Scalping eur/usd – Short term euro dollar forex trading
The only way a small account can be a big customer in a short time, is using a substantial leverage effect.
Substantial leverage effect begins at 7x, between 1x and 3x are we talking about investing, between 3 and 6 we are talking about starting to speculate, between 7x and 20x we are in the dangerous zone, and over 20 we are dead.
The only way you can achieve a higher leverage without risking to blow up in 10 trades is by trading with a tight stop loss, because it is impractical to base a fixed fractional trading more than 7%, max 10% of your account.
If you play on 7.5% risk of your bankroll on each trade, you go down to half of your assets after nine consecutive losses, and for me this is the maximum of what a brave man is able to bear the throw in the towel.
The statistically minded of you will undoubtedly know that September 1 concecutive loss series is unlikely but not impossible to meet.
If you often trade at a high leverage, the first thing you need to make sure about is that you have chosen and your trading vehicle, ie the market.
The desired market must have the following characteristics: volatile, liquid, and have the highest ratio of the average daily number divided by the bid / ask spread.
In FX, this actually means only one thing: EURUSD beats them all by a large margin, the average daily range (past 50 days) is 108 pips, the Oanda spread is 1.5 pips, the ratio is 72.
This ensures that time / price opportunities, and gives you a chance to minimize the trade costs relative to the size of your average trade.
The type of profit you hope to find the most of the time in the 5% -10% of the average daily range, irrespective of the actual trading frequency. This means that you should shoot for a profit of 6-12 pips on EUR/USD daily average. Why?
Simple, because inefficiencies inevitably be larger than that discovered and exploited by the market very quickly, so it is completely hopeless to expect more. If you trade EURUSD 6 pips per day to the 20 times leverage, you have a 1000% return in one year.
If you feel 6 pips is not much, you might have a very inflated expectations. If you ask me whether I get more, I say, sometimes, sometimes not, and in mind, I have access to much better prices than those available on Oanda have.
When leveraged, you have an obsessive concern about the transaction, such as each pip in high frequency trading makes a dramatic difference after a large number of transactions.
This means that you be very careful about how you inputs and outputs (market, stop or limit orders) to define and be realistic about an average expected outcome.
Scalping eur/usd – Short term euro dollar forex trading – The only way a small account can be a big customer in a short time, is using a substantial leverage effect.