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Baruch's Forex System Journal
- Thread starter Baruch
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Quote from Scientist:
Baruch, that is a well-meant, yet silly comment. I really was joking about betting the farm. How much do you think I risk on a single trade? How much do YOU risk on a single trade? I would not risk more than 1%, or, at the worst, 2%. Yesterday's EUR short never even came anywhere remotely near that. I ususally exit before I lose that much. While scalping, the relative risk factor is of course drastically reduced, if I scalp the size I currently "swing" trade, I risk less than 0.5% on any single trade. I can scalp with several times the size I can swing trade, because lower time-risk and smaller stops. Now THAT is the advantage of scalping. Unfortunately, this only applies in very liquid markets, like the ES, where the liquidity is high enough to support that.
I disagree with a notion that holding on longer is what makes the big profits, as opposed to scalping. That totally depends on two factors: 1) The market you trade, 2) The money you have / size you trade.
I believe if you trade a market like the DAX, for example, you can make about 10X as much by scalping it. Same for ER2 etc. The EUR is also very nice to scalp. But it's all restricted in terms of liquidity.
I am sick of hearing the argument that there are no $100M-scalpers out there. Jesus, of course there aren't. What do you think how that'd work, scalp the ES with 10,000 contracts?
It's all solely a matter of money velocity. In finance, the smaller you are, the more money you can make, because of more money velocity (compare 1-man fighter versus dreadnought). As you become a multi-millionaire or manage lots of money, you get to find out that it isn't all so easy anymore making a few thousand % a year as it was when you had a $10K account. When you look at it this way, finance actually becomes one of the fairest games in the world. The larger you are, the harder it gets. On the total extreme, beginners can whizz in and out of the market with 1-lots all day long, it's so easy, every market looks abundantly liquid, you always get a fill, you can buy the bid and sell the offer, and on top of that are totally invisible, because nobody would ever even notice you.
Once the beginner gets over 1-lots, he will realize that it isn't so easy after all. DAX isn't that easy with 10-lots. Nor are the currency futures. If I want to enter a dozen plus contracts on the AUD, for example, I can't just put my limit in and wait. Chances are the market will move there to take the volume out and then run against me, or, never go there, because it's scared of the volume. So I have my execution platform strategies set to not send orders until price is a couple of ticks away. Admitted, you're late in the queue, but you see, that's why you can only do AUD well for swing-trading or pos trading. You gotta give up a tick or two. On the EUR, it's similar. You have to scale in preferably over several levels, so things are smooth and people don't see big orders matched or get scared by your size, or, as on AUD, see your order sitting there way in advance. Always keep low profile and camouflage yourself well. "They" are all watching you.
I was talking to a very good friend and prop trader (we're in chat during RTH everyday), who scalps MSFT etc with decent size. Most of the time, he will go for 1c gains or sometimes even less. He will get liqudity rebates etc, and if you do size, it all adds up. Now, I sim-traded some MSFT for fun and found it to be a potentially very very profitable market. I asked him if it's possible to scalp MSFT with 50K (shares). Well, he told me that it's pretty tough with 50K, they really see you coming, so you will have to split your orders etc. and perhaps get in over a couple of levels. He says anything over 10K can become problematic. You see, that's just the way it is with scalping.
Well, to sum it all up, I have come to a point where scalping can at times become a nuisance fill-wise, so I go for longer-term things. That has nothing to do with my "decreasing love for scalping". Scalping is the best style of all if you're really small. It's just the way it is that if you want to trade bigger, you need to give something up.
The trading style you employ should not so much be a choice of preference, but more a choice of the individual market and size you wish to trade.
Hi Sci,
You trade ER and ES. Why not NQ?
Quote from Jayford:
I trade ES too.
Its been my bread and butter for quite some time as far as small consistent gains are concerned.
I don't scalp em though. Used to. A bit too crazy for me now. I do 2 or 3 ES trades per day now (vs 50 in the past). I think scalping is very tough. Ya need a high % win ratio if you are taking lots of micro gains.
Jay
Hi again,
Why not NQ?
You might have answered this earlier in your journal, so excuse me if I am flogging a dead horse. How long a time frame do you usually hold your trades? From what I can tell, it looks like it varies from a few hours to about two days. The reason I ask is the one thing that really seems to kill the performance of my system is that have a tendency to get out too soon, thereby decreasing the profitability of my winners.
The other question I have concerns position sizing. Obviously the length of time one can stay in a trade is dependent on this (especially in as highly leveraged an instrument as Forex). While I am generally satisfied with my method of position sizing at the moment, I do feel it need to be tweaked.
Any answers/suggestions you can give will be greatly appreciated.
The other question I have concerns position sizing. Obviously the length of time one can stay in a trade is dependent on this (especially in as highly leveraged an instrument as Forex). While I am generally satisfied with my method of position sizing at the moment, I do feel it need to be tweaked.
Any answers/suggestions you can give will be greatly appreciated.
Quote from Baruch:
Hi again,
How can you trade from those places (resort hotels)?
No way. I always have a net connection where I live. In 1987 I travelled with a 1.2 meter dish for Comstock data. Much easier now.
I already have a broadband connection lined up for my rental in Cabarete. Many third world countries are better wired than the US, especially with wireless net. The US is too big, and has fractured technologies.
Back to forex, I would concentrate on your charts more than the news. News releases have a funny habit of sending markets opposite of what you think about half the time. The charts don't lie.
Also, no, I don't trade NQ. I don't like the way it moves, and ES has greater liquidity, although that's a moot point as they are both plenty large.
Jay
Quote from LouDogg:
You might have answered this earlier in your journal, so excuse me if I am flogging a dead horse. How long a time frame do you usually hold your trades? From what I can tell, it looks like it varies from a few hours to about two days. The reason I ask is the one thing that really seems to kill the performance of my system is that have a tendency to get out too soon, thereby decreasing the profitability of my winners.
The other question I have concerns position sizing. Obviously the length of time one can stay in a trade is dependent on this (especially in as highly leveraged an instrument as Forex). While I am generally satisfied with my method of position sizing at the moment, I do feel it need to be tweaked.
Any answers/suggestions you can give will be greatly appreciated.
Hi LouDogg,
It would be nice to hold positions a week or two or three - and take 1000 or more out of the market. It can be done. George Soros does that. Exit is a lot more important than entry.
But how can you hold a position over the weekend in times like this? How can you short the dollar before the weekend, when you don't know if Osama bin Laden gets caught or killed? (I suppose we will get a 200-300 pips gap if that happens). It's not easy.
My system does'nt have rules for exit - only to give the position a free ride, when I have my first 30 pips profit. I use a trailing stop, look at the chart and listen to the news. It's very difficult to know when to take the profit. We all know that we have to let our profits run - but we don't want to give a lot of pips back to the market. No, it's not easy.
Some systems go flat with a new cross, but I don't think this is a good idea. I have seen proof for that.
Maybe Jay or Scientist or others have som good ideas? (And better than an scaling out-strategy, which always cost you pips).
Position size? Don't overtrade, but I don't think your size has anything to do with your profit-taking. It's always difficult to let your profits run. You must have very good reasons for not taking your profit, if you have made a lot of pips.
Quote from Baruch:
Hi again,
Why 34ma?
Well I like to keep a smaller MA to assist with the 50ma, but, didnt want too small as I found too many false signals, so, basically its just a number I pulled out to be close to my 50ma. Nothing major about it really...I just like to use it as a slightly faster ma than the one i use to trade of as a heads up. If that makes sense..
Ive actually hated the past week or so being stuck in a range..kills my longer term system totally, even with the range going between 100-200pips or so...tend to turn the charts down then to smaller time frames for smaller moves but im not as comfortable there.
I trade a lot of different pairs tho, Aud/Cad, GBP/JPY, Eur/JPY, etc...so I find that helps sometimes when the USD is doing a sideways dance, I dont mind the wider spreads as Im looking for moves of couple hundred pips over longer terms.
Im developing something tho to take advantage of sideways action more and also shorter terms, but, my longer systems work while I play, so im only wanting something shorter term to use if I feel like chart watching all day.
Quote from Jayford:
No way. I always have a net connection where I live. In 1987 I travelled with a 1.2 meter dish for Comstock data. Much easier now.
I already have a broadband connection lined up for my rental in Cabarete. Many third world countries are better wired than the US, especially with wireless net. The US is too big, and has fractured technologies.
Back to forex, I would concentrate on your charts more than the news. News releases have a funny habit of sending markets opposite of what you think about half the time. The charts don't lie.
Also, no, I don't trade NQ. I don't like the way it moves, and ES has greater liquidity, although that's a moot point as they are both plenty large.
Jay
Hi Jay,
No, the charts don't lie - but they will make you crazy, if your are sitting the whole day just watching them. You need to know, what makes those charts, what's behind the moves - the news, most of time, I suppose.
I love to trade forex - because you get a lot of information, what's happening in the whole world. If you only look at the charts, you will die because your are so bored...Why not look BOTH at the charts and the news?
Yes, I agree that the news send the markets opposite of what you think half of the time. But If you want to stay with your position, I suppose you must know why you should do it.
PS. Why don't you like the moves of NQ?
Quote from izeickl:
Well I like to keep a smaller MA to assist with the 50ma, but, didnt want too small as I found too many false signals, so, basically its just a number I pulled out to be close to my 50ma. Nothing major about it really...I just like to use it as a slightly faster ma than the one i use to trade of as a heads up. If that makes sense..
Ive actually hated the past week or so being stuck in a range..kills my longer term system totally, even with the range going between 100-200pips or so...tend to turn the charts down then to smaller time frames for smaller moves but im not as comfortable there.
I trade a lot of different pairs tho, Aud/Cad, GBP/JPY, Eur/JPY, etc...so I find that helps sometimes when the USD is doing a sideways dance, I dont mind the wider spreads as Im looking for moves of couple hundred pips over longer terms.
Im developing something tho to take advantage of sideways action more and also shorter terms, but, my longer systems work while I play, so im only wanting something shorter term to use if I feel like chart watching all day.
Hi again,
OK, but please keep us informed.
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