Simple Forex Scalping Strategy For GBPUSD And EURUSD
Aiming for 100$ a day
Hey everyone. I am somewhat of a beginner meaning I know a lot about the market but haven't traded much. My question is currently i want to start with 1000$ account and make 100$ a day scalping and using 1-5 minute candles (I have a decent 60-80% win rate strategy). Is this possible without having a margin account and what stocks are good to trade. I was thinking about forex like some currencies like euusd and nzd/cad. Thanks for any advice!
Experienced Traders: help me put my early results in perspective, please?
I'm up almost 20% in one week, without ever risking more than 5-6% of my account balance on any single trade. I'm sure this is unsustainable, but is it possible I could average 5%/week over time? Background: I have spent much of the last decade playing poker professionally, so I am way more experienced with short-term, high pressure, real-time investment decisions than the average n00b forex trader. I read a book on forex and opened a practice account, which I traded successfully for a month before going live. The strategy i developed is pretty simple: -I started with $500 and only trade 10k lots. My plan is to move up to 20k lots when (if?) I hit $1k, 30k lots at $1500 etc. -I only trade the EUUSD. -I hold positions for anywhere from a few minutes to a few hours. -When euusd is moving back and forth within a fairly narrow trading range (10-15 pips), I wait for it to approach the top or bottom of the range and then jump in to catch the rebound. -If I am right, I cash out quickly and take my 3-5 pips and then wait for the next set-up. -If I am wrong and find myself sitting between 5 and 10 pips in the negative, I consult longer timeframe charts to decide whether to kill the trade and cut my losses, or risk another 10-15 pips if I think I just entered too soon and will get it back on the rebound. -If I do choose to hold on once I'm down 10 pips, I cash out as soon as a spike in the right direction gets me even on that trade or just slightly ahead. Sometimes I'll cash out a few pips down if it looks like my rebound is petering out and down a few pips is as close Im gonna get for that trade. -If I hold on and it keeps moving against me, I cut my losses at 20-25 pips. At that point the premise of my set-up (that we're range-bound) is no longer valid. -I steadfastly resist the temptation to add a second 10k to a losing position in an attempt to dollar cost average my way back out of the hole (this was the move that got me in trouble my first week of practice trading) -I close out any short-term positions as the hour when Tokyo, New York, or London begins trading approaches, since this often leads to bigger swings that I cannot predict without better fundmanetals. -When the market is not moving in a predictable range, I sit out and wait for it to either settle (at which point I start short-term scalping again), or make a big move in one direction. -When it swings big (30 pips+ in less than an hour, 80 pips+ over a few hours) I wait for the breakout to stall, then jump in to try and catch the rebound. I'll set a limit at around 50% retracement(basically a fibonacci target with a substantial margin of error). I'll set my stop loss at around 30 pips, generally aiming about 5 pips beyond where the charts show the next big resistance level to be located. I'm willing to risk a few extra pips to decrease the chances that I will get stopped out on a spike that tests just at or just beyond the likely resistance point before failing. I can easily spot a big potential flaw in my approach: my losses are 2-4x the size of my wins, forcing me to be right a big % of the time to stay profitable. Just 2-3 blown trades in a row will eat all the profit of a bunch of wins. That said, I've had 51 winners averaging 4.5 pips against 11 losers averaging 11.4 pips, since I started trading real money. These figures are only slightly better than my averages over 250 practice trades. I strongly suspect that I am running over variance, and I can easily compute that if I flip only one trade each day from winner to loser, I finish the week up 25 pips instead of 100. But even that average would make me rich in a couple years. Frankly, picking off five pips a day seems way easier than beating poker games. What am I missing?? TL;DR: Worried I've just had beginner's luck and I am about to get stomped
I don't like EUUSD, and I don't like breakout orders. So here's a breakout trade on EUUSD. I mention it because the last time I saw this was on EUAUD, and that worked out so well I'm kicking myself for taking profit on only 1/3rd of the move. Here's the trade. 1hr Chart. Pretty straightforward: http://i.imgur.com/YaBJXXG.png You could use an OCO order, but I personally will be watching it and actively trading it (applying the "Fingertrap" strategy I just posted about). I've just set up price alerts so my phone will buzz if it hits either of those levels. Notice the two big spikes through 1.2950 - don't like those. I personally am short from just below 1.300, but given the event risk, and those two big failures to penetrate 1.2950, It's not my favourite trade at the moment. I don't want to see it break to the upside, because the corresponding USD selling will be terrible for my massively risk-short tradebook. But hey, the market will do whatever it wants ;)
James Stanley's "Fingertrap" Scalping Strategy (also good for longer term trading)
I posted this elsewhere a while back, but I thought I'd put it in /forex and not on the blog, because it's my absolute favourite tool in all of Forexland. James Stanley is a (very good) trader and educator at DailyFX (Twitter: @JStanleyFX). He's also very friendly and helpful on Twitter if you have serious questions. Here's the link to the original article but what I'm going to do is explain it in a little more detail, show you how James uses it, and then explain how I use it for finding entries on longer term trades and breakouts. There's also this helpful video you can watch: http://www.youtube.com/watch?v=RrxOiAhIlaQ Right, so before I explain what it is, here's a checklist for WHEN the Fingertrap strategy is effective:
Is the market trending TODAY? (short term trend, not choppy action)
Is it nowhere near a place it could? stop (important fib, trendline, the basic stuff)
Is it the morning of the NY session? (it works best during this time)
Is it a fairly active pair with a tight spread? (if you're going to be scalping)
If the answer to all those questions is yes, you're ready to go: 1: switch to an hourly or 2hr chart, so you can see what movement on the day is like. You should be able to spot a strong directional bias if there is one, and you may have already done analysis to find important support and resistance. 2: Add two indicators: an 8 period EMA (Exponential Moving Average) and a 34 period EMA. I don't know why those numbers, and different combinations might work better on different pairs (EUJPY tends to throw a lot of false signals with this, as does gold, so it's worth experimenting). We use EMAs and not SMAs because they respond more quickly. Here I'm looking at EUJPY on 2hr chart, on 26 April 2013): http://i.imgur.com/9wqd36U.png 3: Is price clearly above or below BOTH moving averages (eg. it's a downtrend and price is below both, or an uptrend and it's above) AND has the 8 EMA crossed over the 34 EMA (crossed to the downside if you're looking at a downtrend). These two factors are a strong confirmation of a trend, if you need one. 4: Once you have confirmed that a trend is in place, switch to your preferred scalping timeframe. I usually use 5m or 1m charts. You'll now see that the 8EMA (which is the only one we're looking at from now on) hugs the price quite closely. 5: If we're in a downtrend, what we are looking for is for price to ideally break through some kind of support, and then to rebound to the 8EMA. It can push through it, even close a whole candle above it, but should eventually move back down below it. This is your signal to enter short. As you can see from the chart below (same time, 5m chart), it's essential that you determine that there is a trend first and not just some jumping around. http://i.imgur.com/pvjgeKg.png 6: The idea is to use relatively small trade sizes, and scale in and out of the trade rapidly. When price extends quite a bit away from the 8EMA, that's the time to take partial profits, wait for a rebound to the 8EMA, and then enter again. 7: The game ends when the 8EMA crosses the 34EMA again, and price is on the other side of both of them The idea is that, even with strong moves, there are quick pullbacks. This strategy helps to give you an edge in determining where those pullbacks are likely to stop. It's not perfect, but no strategy is. The point is that it gives you a higher probability of entering at a good time (buying relatively low, or selling relatively high), and it also means you can have a lower risk entry (being closer to the last swing high). Now, I don't get to do a lot of scalping because I have a day job, but I do use this for breakouts, and just any regular old entry as a matter of habit (unless I'm doing a fairly long term trade and 10 pips either way doesn't matter that much to me). What I will do is wait for a breakout or a strong move in the direction I want. Then I put my Fingertrap template on, and wait for price to "reload" to the moving average before getting in, placing my stop above a nearby swing high. My stop will always be placed while thinking about how long I plan to hold the trade. If I'm looking for a move in GBP/USD from 1.56 down to 1.50, I'm not going to place my stop above the nearby swing high on the 5m chart - I'm going to place it around 1.5650. So you have to use your discretion obviously. For example, I will be watching EUUSD very closely for a break of 1.3000 or 1.2950, and then employ it from there. For scalping, the nearby swing high is definitely a good place to put it - if the trade goes that badly away from you, you definitely want to be out. Give it a try, and let me know if you find it to be helpful! Let me know if you have any questions.
About to start trading for the first time. Anyone wanna talk?
I don't really have any specific questions, just looking for general advice. Well, maybe one...see the bottom. I've gone through most of the babypips school, and just finished reading Courtney Smith's book. I have somewhat of a bit of background in game theory due to hobbies (I was one of the better players in the country in the national tournament scene of a certain video game, and have close friends who have been ranked in chess and poker who I have been playing with and learned a lot of game theory from), and tend to prefer boring, "turtle" strategies. I considered scalping, but I don't think it will fit my lifestyle (time consuming). So, I'm probably going to look at position trading the daily charts, and I'll start mostly with the methods from the book I was reading. I want to be as disciplined as possible- picking entry/exit points before entering the trade, doing as much of it automatically via stops as possible (which I will look at and adjust only according to TA), and looking at my positions once per day. No emotion. On a long flight yesterday I finally sat down and wrote up a trading plan, buying on a few techniques, all of which have set stops. I'll calculate my position size so that if I am stopped out (stops based on technical analysis) I will lose 1% of my account value. This also means that positions with wide stops will not be very profitable. I will write down every trade and what signal I used to make the trade. Every thirty trades, I'll eliminate my worst-performing signal and replace it with a different one, and see how I do. I did some backtesting on EUUSD over the first few months of 2009. Trading on inside days seemed profitable, as well as reversal days. Channel breakouts were iffy...I used the ADX filter to exit, and that let me exit at really good times, but because the stops were too wide (for long position, I was buying at 55 day high breakout and setting stop to 20-day low breakout) I was barely making any money off of it and that was wiped out by the bad trades. I need to figure out where I can place tighter stops on Channel Breakouts without removing too many winning trades. My biggest concern is that inside days seemed too consistent...I usually made almost as much money as I was risking on my stop every time I did it, barring one or two times where I basically broke even. Seems like a couple losing trades could've set me back pretty quickly and I should be seeing more. I should probably do more backtesting, but I feel a trial by fire would work better. I'll probably just set the risk to 0.5% instead of 1% and start a very small account and see how it does (I'd have to lose hundreds of trades in a row to get wiped out). Am I doing this right? And, the real question- what broker should I use? Right now I'm looking at Oanda. I saw a poster saying good things about IB and I'd rather use Ninjatrader because I hate MT 4, so I might look at shifting over to them when I have more money, but I don't have $25k liquid cash available to open an account with them. Oanda's flexibility with position size seems ideal for my ~1% risk on stop plan. However, the more I read about Forex brokers, the more nervous I get...they seem to make money when you lose and engage in all kinds of unscrupulous tactics like stop-hunting, slippage failing to trigger stops, and raising the spreads during big moves. Feels more like playing against the house than trading. This alone makes me feel tempted to go trade stock options instead with the same plan and see if that works. Thoughts?
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