# Trading Psychological Levels - 1 pip scalping



## korrupt_1 (26 August 2008)

Finally getting starting into Forex and it has opened up a whole new world to me... I can see potentials and with the ability to trade multiple pairs in real time with huge leverage, it's a receipe to fast track wealth or put me on the streets 

Anyway,.. been trading S/R with some success. Winning 7 in 10 trades with 2:1 RR, so it's smooth sailing so far...

However, I keep on going back to trying to scalp it for a few pips here and there. I have noticed that on many pairs - mainly concentrating on the A/U for now - that when it crosses a psyschological level like 0.8700, 0.8650, 0.8600, etc... it tends to over shoot it by atleast 1 or 2 pips...

I've backchecked this roughly (manually) for a few months and it looks like it's good. With SL at 20pips seems to be safe... (I know what you are thinking 1:20 RR is CRAZY!!!! )

So, my question... what's stoping me from doing a, say $1000 contract for 1 pip at these levels? Is there enough liquidity to carry this order through?

Does anyone else do this? I'm sure I'm not the first to notice this behaviour.

So far this morning, I've managed to steal 3 trades of 2 pips each as it crossed 0.8600 on the A/U pair... through IG Markets on $20 contracts...

If I want to do this with larger contracts, should I be using an ECN or MM broker?


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## caribean (26 August 2008)

*Re: Trading Pscyhological Levels*

Hi korrupt, i'm not a trading guru, and i'm usually very open minded about trading systems, or methods, but i think that's a recipie for disaster, most people starting in Forex think the same way....$1000.00 per pip x 2 or 3 pips a day,it can't be that difficult.......
but if it works for you then let me know and i'll use the same method...lol


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## korrupt_1 (26 August 2008)

*Re: Trading Pscyhological Levels*



> $1000.00 per pip x 2 or 3 pips a day,it can't be that difficult.......




haha.. not that crazy - just 1 pip for me 

But serriously, I totally agree with you on that one - doing $1000 contracts sounds like asking for big trouble...

I've been doing this for real some 50 odd trades in the last 2 weeks. Each time going for 2 pips risking anything from $5 to $20 contracts. Beginners luck? but 100% hit rate so far... there was one scare a few days ago when it bounced off the 50 level and went back the other way some 40 pips before crossing over it cleanly.

Whether it works or not reliably... i'm not sure... but backchecking it manually seems to say 1 pip is possible... (even taking the 2 pip spread into account)

I wonder if someone like Tayser or Prawn would be able to comment?


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## skyQuake (26 August 2008)

*Re: Trading Pscyhological Levels*

Hey Korrupt, I have noticed the same thing myself thought I have never thought of trading it. Good thinking.
From what i've seen is that once the pair approaches round figure levels, it will spike to hit the level and sometimes past it by a few pts. Less so for new highs for new lows though.
I say go for it. Big contract size shouldnt matter too much as fx is fairly liquid around those crucial levels. 
What would increase your success rate imo is to have a look at the open interest on Barriers Oppies on those levels.


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## korrupt_1 (26 August 2008)

*Re: Trading Pscyhological Levels*



skyQuake said:


> What would increase your success rate imo is to have a look at the open interest on Barriers Oppies on those levels.




What's a barriers Oppies?




> I say go for it.




A pip is a pip... so if a trade was successful, then all is good... (execpt for the stress when the position was in -ve) LOL


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## caribean (26 August 2008)

*Re: Trading Psychological Levels*

All i can sincerely say is, good luck


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## MRC & Co (26 August 2008)

*Re: Trading Psychological Levels*

I would learn to read the tape Korrupt.  

Look what is happening when these round figures are being approached and the reaction to these levels.  They are basically just another point of support and resistance and I use them myself on the CL (full sized crude contract), sometimes you will see resistance/support in the DOM come in at these levels and actually hit the market, protecting them.  Other times, you will see none and it will shoot straight through them.  

With a 1:20 R:R, you are suicidal IMO.  You are not going to get above a 95% hit rate with these type of plays.

Just my opinion.  Good luck with it, but really try and learn to read the tape.  Takes a long time, but is your best chance IMO.


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## prawn_86 (26 August 2008)

*Re: Trading Psychological Levels*

korrupt, i am far from an expert at any form of short term scalping, but if you have recognised an anomoly then well done.

My advice (for what is worth (0)) is make sure you spend time demoing or trading with small amounts, so if you are wrong it doesnt send you to the wall. Im talking over 100 trades here to get some sort of statistical significance happening.

I know when scalping the Cyrox method that the barriers you mentioned do act as a sort of 'magnet' and i know there is usually a 'zone' around the big levels like .00 and .50 so i guess it could work.

When it comes to RR and postion sizing and the like im out of my league. Listen to what others say re RR etc and stick to the 2% rule, especially at first.

Hope that helps. My opinions only etc etc


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## prawn_86 (26 August 2008)

*Re: Trading Pscyhological Levels*



korrupt_1 said:


> there was one scare a few days ago when it bounced off the 50 level and went back the other way some 40 pips before crossing over it cleanly.




And yeh, i would tighten up that stop by a lot! if you lost 40 pips on one trade, thats going to take 40 positive trades to get it back.

Perhaps look at a 5 pip stop, but again im not an expert on position sizing or anything like that. In fact im not an expert at anything... yet


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## MRC & Co (26 August 2008)

*Re: Trading Psychological Levels*



MRC & Co said:


> sometimes you will see resistance/support in the DOM come in at these levels and actually hit the market, protecting them.  Other times, you will see none and it will shoot straight through them.




Of course, others you will see that large volume absorbed and price will keep pushing through.  Thought I would get that in before someone tried to correct me.


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## Trembling Hand (26 August 2008)

*Re: Trading Psychological Levels*

korrupt hate to throw you but what you are seeing may just be random.

Let me explain. You are trading IG markets which is not a real market but a synthetic one. ie they don't send your trade to the market but take the other side of your trade. You probably know this already.

What you probably don't know is how they price your FX trade. What they do is link the price to the corresponding Globex Futures contract. 

But, Here is your problem, they don't match the actual market price. They set the price some arbitrary amount away from the "real" market. Like 17 pips or what ever they feel like. The round number you see your pattern at has nothing to do with the real world.

Just another trick the bucket shops play. At the moment IG AUD/USD is going tic for tic to the front month globex Fut but 21 ticks higher!!


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## caribean (26 August 2008)

*Re: Trading Psychological Levels*



Trembling Hand said:


> korrupt hate to throw you but what you are seeing may just be random.
> 
> Let me explain. You are trading IG markets which is not a real market but a synthetic one. ie they don't send your trade to the market but take the other side of your trade. You probably know this already.
> 
> ...



It's normal for the futures to be diferent to spot, also, most forex MM's will be basing their price on the interbank spot prices, not currency futures.
Correct me if i'm wrong, TH.


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## caribean (26 August 2008)

*Re: Trading Psychological Levels*

..i should point out,without complicating things, that futures or "forward" contracts include the cost of finance over the time period of the contract.


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## Trembling Hand (26 August 2008)

*Re: Trading Psychological Levels*

Nope. Futures Tick for Tick. 

If you ever have the pleasure of seeing a fat finger order go through the Futs you will see the Bucket shops match it.


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## caribean (26 August 2008)

*Re: Trading Psychological Levels*

I'm not disputing what you're saying, you may well be right...nor am i agreeing with you, i watch futures and spot minimum 4 days a week, 5-6 hours a night, and i never see that much difference in the way they move, slight overshoot some times, not much more.....


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## Trembling Hand (26 August 2008)

*Re: Trading Psychological Levels*



caribean said:


> I'm not disputing what you're saying, you may well be right...nor am i agreeing with you, i watch futures and spot minimum 4 days a week, 5-6 hours a night, and i never see that much difference in the way they move, slight overshoot some times, not much more.....




Yep I agree. Just warning about the actual price levels a bucket shop quote.


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## tayser (26 August 2008)

*Re: Trading Psychological Levels*

ODL (MT4), Oanda, MBT and ADM Derivatives (Currenex Lite) are all within one or two pips of each other - bucket shops or ECNs, they're all following the interbank rates.


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## korrupt_1 (26 August 2008)

*Re: Trading Psychological Levels*



Trembling Hand said:


> korrupt hate to throw you but what you are seeing may just be random.
> 
> Let me explain. You are trading IG markets which is not a real market but a synthetic one. ie they don't send your trade to the market but take the other side of your trade. You probably know this already.
> 
> ...





Firstly... I hear you TH, about how CFD providers requote and do not match the ture underlying price levels - but if it moves tick for tick, and as long as they don't play silly games, does it really matter?

Secondly,.. the effects I am noticing around rounding levels maybe random as you suggest... but if it's repeatable with high level of success... then is it really random? Perhaps a coincident?

I've quickly checked the E/U pair for the past few days of data on the hourly chart and it also exhibits something similar to what I've been seeing on the A/U pair... (attached chart)... at every stage where it crossed a rounding level the quote has traced back over that level...

If someone has access to historical data and can write a quick backtest to see if it's possible to scalp just 1 pip at rounding levels... it would prove something useful to look out for...

As a starting point.. i'm looking at:

Go short if coming from above a rounding level.
Go long if coming from below a rounding level.
Only re-enter if quote has moved >20 pips away after crossing the rounding level (ie don't want to re-enter if it's only just crossed the level and has doubled back)
Only enter if its NOT a new low or a new high.
Target 1 pip (but need to factor in the spread - 2-4pips depending on the pair traded)
SL... let's say 50 pips for now...


Bugger me, for now I'm only messing around with money I can afford to loose, but golly it looks extremely tempting to up my ante on these trades as it's been 100% successful so far... maybe a $200 contract for 1 pip...  just don't tell me what my potential loss is if I get stopped out... I will be in denial... hahaha... :bonk:


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## Trembling Hand (26 August 2008)

*Re: Trading Psychological Levels*

Well if you can see the pattern trade it. Simple.  No argument from me.

Only thing is you simply cannot trade for a 1 pip target. PERIOD.

Thats bigger than the spread! When scalping, like all trading, you have to have your avg winner larger than your avg loser. Have to!

How is that going to work. Banging out 8 winners at 1 or 2 pips then you enter the trade that goes negative on you straight away. You down 12 pips before you can even think about it.


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## prawn_86 (27 August 2008)

*Re: Trading Psychological Levels*

What TH said.

Why does your SL need to be so big? Plus you will need to try and let a few positive trades run here and there.


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## skyQuake (27 August 2008)

*Re: Trading Psychological Levels*

Do a bit more backtesting, and some forward testing. Trying to make 1 pt with a 20pt stop would have high %success just by virtue of markets chopping around. You just gotta figure out if its worth it. Good luck and remember to share your millions


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## korrupt_1 (27 August 2008)

*Re: Trading Psychological Levels*



skyQuake said:


> Do a bit more backtesting, and some forward testing. Trying to make 1 pt with a 20pt stop would have high %success just by virtue of markets chopping around. You just gotta figure out if its worth it. Good luck and remember to share your millions





LOL.. you wanna share my losses too? 




prawn_86 said:


> What TH said.
> 
> Why does your SL need to be so big? Plus you will need to try and let a few positive trades run here and there.




I'm sure the SL doesn't needs to be so big... but it will allow it to move around before it yields 1 pip. I've been using 20pip SL recently and have not had a stoppage . Although I do see some earlier examples of where I would have been stopped out. I think these were crossings that happened during news annoucements.

I agree that some trades will need to be left run, - probably when I'm monitoring it, but otherwise, 80% of the time, the trades are automated by orders with predefined targers and stops.

Anyway, I've decided  - as a hobby in between my real trading - to document all my trades details and put it up for public scrutiny. If I blow up my a/c, well so be it... it's only money I'm willing to loose (actually... call it an education fee)

Will update later last night's work.


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## Trembling Hand (27 August 2008)

*Re: Trading Psychological Levels*

WHY??

Why bother with something that needs a 20 to 1 win/loss ratio just to break even?? thats 95 winners to 5 losers just to make nothing!

Come on! that's a waste of time.


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## prawn_86 (27 August 2008)

*Re: Trading Psychological Levels*

Agree with TH once again.

You really dont have the 'odds' going for you with such a big stop. Dont trade around news time, and then put your stop to like 5 pips instead of 20.

Im still not sure i grasp what exactly it is your trying to do so i'll wait till i see some trades to comment further.

Also (mod hat on), do you want this thread to be re-named if you are going to post your trades in here?


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## korrupt_1 (27 August 2008)

*Re: Trading Psychological Levels*

Oh man... you guys are shooting me down...

I know you pro-traders are adament on capital management with good risk/reward setups - I am too, really!... but if there's an easy 1 pip scalp, why not take it?

The anomaly of the FX shooting pass the rounding/psyschological level for 1 pip can be easily backtested. I've been doing that visually on the charts, but it's hard to guage maxium drawdowns and time in market. A good backtesting script will be able to tell me immediately these things I need to know...

For now, I will continue to experiement and see if this really has potential... you can call this the "crappy, high risk, low yielding but successful 1pip scalping" strategy


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## Kauri (27 August 2008)

*Re: Trading Psychological Levels*



korrupt_1 said:


> Oh man... you guys are shooting me down...
> 
> I know you pro-traders are adament on capital management with good risk/reward setups - I am too, really!... but if there's an easy 1 pip scalp, why not take it?
> 
> ...




 What spread does your broker run on the pair/pears you are looking at??

Cheers
..........Kauri


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## nomore4s (27 August 2008)

*Re: Trading Psychological Levels*

With a 20 to 1 ratio it's only a matter of time before you blow up.

If you took even 2 losses in a row you would need 40 wins in a row to break even.

Even with a SL at 5 pips you are still asking for trouble if you are trying to get only 1 pip, any run of losses will hurt.


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## prawn_86 (27 August 2008)

I have modified the thread title for you korrupt.

I will be very interested to see some charts of your trades.

The only thing that I am worried about is the size of your stop loss, as TH said, if you get you SL hit once then you need 20 positive trades to make back that 1 loss. So as you can see the losses potentially could compound very quickly.

Watching with interest though 

EDIT - nomore4s beat me to it...


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## korrupt_1 (27 August 2008)

Ok... just really quickly... don't have much time atm...

Here's a chart of the last 3 hours on the A/U.

The broker I am using has 2pips spread... so from entry to exit, one would need 3 pips in total.

These are not trades, but theorectical. Total 14 trades. 8 Longs (red), 6 Shorts (Blue). The black line is the $0.8600. The two horizontal red and blue lines are the entry and exit levels.

The 8th Long trade would have been stopped out if using anything less than 10 pips.

Looking at the chart, I think an SL of 7 pips would be ok... but that really means only 5 pips due to the spread...


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## Timmy (27 August 2008)

*Re: Trading Psychological Levels*



korrupt_1 said:


> ... but if there's an easy 1 pip scalp, why not take it?




Sitting through a 19 pip 'pullback' before it recovers 20 pips for your 1 pip profit is not an 'easy scalp'.  Maybe you will have to blow some money before this makes sense to you.


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## caribean (27 August 2008)

Korrupt, most of the experienced traders have told you it will not work, though i'm sure you'll try it none the less, and that's fine, you've got to satisfy your self, just don't commit real money untill you're sure it works, when you find out it doesn't, don't get disheartened, there are many ways, you'll find one that suits you, but it's hard work, it doesn't come easy.
Those support/resistance areas occur everywhere, you don't have to use fibs, pivots or anything else of the type...simply observe where price has reacted previously, draw a horizontal line there, observe how price reacts on those levels, what type of candlesticks do you get prior to price momentum kicking in, then move on to trendlines, try to "triangulate" at least three reasons for taking a trade...and at least one reason for exiting it!!!
If you like indicators add one, and watch how it behaves when near those levels..... the start of building a method.....
All of the above is just my humble opinion, hope it helps you.


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## korrupt_1 (27 August 2008)

Trade Summary for 26th August

10 trades
Maximum Potential loss... < 10pips on Entry 1


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## korrupt_1 (27 August 2008)

Trade Summary for EUR/USD 26th August

10 trades
Maximum potential loss of 20pips on trade #7


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## prawn_86 (27 August 2008)

korrupt_1 said:


> Trade Summary for EUR/USD 26th August
> 
> 10 trades
> Maximum potential loss of 20pips on trade #7




So you would be down by a lot if you had that 20pip stop. if you tightened it to about 3 or so then you could have something by the looks...


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## korrupt_1 (28 August 2008)

27th August AUD/USD

5 Trades
Maximum potential loss 10pips on trade #5


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## korrupt_1 (28 August 2008)

Trade summary for EUR/USD on 27th August

10 Trades
Maximum potential loss 16pips on trade #8. It could have crossed cleanly or oscillated around the 14700 level before crossing it during that 5 minute.


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## korrupt_1 (28 August 2008)

Just to clarify the above EUR/USD trades, I said trade #8 had a potential loss of 16 pips... i just got my hands on the 1 minute charts and it showed that it crossed cleanly in that minute. Likewise for trade #7.

This makes the maximum potential loss for the above EUR/USD on trade #5 at 11pips.


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## korrupt_1 (29 August 2008)

Trade summary for 28th August on AUD/USD

5 Trades
Maximum potential loss on trade #2 of 9pips


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## korrupt_1 (29 August 2008)

Trade summary for EUR/USD on 28th August

8 Trades
Maximum potential loss of 29 pips on trade #3. Time in that trade would have been >1hr


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## Frank D (29 August 2008)

Oh my god....


1 pip scaple...... you guys need to be slapped around with a big wet fish.

You have no friggin idea.


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## nomore4s (29 August 2008)

Frank D said:


> Oh my god....
> 
> 
> 1 pip scaple...... you guys need to be slapped around with a big wet fish.
> ...




lol, I think a few of us have been trying to tell korrupt that but...........


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## korrupt_1 (29 August 2008)

All I'm trying to say here is that if there's this (random) thing where the *FX spikes pass rounding levels*... then there's potential to make a win. Why not take advantage of that?

So far, documented 3 days across two major FX pairs.
48 trades and providing your stops are wide enough... that's 48 wins/pips, 0 losses.

There's nothing wrong with getting 1 pip... some traders are making a living from a few pips per day - and are successful at it... it can be done... why can't it be done on a rounding level - why does it has to be at S/R, pivots, fibonacci lines, trading with the trends, mma (rainbow), etc? 

To the critics,... you are just jealous that after all those times spent on studying charts, reading news, doing technical and fundamental analysis, waiting for the perfect setup that will give attractive risk/reward trades... that this strategy is so simple...  ok, that's me being sarcastic... but honestly I really do appreciate the comments 

We're all here to learn and test out ideas and systems... by the sounds of it, you guys think I am crazy and wasting my time... perhaps... but as caribean said... i'm going to try anyway... 

The only way to do this is to keep on trading for a few more hundred trades and see where this leads.

fwiw, i've done +100 real trades in the last 3 weeks and have had 100% success - still anticipating the day that I will blow up the a/c... but for the record, I have made around 200% return already.


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## prawn_86 (29 August 2008)

korrupt_1 said:


> fwiw, i've done +100 real trades in the last 3 weeks and have had 100% success - still anticipating the day that I will blow up the a/c... but for the record, I have made around 200% return already.




Good work 

Why not take your initial capital out of the acc now and then you are 'free carried' as such for if/when you do blow it up.


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## caribean (29 August 2008)

Fair enough brother, good luck with it, just remember most people have said what they said, because they were concerned about you, no other reason.


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## korrupt_1 (29 August 2008)

Good idea Prawn... but i'm commited to this... going go gungho and aim to achieve 1000 trades and risk my initial capital until i take profits.

Just amusing myself here... if one was to compound the returns...

Starting capital: $1000
Risk: 100%
Win: 0.1%
Average number of trade: 10 per day (or 2600 per year)

Potential return = $1000 (1 + 0.001)^2600 = $13,446

Assuming that rounding levels will never be the peak/bottom of the trading range and that 1000 pip will allow enough 'wiggle' room.


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## prawn_86 (29 August 2008)

Do what you want, but if you think about it, taking your initial outlay out now, will only set you back a week or two time wise, but you will have effectively spent nothing if you do lose it all.


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## tayser (30 August 2008)

you'll need more than 1 pip for commission.  I wouldnt want to hold a 23 pip draw down on a market "stop hunters R us" maker.


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## korrupt_1 (30 August 2008)

tayser said:


> you'll need more than 1 pip for commission.  I wouldnt want to hold a 23 pip draw down on a market "stop hunters R us" maker.




Aye... 2 pip spread means... need to recover 3 pips to win 1 pip.
So far, this has not been a problem.


Would not want to physically set a stop loss in - as MM know this level and will take it out... just mentally note it - or put something like 100pips in as a disaster stop only - much like you have mentioned on the Cryox Rainbow Scalp thread.


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## tayser (30 August 2008)

I dont even bother with disaster recovery stops anymore, too cumbersome when you need to enter/exit with lightning speed, when you're truly scalping, you're only in the market for seconds.


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## prawn_86 (31 August 2008)

tayser said:


> I dont even bother with disaster recovery stops anymore, too cumbersome when you need to enter/exit with lightning speed, when you're truly scalping, you're only in the market for seconds.




What happens if you have a power outage or something though? I was stuffing round the other day and the power cut out for about 10 min and if a trade was open....


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## Trembling Hand (2 September 2008)

Just posted this in the AUD thread but thought its very appropriate for this one. So here it is from Nick Radge,




> If you are like most people and believe that most important aspect of successful trading is being correct, unfortunately, it's your own ego you're caressing. You can be be a highly profitable trader and lose more often than not - indeed, some of the world's top traders lose more often than not.




Where does that sit with this method


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## BentRod (2 September 2008)

> What happens if you have a power outage or something though?




That's when the praying starts


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## korrupt_1 (4 September 2008)

Guys just to finish this thread off....

Over the last week, I've completed some 70+ trades. All successful.

Since I started this thread.. I'm allowed to say "*This strategy Sux*"...

Why...

1) Risking too much for too little gain.. although the win probability is high (99.99%)... its not worth the stress to see -$2000 before cashing in on +$100

2) Very labour intensive... crossings can happen anywhere/anytime, so you'll need to reset orders if they get executed. This becomes very hard when trading multiple pairs. If you have a trading bot script, you could do it.

3) There are easier ways of scalping 1 pip.

Im sure there's a way to take advantage of overshooting rounding levels, but I just can't seem to find a high win/loss ratio wtih good risk/rewards. I've even tried appling a martingale system to it, but you'll be "doubling up" exponentially... to make back the loss on a tight stop loss.

FWIW... I've stopped trading this method, although I made quite a bit over the last few days, it's distracting me from my usual routine.


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## prawn_86 (4 September 2008)

Good to see you trying things though korrupt.

All the best with your next venture


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## korrupt_1 (4 September 2008)

prawn_86 said:


> Good to see you trying things though korrupt.
> 
> All the best with your next venture




Thanks Prawn...

Check out my next venture here: https://www.aussiestockforums.com/forums/showthread.php?t=12264


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