Super Scalper!

I've read about a very nice scalping strategy somewhere. It's been republished by someone trying to lure innocent traders to fall for his commercial world of missery. He probably copied this strategy from some book published by Mr Dean Saunders. The body of this method is pretty good though and since he doesn't quite understand this strategy himself I like to discuss this case with more honest people not pushing for subscribtions, seminars or other commercial purposes.

I know a lot of traders are scared to bring up their top strategies but I'm not. The more people are aiming for the same goals, the better the momentum for all!
Lets see if we can finetune this strategy together here; I did a lot of research already and I like you te be constructive with me!

Setup:
Take a 5min chart Candlestick, Stochastics(5,3) and Bollinger Bannds(20,2). Add EMA(10) and Pivot Points to your Setup. I studied a lot of currency pairs but USD/GBP and USD/EUR seem to be the best performers.

Strategy(Global):
If PriceCandle closes outside the Bolllingerband(BB) and the next Candle reverses you scalp the 3th Candle. Stochastics had to be in overbougth/sold situation for the Candle that closed outside the BB. Aim for the EMA(10) or set some fixed Profit Taker(s).

Playtime Strategy:
I play Futures from 0200-1100ET, the most liquide period of the day. If the BB is very small I Scalp for a small fixed amount or don't play at all. If the distance from BB and EMA is very small I consider the same story again.
If the first Candle closed way out of the BB and the next one clearly reversing, I jump on bord a bit earlier, Market in this case. If the Canldle that closed ouside the BB was a small one and the following clearly reversing and dropping below the BB I also enter a bit earlier; I like to see some distance to the EMA here. All other entries I try to make a small price improvement by Limit orders. If you are in for some time and EMA is catching up with your price: Exit(will save you a lot of losses!).
I like to watch a 2min setup with Stochastics as well for timing to enter the Market.

Money management:
This has always been my weak spot; I can puzzle for hours to define, re-define etc..
For two futures I take fixed profit on 5c on the first future. If it reaches I The next one I play to reach the EMA. You can also consider a fixed target of 10c because in most cases it will be around this amount. Fixed Stop Losses on 12c feels best to me but its just based on feelings; tried 15c as well.
Optional: Play a third future and look to reach the EMA(10) on a 15min or 30min chart. If there is a Pivot Point nearby in the direction you are playing: go for it!

Pitfalls:
Don't play on the release of the fixed big Macro news(exit trade); use a Forex Calender for this. If the impact from the news was significant you wait for a couple of bars to stabelize. Watch out for Pivot Points that can work against you if very close to enter point.

Tip:
If you see a breakout of the BB but Stochastics is not oversold at all: look for some nice Divergence play from Stochastics to be nice for your wallet(Divergence play from Stochastics has always been my main source of activity; 5min chart mainly)!

Last week I traded this way some 60 times; also on the USD/CHF. I won't trade the USD/CHF next week anymore. Lost: 6 Trades. Early exit: 7 Trades(-10c all together). I made a lot of money before on the simulator as well and feeling very confident to continue. Check the results for yourself; you will be amazed and see that I'm serious here!

Please contribute in a positive way and lets make this thread one of the greatest ever!

Mark "The Great"

I forgot:

Money management:
If price takes out my Profit Taker at 5 or 6c: I adjust my Stop to breakeven.

Integrate your knowledge, if any, on Candlestick as well.

So if there is a breakout below the Bollinger Band and the next candle shows no body at all you play the third candle because you see a Doji(See today: EUR/USD 5min 0640ET).

If the second bar reverses and the body is bigger than the first bar you see Engulfing: strong signal. Be carefull though: if this candle allready is very close to EMA(10) 5min chart you migth want to look to a higher timeframe to see if there is any room to scalp to the EMA on this chart(take 15 or 30min).

My trades for the day in detail(Multiple of 2 futures; Profit taker at 5c; 2nd future flexible; Stop 12c):
EUR/USD:
0330ET: Classical Pivot Bounce here as well; quick look at the 15min chart after my first prft taker: I saw it would probably go to 1.373-1.375, it just did and I took prft on the 2nd future.
0420ET: I scipped this one because we just broke below Pivot and there was little room towards this Pivot; situation unfavorable.
0530ET: Bit of the same regarding 0420u; Idicided to play this one to the Pivot for 5c but my order didn't get filled on 1.3555. You see enfulfing here as well; perhaps I should have jumped in here playing to break the Pivot in strength.
0635ET: I played the Doji; see previos comment. I jumped on board getting ugly price; 2nd future busted on the Stop.
0755ET: I scipped thid Doji because of the fresh breakout from Pivot.
0810ET: I really got away with this one scalping for 5c(the small price improvement I made here saved my ass!).
USD/GBP:
0315ET: I bought at 1.5945, making a bit of a beter price. I was lucky here as my prft taker just was taken out and on the 2nd future my Stop was taken out.
0525ET: I bougth 1.5924; got the first prft taker, adjusted stop and got busted on this one. Ugly story: bad execution as I should not have adjusted this stop seeing the developing Divergence on the 5min(2min as well). Its just that I get nervous when the initial move is against me..
0745ET: Didnt look very favorable according the strategy(very little space to the EMA, small Band as well). But.. I was in early here at 1.5932 because of the strong Divergence from Stochastics on the 2min chart!

Small profit today, yet no losses! I'm tired; call it a day. Motto: stay flexible and keep thinking!

I will give you some more of my trade log in the following days; feel free to ask questions!

On a day like today I'm really asking myself why I didnt just took all profit on 5c; I didnt make much on the second future. On the other hand: you are a bit of a bottom fisher playing like this and the rewards can be big if things start running in your favor on this second future. I made some very nice runs the past weeks, specialy after seeing divergence developing on the 5 and 15 min frames. Watch the bigger timeframes for a clear picture where things could go remember.
Protect your profit if your in for more but keep a little room for the price to think for a while. I dont like trailing stops but I would say you could use one on 10c or something.
In fact its a not a pure scalping play offcourse playing this second future like me. I often read that all scalping doesnt make up for a couple of good runners; its still a twist in me.
You could consider taken all fixed prfts on 5c or perhaps 5c and a short step to 7c-10c. Shorten your stop a bit to 8c-10c if you do. I wouldnt recommend to leave the the first profit onprotected by not raising the initial stop: protect the first money made. Feel sick of the profit you didnt make but be happy that you didnt get out with nothing!

I stopped trading 0900ET but saw a situation before 1100ET I like to mention:
USD/GBP:
0950ET: In Playtime Strategy in my first comment a metioned following: "If the first Candle closed way out of the BB and the next one clearly reversing, I jump on bord a bit earlier, Market in this case" Now 0950ET was just this situation: you could have jumped on board seeing the breakout Candle dissapear quickly, lets say sell half way down. It is dangerous play though because you just witnissed a breakout on heavy volume and I would mot recommend to play against this. On the other side: if you look to the 2min chart you see Divergence developing from Stochastics, I would have done the quick 5c scalp after the first red Candle on this 2min Timeframe. Try to combine this factors, its good decicion-making!

Forex calendars I'm using:

http://www.forexfactory.com/calendar.php

http://www.amplifytrading.com/site/page/market/Figure-Sheet-74

The first one is cool if you don't have a news service; it quickly updates after release. I'm also using DowJones news wires for realtime coverage(optional).
The latter I use to see if there are any European Auctions that migth influence trading significantly. The Spain Auction is an extra point of attention today; I will not trade EUR around this time(Spanish auction results are always come out between 0430 CET and 0445 CET, while Portuguese auction results come between 0530 ET and 0545 ET).

My trades for the day in detail:
EUR/USD:
0245ET: Because of Divergence from Stochastics 2min I was in early here; I didnt think the candle could turn green again. First Future 5c; second one busted on the stop(allready adjusted to breakeven offcourse!).
0340ET: I played the Doji; the small price improvement just made the scalp to 5c; second future busted on breakeven.
0400ET: I tried again to go long on engulfing 5min and Divergenge on the 2min frame. It was a false signal I realised later: In downtrends its often better to look at tops in stead of bottoms(Failing Divergence is often a strong case for the other direction: down in this case. It was indead followed by more Divergence on the next top to drop like a stone. I'm angry with myself not to have played this one, even Pivot point was nearby). Fortunately I got out in time loosing only 3c each future(EMA catching up with your price remember; also dangerous suction down from the Pivot below).
0415ET: I scipped this one because I was still in anger with myself. I could have been a scalp for 5c though.
USD/GBP:
0225ET: I tried to scalp but because of the smal price improvement I tried to make I didnt get a fill(I don't like to chase the price in most cases if there isnt much left to EMA; also mention small distance from BB to EMA).
0330ET: Scipped Doji because of the fresh breakout below Pivot.
0355ET: Seeing all kinds of Divergence from 2min and 5min chart I thought it would bounce back to the Pivot. I was lucky to just scalp the 5c and(as always lately) my second furure got stopped on breakeven.

Pffff what a struggle!!

Now I will tell you a little secret: I'm also trading the gifts from macro news. I quickly jumped on board the ugly GBP story, made a homerun and.. called it a day!!!

The Spanish Auction came out at 0440ET by the way. I'm not sure if it was the failing Pivot, the ugly Brittish story or some bad result from the Auction(did miss the story on CNBC at all, still digging deep on their Brittish missery) but ugly it was!

Situations after 0500ET:
EUR/USD:
0500ET: Nice reversal; don't wait for the new candle if you are sure time is to short to drop back. You could have made your way to the EMA on the 15min chart as well or to the Pivot(srong case here).
0615ET: Looked like a fall from Pivot but I usualy do't like to play with Pivot so close to entree point. Also watch the small space to the EMA on the 15min chart. Same strry for the small Doji: to close to Pivot.
0645ET: Classical drop to Pivot. Note the Divergence from Stochastics 5min as well.
0755ET: This Doji looked tempting yet outside the BB be carefull. Could have been a blow..
0805ET: Clear case. You should have entered this trade early as well because of the strong divergence from Stochastics on the 2min frame.
1000ET: Perhaps a bit close to Pivot for good comfort but of you had seen the Divergence from Stochastics 2min frame you should have jumped on board!
1040ET: If you would have done a small price improvement your stop would just have survived. If not: you should have jumped in 1055 on Divergence from Stochastics on the 5min chart, making a homerun to the Pivot.

USD/GBP:
A no go situation for long watching the small BB.
1000ET: Should have been a play: watch the Divergence from Stochastics at 1000ET!
1040ET-1055ET: Same sitation as for the EUR/USD; Divergence from Stochastics 5min chart was even stronger.

Good stuff. I like bolly bands too and have a method very similar to yours but I don't use the stochs, I use a macd histogram. Works great in range markets. For trending markets I usually will skip the 1st 2 signals as these tend to be false. The best part is the small risk. I have been toying with the idea of using the 2 signals THAT I WOULD HAVE NORMALLY SKIPPED and trade the opposite direction for a few pips, but I haven't tested this to any significant degree. Most traders tell you not to skip signals but I think I can great use of this strategy.

I generally trade eur/usd during the day and aud/usd during the Asian session.

Happy Trading!

Peter

I like to play trends as well. Stochastics can be great for this although many say its not an indicator for trending items.
If results from Divergence Stochastics very little to none: watch for a trend to continue. If strong Divergence is failing: a strong counter trend usually follows.
People usually get confused thinking signals are failing but you have to switch to look for the bottoms in stead for the tops in an uptrent to see if there is more to come. Once you see more divergence from here: strong trend!
Try some more bounces of the EMA in stead of towards the EMA for nice scalping if you're sure a trend appears. Rewards can be big!

The problem with me and trends is: Its often so hard for me to belief things can still go higher or deeper..

If you mean the first two signals outside the Bollinger Band(in a row?) one could perhaps place a stop in the middle of the previous candle and just scalp the next one. Depending on strength of the breakout and distance of the candle(s) before they reached the BB. Not quite sure what you mean!?

Here's an example of what I mean. Not the greatest example but it will do. We are in a down trend in this chart. Notice the 2 false buy signals that would have ended up in a loss. The 3rd signal gathers some steam and works out nicely. Previous to the downtrend we have consolidation. You can see several good signals there.

Peter

wackypete2 said:

Good stuff. I like bolly bands too and have a method very similar to yours but I don't use the stochs, I use a macd histogram. Works great in range markets. For trending markets I usually will skip the 1st 2 signals as these tend to be false. The best part is the small risk. I have been toying with the idea of using the 2 signals THAT I WOULD HAVE NORMALLY SKIPPED and trade the opposite direction for a few pips, but I haven't tested this to any significant degree. Most traders tell you not to skip signals but I think I can great use of this strategy.

I generally trade eur/usd during the day and aud/usd during the Asian session.

Happy Trading!

Peter

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What stops, profit takers or other instruments do you use in your money management?

Very curious; I'm always struggeling with this issues..

What it looks like the difference is between us is you use more discretion than I do in how you determine entry/exit. I use somewhat more strict rules with a bit less discretion. Like anything, however you do it takes patience and discipline.

Peter

marktalens said:

What stops, profit takers or other instruments do you use in your money management?

Very curious; I'm always struggeling with this issues..

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I like to use the middle boll band (20ma) as an initial target. If I can get 20 pips at that point then I exit the full position. If I can only get 10-12 pips then I exit 1/2 and place a stop to break even for the other 1/2. If it looks like I wouldn't be able to get about 8 pips at the time of entry then I don't take the entry and wait for the next one. In other words if entry point to the middle band would profit less than 8 pips then I don't enter. Also I usually exit at market if after 4 or 5 candles price hasn't moved much. At that point any momentum or bounce is likely to be gone or non existent.

Peter

ADDED: Stop loss is usually 10-12 pips

If you add EMA(10) or Ema(12) to your chart you will probably see that the price will just bounce down of this line making a strong case for the trend to continue. Not quite sure because its a very steep move down. Perhaps add a couple of EMA's to see witch fits the trend..

What strict rules do you use?

Messages just crossing..
Very intresting; will have a close look at it tommorow!

She is yelling again; I promised half an hour ago I would finish the job..
See you tomorrow!

wackypete dont fall for him mate this man is a spammer!

DashRiprock said:

wackypete dont fall for him mate this man is a spammer!

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No problem. I''m not looking to buy anything. Just sharing ideas!

Thanks

Peter

wackypete2 said:

No problem. I''m not looking to buy anything. Just sharing ideas!

Thanks

Peter

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mate dont even listen to him!

look at his posts in this thread everyone of them is about "oh a go long here but i also go short" or "yeah i but it when this happens but not if the fundamentals are bad" or "ye i usually make money long on these trade except when im wrong which is when i normally decide to go short on these trades and also make money"