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I am trading at FXCM as my broker and the product I use are called Contract for Differences CfD's. I can say that my ultimate goal would be to trade on the future market, but as of now, I still trade in CfD's, because smaller contractsizes can be traded.
I will answer your given questions to myself while also writing it down in this journal in your quote.
my friend, due to the nature of your responses I wonder if scalping is the right outlet for your trading. you might have a better time using your analysis/interest of cycles for longer term or swing trades.
scalping is the business of capturing fluctuations in prices. the answer to the first question might have gone along the lines of order types, liquidity and size that moves the market. how that relates to the second question about bollinger bands is basically nothing. i also dont think you can gain that kind of information with CFDs putting you at a bit of a disadvantage on intraday time frames.
considering that you are trading CFDs, i know you can reduce your size quite a bit to be able to support longer term trades. so i wonder, why choose to scalp?
What do you mean by risk? If you mean dollar amount, your risk is proportional to your account size not your time frame. Now while being in the market longer does require you to give your trades more "room", you compliment that by trading smaller size.
a couple things to note here you might want to think about. Volume moves the market. Period. And more specifically liquidity. Choosing to avoid volume isnt going to change that and you are putting yourself in a bad spot not trying to find a way to derive the information you need to be able to scalp effectively. Candlestick bar patterns have nothing to do with price fluctuations intraday, and then being that BBs are derived from your charts; BB have nothing to do with price fluctuations.
Going back to my first question I asked you about how price moves. If you are intent on scalping then I would hope that you would like to learn how that happens. Because the answers are not candlesticks and BBs (not that they cant be useful). Scalping is a method of trading that isnt just dictated by your chart time period.
Thanks again for the participation in my journal and try to help me along my way, I will note your arguments, and try to consider them. When I have my strategy explained in full, I can then maybe try to add more material to it.
'Interest' and the volume trading that interest directly results in the direction of prices.
Volume >> Direction
You seem to be content with only using the OHLC of a price bar to derive your trading ideas. Again perhaps I am assuming too much as you have still not written out your trading plan. Im sorry if I am hijacking your Journal I am just trying to help you think a bit more deeply about the subject of the market.
My worst trading periods when I started trading was when I was blindly scalping the YM/ES using MAs and BBs on tick charts, min charts, range charts, etc. If someone asked me then what was meant by "hitting the offer" and how that affected prices I'd have no idea how to answer.
For a better understanding of the market over a longer time period I put on a MA of 155 days and a MA of 200.
It is also handy for knowing whether or not you are entering a position close to such a line, because these lines often represent support and resistance as well, next to the standard pivot lines.
I also, for easy use, put on the %B which gives me a linear view on the BB's. I only select one, which is the one with a MA of 32 days and a deviation of 3, because this is the 'extreme' one.
When both BB's are drawn on the chart, we have a zone/empty space between them. This is what I call my entry zone.
Such a zone needs to be ideal for you to enter a trade. Ideal conditions are for example when the BB's are showing constricted behaviour. Often an opening or closing is in this zone. We then see constricted behaviour as if it wants to correct itself from such an extreme movement, not entirely though, just a bit. Because its direction was justified. And this 'bit' is what I call an opportunity.
But I also notice a problem here, we have a zone as an entry point, not a specific price level.
Although we might be able to use the bands of the 32 BB as our entry point. But often they don't come there. when the market is constricting/flat.
For statistics/calculation we have an entry zone, or could on a close of a candlestick in this zone have a specific price level.
We shouldn't forget when the market is operating in this zone, it means its deviating for a large percentage from its normal behaviour therefor conditions also will remain extreme!
I could use the BB bands of the 32/3 BB, as an entry point. But like I stated it often doesn't reach to such extreme. To create more opportunity I am satisfied to open a position in the zone. And might be able to open a second position if it truly touches the band.
When opening in a zone, we can also use the BB lines of the 32/3 one as our stop loss, or could simple lower it to a fixed amount beneath this line. Because in extreme situations we deal sometimes with spikes, that spike above/below the 32/3 BB's, before retracing all the way back to the 20/2 BB. We could use the 20/2 BB as a target or use a fixed number of points as our target. Or could grab a smaller time frame (smaller or equal to 5 minutes) and set our target on the mid-BB (its MA) of the 20/2 BB.
Right now, I am using a fixed amount, selling my entire position, because my contract size is still small. But when I am able to trade with larger sizes we could create a good sell method.
In MT4 you can let your Expert Advisor/Robot sell something at a minimum of 6 points. So obviously our first target would be those 6 points. The question is, how much of our position do we sell! When a portion is being sold, I also raise my stop loss to break even.
You are not hijacking anything, I thank you for your interest in my journal and... I have Canadians in high regard since I have family living in Canada!
For a better chance of being right we look at our RSI to see if its overbought or oversold. If the RSI is overbought or oversold we have more certainty that the market will try to correct itself in the opposite direction (reversal). This direction is also the direction we have opened a position for in our Bollinger Band zone. Which means the RSI in an overbought or oversold state is confirming our entry point in our Bollinger Band zone.
We also watch for support or resistance from the pivot line. And we look out for structures if it may reach a bottom or high.
I also try to watch out for gaps, but I don't always know where a gap is. Daily gaps are easy to see or notice so I take them in account as well. I understand we have different sort of gaps. I am often just looking for the 'opening' gap.
Try not to confuse the opening gap with what you see at your opening, although that could be classified as a gap as well, if the opening shows a gap. What I classify as a gap is: price level on the official close - price level on the official opening. In Central European Time (CET) this would be, we have our close on 17:30 and our opening on 09:00 for the DAX!
Tonight I will reread the feedback given and look what I can do to make my trading better.
I will try to go 'live' as quickly as possible as then analysis of a trade is possible and we can see what can be improved or what is actually good about this strategy.
Tomorrow I will show you how it looks like from a real taken trade assuming an opportunity appears.
I will also notice that... I want to make a new rule, which says don't trade the first hour of the opening on Mondays (09:00-10:00 CET) on the DAX. Often strange things occur and news of the weekend needs to be taken in as well.
I have also added a volume indicator RielA suggested. To be honest, I have had it on for a long time already, but often I didn't saw use in it. I will observe how volume behaves when I see an opportunity forming.
I also want to say that often I trade when the candles are being formed. I don't wait on a close/opening of a new candle, this might be something to adjust in the future, though.