Scalping FX with Cyrox Rainbow

[tayser]

Hi tayser, prawn et al.

just wondering if you could provide more of your reasoning behind the entries...

also, what times are the best for the other pairs, GBPUSD, AUDUSD, EUR, etc

thanks in advance

briefly:

entries: two kinds,

1. trend continuation, where price breaks previous support/resistance, or if it breaks a .10 level (.10/.20/.30/.40/.50/.60/.70/.80/.90).
2. contrarian trades, wait for a big movement to do its thing, teach yourself to pic where its top/bottom (usually on a S/R line), take the contrarian view.

by all means go through this thread, but look at the source too: www.cyrox.com/forum.

 

[prawn_86]

2. contrarian trades, wait for a big movement to do its thing, teach yourself to pic where its top/bottom (usually on a S/R line), take the contrarian view.

I've been having a play with this tonight. Just watching it mainly. Seems to me there are large spikes and then quick pull backs, which were ranging between 99.3 and 99.4.

Hard to make much more than 1 or 2 pips though once u take the spread into account

 

[BSD]

http://en.wikipedia.org/wiki/Fooled_by_Randomness

 

[prawn_86]

http://en.wikipedia.org/wiki/Fooled_by_Randomness

Care to elaborate BSD?

 

[BSD]

Just a reference to a book that covers perfectly the discussion here and the efficacy of similar strategies.

A wonderful book.

My blunt view - 10 pips?

Who cares?

Not a criticism, just my view on such strategy.

 

[prawn_86]

10 pips per day compounding can add up quite quickly.

The market needs all sort of traders, its how it works.

I chose this method cause i am a mid to long term share investor, so this gives me something short term to learn, and hopefully profit from.

 

[Trembling Hand]

10 pips per day compounding can add up quite quickly.

Yes but surely to get 10 pips per day after cost you would need to be taking 40 pips per day as a 'average' good day.

I haven't seen one trader who has a higher average day than his target.

The market needs all sort of traders, its how it works.

I agree there. Most people wouldn't believe how I trade.

 

[BSD]

As I said - no personal criticism. My view is simply that such skinny margins give the punter a win 9 times out of 10 but the losing event often wipes out all the gains from the 9 wins.

Sold puts, $1.10 favourites etc.

The pretty graphs act as a crutch.

I play cards in between my market activities. My last 12 months have been wonderful - perhaps my black swan is just around the corner?

But at least I know I am betting with the odds in my favour and there are only 52 cards. Nobody can calculate the 'real' odds in markets.

 

[tayser]

Yes but surely to get 10 pips per day after cost you would need to be taking 40 pips per day as a 'average' good day.

If you're a newbie at the method you would. Patience, waiting for a big move and correctly trading it can you provide you with your target in one trade.

edit: et voila, this unfolded as I was typing this post:

1 second chart for reference (loaded with historical data):

 

[Trembling Hand]

What about the size of the stop? Where is that and how loose do you need it considering the 2 pip spread?

 

[prawn_86]

What about the size of the stop? Where is that and how loose do you need it considering the 2 pip spread?

That was/still is one of my main concerns TH.

I am very very new to trading this system, but i think the premise behind it is that it is an intuitive system. So after 6 months or a years worth of screen time with trial accounts you will learn the patterns of your selected pair, learn to pick the high probability entries, and learn to exit when you feel a trade is going against you.

But yeh, at this stage im struggling with my stops on my losing trades...

However, its probably to be expected with only 3 days screen time

 

[Trembling Hand]

Every instrument is different and they all have their own behaviors that you can learn, I agree there. My point is about scalping, the mechanics of entry and exit are more import than any other type of trading. You moves to the spread are as thin as any other type of trading. So getting a signal and just entering is not going to give you the maximum edge. To scalp small moves you have to enter on the very small counter moves within a very small trend. So getting a signal and just entering is really putting you at the mercy of whips.

And scalping over the long run is pretty thin you have to trade often and with large size and with very good entries and small stops. If not over time you will be cut up.

Also the spread if you are paying 2-3 pips @ market that's 4 to 6 pips down on every trade, whats that over a year?? Massive


All I can say is keep very good records and work out you expectancy over the long run it will be a lot smaller than you think. Which means trading @ market with a large spread is costing you big time.

 

[prawn_86]

All I can say is keep very good records and work out you expectancy over the long run it will be a lot smaller than you think. Which means trading @ market with a large spread is costing you big time.

Any suggestions as to how the spread can be overcome?

 

[Trembling Hand]

Any suggestions as to how the spread can be overcome?

To scalp I think its absolutely critical to be using Futures where your spread is 1 pip and orders can be place @ limit and be taken out by other traders.

If you have a profit target placed @ limit order you will be taken out 3 to 4 pips move sooner than trading @ market with a MM.

Think about it if you want a 10 pip move theoretically you can, trading with Futures, only need a 8 pip move to get that if you trade on limit. With @ market and 3 pip spread you are going to need at least a 14 pip move to get 10 pips profit. Crazy!!

Not to mention adding 3 pips to your losers!!

 

[tayser]

You can trade with a limit order inside the spread on any ECN FX broker with others on the network or the market makers who are providing the liquidity (i.e the banks) as well, and you dont 'need' to trade with futures. You can do the same thing with AUD/USD, EUR/USD, USD/JPY, USD/CHF, USD/CAD and GBP/USD which sit on 1 pip spread throughout most of the day on EFX and I'm betting it'll be the same on an institutional/high-end platform like Currenex.

 

[Trembling Hand]

Yep thats sounds better than MM trading.

Whats the R/R on your individual trades?

 

[tayser]

I wouldn't even dream of scalping with a market maker - well I did, and learnt first hand that it's not worth the effort.

I've never really calculated risk return and I suppose you can't really do it in the sense that the stop is not pre-set before you enter the trade - it's a discretionary stop so the ratio would change dramatically when I'm in the trade.

In saying that, my targets in a slower moving market are 4-5 pips net (add one for AUD/JPY commission on EFX - probably half a pip on a Currenex broker when you reach that level), and 9-10 in a faster moving market.

My mental stop is 4-5 pips (add one for commission), so it's 1:1 in a slower moving market, or 1:1.5 in a faster moving market. What increases your chances of winning rather than losing is only entering high probability entries and not getting greedy!

 

[tayser]

A random bank ****ed up here, nevertheless, was enough to rattle me out of the trade. Entered on trend continuation trigger (broke previous resistance and the bid was good 4-5 pips above the .00 level).

Time Order ID Message Event TIF Orig Trader ID
17:06:48 0vw002s:02ur-00 Buy 850000 AUD/JPY @ Market on MBTX [expiring: 23/05/2008] (850000 traded at 99.07) Filled GTC DEMO****
17:20:23 0vw002s:039c-00 Sell 850000 AUD/JPY @ Market on MBTX [expiring: 23/05/2008] (850000 traded at 99.09) Filled GTC DEMO****

stayed in the trade based on the M1 AUDJPY chart with GMMA - trend heading upward to a Monthly resistance line at 99.14

 

[prawn_86]

Have you looked at this method with a longer timeframe Tayser?

Say a 1 min chart? Just out of interest

 

[tayser]

Nope, I only use longer timeframes for confirmations.

I love London open... all the Yen crosses plunging at once... I'll have a pip, you'll have one too