Hi F,
Is one of the constraints of this type of trading i.e. multiple trades, not the commissions, unless you have a large account to operate from, as round trips do add up, or am I missing something here...even more so when you are taking 70% off and leaving on 30% for a later exit.
Thanks
Pete
Hi Pete
OK - let me address each part of your questions
Firstly the additional cost of taking multiple trades - when I was training to become an accountant over 30 yrs ago - one of my mentors who was very business orientated said - don't just look at cutting costs all the while - as you may end up worse off and not realise even if you reduce the cost base or the overheads by say 30% - you might end up halving the turnover - and ending up worse off ;-)
So bearing this is mind - yes I would prefer to pay only say for example $1000 a month on all spread and commission cost than say $5000 - you are better off surely ??
But think about it - you are only interested in your net gains -so if you got away paying say only $1k to your brokers - and say making $9k net - are you better off than paying say $4k to your broker - but making $18 k net ?
Yes - making more trades costs you more - BUT you only take more trades if you have a high win ratio and a positive RR - so if you take say 80 trades in a week instead of just 10 trades - you will pay out more - but similar you should end up with a lot higher net gain
I could reduce my own brokers bill by half by cutting out on say 40 trades a week - but if out those 40 extra trades - 30 make a net positive profit after costs - I end up with more money
Thats the whole point of trading - we would all like to earn more net money after all our costs
I would agree scalping for 1 to 3 pips only is expensive - that's why I prefer trying to make 7 -25+ pip trades - higher RR's and more profit - I would prefer to make 50 or 100 pips a trade - but not if I need 30 -50 pip stops and it takes 4 -8 hrs to achieve my target - instead of only 15 -30 mins
I hope that as put that first question to bed and if I ever end up paying my broker say $20k a month - it means I will be earning an awful lot of money
Next question - the 70% and the 30% free trade concept
When you scalp you have targets - but sometimes 12 pip scalp - might retrace say 9 pips and then go up another 15 pips and then retrace say 6 pips etc etc and 2 hrs later its made 46 pips - all from an initial 5 pip stop
But during that journey - it could have easily stopped at say 21 pips and reversed 37 pips the other way
So the way around it is to take 70% of your stake off at say 5 - 10 or ideally 15+ pips - and then leave 30% on as a free trade with your stop already in profit - whether it be just 3 pips or 9 pips in profit
You then cannot lose what ever happens/ You can also add to it again as well - ok extra cost of a trade - but again irrelevant if it makes you more money
So you dont have to babysit or worry about the trade so much as its a winner what ever happens
Obviously you want to to go on and make treble the pips you made on the 70% - ie if you made 12 pips on 70% and the 30% then goes on to make in total 36 pips - you have made more money on 30% stake - than on the main scalp stake at 70% - and would you want to leave all your stake on and manage it for an hr or 2 and then find out you get worried when it pulls back 9 pips and you pull the whole trade for only say 3 pips - after being up over 15 pips ??
So the free trade - 25 -35 % concept of leaving that part of the stake on can be very efficient and make you a lot of pips
In my case in 2012 I was very fortunate to have a"free trade" stake make me over 1000 pips on one trade in approx 3 months - - during that time I reduced down to only 10% - and scalped against myself on higher stake sizes etc - but it was great to know - even if the trade came back against me 150 pips or so - it was still in profit
I generally find out of every 10 scalps - at least 2-3 should work with a free trade earning more than the initial scalp
I appreciate it might be difficult to get your head around some of the MM ways I work - as they are not the normal standard stuff you will read about - but I can assure they do work - but like everything in trading - not every time
Hope that helps Pete
Regards
F
