Hi,
It seems a contradiction. To be risk averse and to scalp the 1 min and 5 min. But I am. I hate to lose money. I have been using a strategy that is working marvelously. I have benefited greatly from the struggles and achievements of the posters on this forum and felt I wanted to share what I have found useful. Although it is by far not a perfected system. The basic idea may be useful to some.
Purely mechanical systems have not worked out well for me. No matter how refined the indicators complete with adjustable parameters and bells and whistles alerts (which tend to give me a headache).
I watch the charts and the trading action very intently - trading the minute doesn't allow for long walks in the park between entries and exits.
I particularly look for reversal action. Breakouts are welcome and the strategy can be applied there also, but for reversals it is ideal.
MACD and OSMA, 2 sets at different settings, 21,100,9 and the default 12,26,9. Divergences and confirmations between the two help to identify the trend and spot the reversal.
Look for a cross of the signal line at a significant distance from the 0 line on both MACD's.
This is usually a reversal rather than a correction or consolidation. Usually but not always... But more often than not. Checking higher time frames like the 15m or 30m or 60m etc can help to clarify a reversal and the strength of the change of direction.
There are moving averages on my chart also, 200ema, 20 sma and 3,6,9 sma. Just eyeballing the actions of the ma's can give a nice picture of the general trend. A cross of the 200 ema is significant in confirming a reversal or at a very least a full retracement to 61.
For this strategy a broker who allows hedging is required. Since the US regulators are now quite paranoid and under strong criticism for "not regulating the markets properly" NFA has over compensated by banning hedging (totally unnecessary and for someone like me catastrophic). A simple notice attached to application forms stating that "Hedging may not work to the investors advantage, use with caution" would have been more than sufficient. Anyway I moved my account to a London based company.
The stategy: look for the cross on MACD both settings, try to confirm with higher time frames. Price action should be a good distance from the 200ema. For a short position (my favorite since tops tend to form more quickly than bottoms) place a sell order (use a limit if that would get a better entry).
Then place a buy limit instead of a stop just above the high that occurred in concurrence with the MACD crosses.
The idea is that if indeed this wasn't the actual turning point and there is still a little more upside to go before the price action turns down for real, the upside can be turned into a small profit using a hedge, instead of a loss using a stop. The important thing is to get out of the buy position right away if it does trigger. As soon as there is any sign of the buying slowing. Could be 5 pips, 10 pips, whatever. Don't want to get caught in the buy position when it does turn down. Very often this little last spurt of buying will take place, a new high is created and there is very obvious divergence in the MACD, especially the default setting. A new short position can be taken at this point with 2 buy limits just above the high that was just created. This can be repeated a few times. But eventually the turn down comes. Checking higher time frames for confirmation of a down turn before even entering this trade is important. After practicing a few times it gets easier to identify this set up.
Benefits are, losses are turned into gains. And several positions are profitable on one set up. Losses are minimized if the unforeseen twist of fate derails the whole thing. The losses are limited to simply the differences between the long and short positions and the cost of spreads.
The more the trade goes against the original short and runs wild high temporarily the more of a profit from the hedged long, and when it turns the shorts are all good. Even if it is a retracement and not a reversal and doesn't retrace all the way to original short position, it can still be profitable overall.
The extra added benefit and for me a very significant benefit is the noticeable lack of fear and stress by having the hedges in place. No run away losses. In fact those so called losses are actually now profits.
The best thing of course is to hit it on the head, get it perfect, and enter short at the very top. Happens every now and then. But when it doesn't, hedging is great.
The following charts show 1st the original set up and then how it played out with the brief spurt of additional buying just before the final turn down and how the hedged buy limit acted to turn a potential loss into a profit.
Attached Thumbnails http://static.forexfactory.com/forex...1&d=1246689312 http://static.forexfactory.com/forex...1&d=1246689312
__________________
That's the plan, but anything can happen and usually does..
http://www.forexfactory.com/images/misc/progress.gif
It seems a contradiction. To be risk averse and to scalp the 1 min and 5 min. But I am. I hate to lose money. I have been using a strategy that is working marvelously. I have benefited greatly from the struggles and achievements of the posters on this forum and felt I wanted to share what I have found useful. Although it is by far not a perfected system. The basic idea may be useful to some.
Purely mechanical systems have not worked out well for me. No matter how refined the indicators complete with adjustable parameters and bells and whistles alerts (which tend to give me a headache).
I watch the charts and the trading action very intently - trading the minute doesn't allow for long walks in the park between entries and exits.
I particularly look for reversal action. Breakouts are welcome and the strategy can be applied there also, but for reversals it is ideal.
MACD and OSMA, 2 sets at different settings, 21,100,9 and the default 12,26,9. Divergences and confirmations between the two help to identify the trend and spot the reversal.
Look for a cross of the signal line at a significant distance from the 0 line on both MACD's.
This is usually a reversal rather than a correction or consolidation. Usually but not always... But more often than not. Checking higher time frames like the 15m or 30m or 60m etc can help to clarify a reversal and the strength of the change of direction.
There are moving averages on my chart also, 200ema, 20 sma and 3,6,9 sma. Just eyeballing the actions of the ma's can give a nice picture of the general trend. A cross of the 200 ema is significant in confirming a reversal or at a very least a full retracement to 61.
For this strategy a broker who allows hedging is required. Since the US regulators are now quite paranoid and under strong criticism for "not regulating the markets properly" NFA has over compensated by banning hedging (totally unnecessary and for someone like me catastrophic). A simple notice attached to application forms stating that "Hedging may not work to the investors advantage, use with caution" would have been more than sufficient. Anyway I moved my account to a London based company.
The stategy: look for the cross on MACD both settings, try to confirm with higher time frames. Price action should be a good distance from the 200ema. For a short position (my favorite since tops tend to form more quickly than bottoms) place a sell order (use a limit if that would get a better entry).
Then place a buy limit instead of a stop just above the high that occurred in concurrence with the MACD crosses.
The idea is that if indeed this wasn't the actual turning point and there is still a little more upside to go before the price action turns down for real, the upside can be turned into a small profit using a hedge, instead of a loss using a stop. The important thing is to get out of the buy position right away if it does trigger. As soon as there is any sign of the buying slowing. Could be 5 pips, 10 pips, whatever. Don't want to get caught in the buy position when it does turn down. Very often this little last spurt of buying will take place, a new high is created and there is very obvious divergence in the MACD, especially the default setting. A new short position can be taken at this point with 2 buy limits just above the high that was just created. This can be repeated a few times. But eventually the turn down comes. Checking higher time frames for confirmation of a down turn before even entering this trade is important. After practicing a few times it gets easier to identify this set up.
Benefits are, losses are turned into gains. And several positions are profitable on one set up. Losses are minimized if the unforeseen twist of fate derails the whole thing. The losses are limited to simply the differences between the long and short positions and the cost of spreads.
The more the trade goes against the original short and runs wild high temporarily the more of a profit from the hedged long, and when it turns the shorts are all good. Even if it is a retracement and not a reversal and doesn't retrace all the way to original short position, it can still be profitable overall.
The extra added benefit and for me a very significant benefit is the noticeable lack of fear and stress by having the hedges in place. No run away losses. In fact those so called losses are actually now profits.
The best thing of course is to hit it on the head, get it perfect, and enter short at the very top. Happens every now and then. But when it doesn't, hedging is great.
The following charts show 1st the original set up and then how it played out with the brief spurt of additional buying just before the final turn down and how the hedged buy limit acted to turn a potential loss into a profit.
Attached Thumbnails http://static.forexfactory.com/forex...1&d=1246689312 http://static.forexfactory.com/forex...1&d=1246689312
__________________
That's the plan, but anything can happen and usually does..
http://www.forexfactory.com/images/misc/progress.gif