I have a number of trading cronies who for one reason or another have different opinions on scalping, I of course am referring to scalping the FX markets, taking lots of little trades taking the tops and bottoms of sideways markets and just going with the flow, get in get out, lock in 10 pips, thanks for coming.
Many of the guys who have traded for years say it is not the way to go and over time you cannot win long term, although I have had a lot of experiences with clients I trained who did not think too much about statistics and just traded any way.
Two systems that can work really well is a basic stop and reverse using a swing trading technique or a simple short term crossover approach or a blatant bi directional trading, where you take a buy and a sell and the winner closes and the loser is doubled up, you leave it open but just open one more unit, so you are always in the market, this it creates a series of winning trades and a series of trades that are effectively martialling there way to averaging down and a smaller retracement will deliver the profit.
I have had traders who I trained take 80 trades in a night all about 3 to 4 pips, I was amazed, and as ignorance is bliss, as they say, and these traders were defying everything I thought I knew about trading.
Can you make money scalping, yes I believe you can, but I think you must not take yourself to seriously though because it really is different to trading a trending system.
One of my old partners used to put three trades on a day, around 8.45amm each day, he would put fifteen pip limit and about a forty pip stop loss which at times I have seen him move to avoid getting taken out, about 89% of the time he won, He carried a few huge losses but over time this largely mechanical trading system scalped 45 pips a day, that's about $2200 a week if he did not get hit.
It was uncanny and the funny thing is I asked him how he selected which pairs and which direction, and he used to go on about the news and his opinion of how the market would digest last night's overseas news and political discourse from the US. It was a load of cobblers; he just made sure his targets were close enough, so they got hit regularly. He was the favourite.
Can you make money scalping, yes, I have seen it, although for a long while I thought it was a fluke and not duplicateable.
Topping and tailing can work, trading the sideways moves during the Asian session especially after about 1pm, there is a major move that starts around this time once every two weeks or so, yet you can make enough to cover those losses.
I traded a system based only on positioning rather than market conditions like a system played on Baccarat or Roulette in a casino, it worked well and I made money for a time, I eventually like all gamblers, (I believe I was gambling at that time), lost the whole bank. Ouch again.
If you are a good scalper, keep records, keep every trade record so you can see how well you go, it is possible you know to make money scalping, of course it is, but is it possible for you, and that really is the right question to ask, is scalping the right strategy for me, do I believe it or am I reducing the markets to a game of chance.
A few ideas for the scalper are:
€ ignore support and resistance at your peril
€ Don't double up to catch up
€ Watch the spread as it has a massive impact at this end of the game
€ Do not treat the market as a casino
€ Trade the market when it is moving what for moves that display thrust
€ Trade a session or time of the day that suits the strategy
€ Keep records
€ Do not revenge trade if you get behind for a day, learn to walk away a small loser, it is better than walking away skint.
To summarise, I now trade a one minute bar, where even as late as February this year, if you told me I would trade the one minute bar, I would have said to you, no way man!
You can survive, but it is tough, it is lucrative though, as frequency of trading obviously increases and so the opportunity to make huge returns is back on the table, when it works they are anyway.
Be realistic and watch out that you do not develop a series of new bad habits.
My system for trading the one minute candle chart is a really good example of how scalping can work, although I feel it is much more than that. I am using the Impatient Trader trading system which relies on breakouts from levels of consolidation and also applies stop loss strategies around these areas as well to create a reasonable value on each trade. If I am right 33% of the time I am not going to lose money.
Many of the guys who have traded for years say it is not the way to go and over time you cannot win long term, although I have had a lot of experiences with clients I trained who did not think too much about statistics and just traded any way.
Two systems that can work really well is a basic stop and reverse using a swing trading technique or a simple short term crossover approach or a blatant bi directional trading, where you take a buy and a sell and the winner closes and the loser is doubled up, you leave it open but just open one more unit, so you are always in the market, this it creates a series of winning trades and a series of trades that are effectively martialling there way to averaging down and a smaller retracement will deliver the profit.
I have had traders who I trained take 80 trades in a night all about 3 to 4 pips, I was amazed, and as ignorance is bliss, as they say, and these traders were defying everything I thought I knew about trading.
Can you make money scalping, yes I believe you can, but I think you must not take yourself to seriously though because it really is different to trading a trending system.
One of my old partners used to put three trades on a day, around 8.45amm each day, he would put fifteen pip limit and about a forty pip stop loss which at times I have seen him move to avoid getting taken out, about 89% of the time he won, He carried a few huge losses but over time this largely mechanical trading system scalped 45 pips a day, that's about $2200 a week if he did not get hit.
It was uncanny and the funny thing is I asked him how he selected which pairs and which direction, and he used to go on about the news and his opinion of how the market would digest last night's overseas news and political discourse from the US. It was a load of cobblers; he just made sure his targets were close enough, so they got hit regularly. He was the favourite.
Can you make money scalping, yes, I have seen it, although for a long while I thought it was a fluke and not duplicateable.
Topping and tailing can work, trading the sideways moves during the Asian session especially after about 1pm, there is a major move that starts around this time once every two weeks or so, yet you can make enough to cover those losses.
I traded a system based only on positioning rather than market conditions like a system played on Baccarat or Roulette in a casino, it worked well and I made money for a time, I eventually like all gamblers, (I believe I was gambling at that time), lost the whole bank. Ouch again.
If you are a good scalper, keep records, keep every trade record so you can see how well you go, it is possible you know to make money scalping, of course it is, but is it possible for you, and that really is the right question to ask, is scalping the right strategy for me, do I believe it or am I reducing the markets to a game of chance.
A few ideas for the scalper are:
€ ignore support and resistance at your peril
€ Don't double up to catch up
€ Watch the spread as it has a massive impact at this end of the game
€ Do not treat the market as a casino
€ Trade the market when it is moving what for moves that display thrust
€ Trade a session or time of the day that suits the strategy
€ Keep records
€ Do not revenge trade if you get behind for a day, learn to walk away a small loser, it is better than walking away skint.
To summarise, I now trade a one minute bar, where even as late as February this year, if you told me I would trade the one minute bar, I would have said to you, no way man!
You can survive, but it is tough, it is lucrative though, as frequency of trading obviously increases and so the opportunity to make huge returns is back on the table, when it works they are anyway.
Be realistic and watch out that you do not develop a series of new bad habits.
My system for trading the one minute candle chart is a really good example of how scalping can work, although I feel it is much more than that. I am using the Impatient Trader trading system which relies on breakouts from levels of consolidation and also applies stop loss strategies around these areas as well to create a reasonable value on each trade. If I am right 33% of the time I am not going to lose money.
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