez
{quote} with $2000 one can already scalp ES and other futures that don't require high margin, so it's something to think about at least for me! what about ECN FX brokers that offer level 2? still not the same?
No not entirely. Even if you get filled, you're paying a ridiculous commission on the fx compared to futs. You also have a greater risk of slippage (in my experience). To paint a picture, 1 tick can net a profit on futs. 1 tick (generally speaking) will be a net loss or breakeven on the fx.
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