Your thoughts please

Hi everybody

Just opened an account with finspreads trading 10p spreads on the dax30.

With regards to risk management, i am placing stops at 10 pips and looking to exit when up 8 pips.

Do these look about right?

(i know this is entirely subjective) but would appreciate feedback nonetheless.

Matt

Matt

Smart move re the 10p a point. Don't increase it for at least 3 months, whatever happens. You're at a learning stage so I can guarantee you'll be making plenty of mistakes. Mistakes though are what you want because you learn so much more, and a mistake at 10p is never going to be a problem.

As for your strategy it doesn't look that good to me, basically risk 1 to make 1. So unless you're 75%+ accurate it's probably breakeven at best.

mattboffey said:

With regards to risk management, i am placing stops at 10 pips and looking to exit when up 8 pips.

Click to expand...

Is there something magical about these numbers? You have to adjust to the market conditions.

They look about right if they make money.

Hi Masquerade

There is nothing magical what so ever about the numbers. I have read various articles stating that your risk reward ratio should be 1.2, however when scalping i don't find this feasible. (or am i just showing ignorance?)

Your stop size should be placed at a point which demonstrates your basis for entering the trade is no longer valid. You should close your position for profit when it has got to a point you believe is realistic for the market conditions - take what the market can give you. If you always close at 8 pts profit you will be cutting off your nose. Risk:reward really isn't the be all and end all and your risk isn't 10 pts on that trade but there's a whole thread on this which was started recently.

In summation, using arbitrary numbers isn't the wisest method to trade.

mattboffey said:

Hi everybody

Just opened an account with finspreads trading 10p spreads on the dax30.

With regards to risk management, i am placing stops at 10 pips and looking to exit when up 8 pips.

Do these look about right?

(i know this is entirely subjective) but would appreciate feedback nonetheless.

Matt

Click to expand...

theres an art to scalping and no set rules for stops and limits. you cant just buy through every high and sell through every low to scalp.

mattboffey said:

Hi Masquerade

There is nothing magical what so ever about the numbers. I have read various articles stating that your risk reward ratio should be 1.2, however when scalping i don't find this feasible. (or am i just showing ignorance?)

Click to expand...

What do you consider to be "scalping"?

Scalping is a technique used in cowboy movies by the Indians

Scalping is generally the best trading strategy if you want to lose money slowly, unless you can -

a) have a chance of controlling the bid-offer spread (ie, being able to buy the bid and sell the offer), and

b) have ultra low commissions so it's possible to buy the bid and sell the offer and still make excellent money.

Without both of those, there's almost zero chance of making money overtime because the cost of doing business will get you.

My advice is simple - look at a daily chart, see those big moves of several hundred points (or even 50-100), those are the ones you want to try to get on, great money to be made and the cost of doing business is irrelevant.