ForexSpirit

As the old saying goes, ‘Insanity is doing the same thing, over and over again, but expecting different results’ (cue hat tipping to Albert Einstein and Benjamin Franklin who are often credited with this quote).

I guess that brings me one step closer to crossing that line (if I haven’t already) as I’m back scalping. Long-time readers might remember my last foray into scalping territory which took place just over a year ago. I started out with a pretty traditional trading plan but soon mixed things up.

I find myself back here again for three reasons:

1. Disappointing November results.
2. I’ve had the chance recently to take a peek at some of the MAX Trading System. While it can be used on pretty much any time frame it seems to be predominantly used on 5 minute charts. It’s a bit overly technical for my tastes but it got me looking at shorter time frames for a while.
3. I was reinvigorated by the scalping during low volatile times done by PIP-SIPHON.

It’s pretty easy for me to identify one major reason why I switched away from the traditional scalping approach so quickly last year. And it wasn’t that I would find it better to just mould my prior trading approach to a shorter time frame. It was that I’m not an early riser. I’ve always had trouble getting up at the crack of dawn. There have been times when I’ve tried to make it a habit but I have yet to make it stick. I keep on reverting to my old ways of getting up much later.

This matters because early morning is the only time that I can dedicate exclusively to sitting in front of the charts and trading without the possibility of being distracted. That means if I want to sit down and dedicate an hour to focusing on scalping I have to do it bright and early.

My new routine means getting up at 5:30 EST. I want to be bright eyed and bushy tailed while I scalp EUR/USD between 6:00 and 7:00 EST.

I lasted about two weeks trying this in September 2008. It’s generally acknowledged that it takes 30 days to form the basis of a new habit. My goal this time is to at least reach the 30 day mark before reviewing and forming any conclusions. This could be tricky as December is not going to be conducive to an uninterrupted 30 day run. There are the Christmas and New Year holidays coming up and I’m taking a 10 day break to visit friends and family back home in Dublin. While in Dublin I will look to trade the same timeframe rather than get up early. I think there are going to be too many nights out to make that a realistic possibility. The crunch will occur when I get back. Will I be able to get back into the early morning routine?

I started getting up early and scalping last Thursday (December 3). That’s given me a few days to ease into things and to get reacquainted with looking at the very short time frames again.

To help me see if I’m making any progress I’m going to try and document some of my sessions. To start things off, here were my trades from this morning:

1. There was a consolidation zone between 1.4764 and 1.4772 for most of the prior hour, so this was a basic breakout of congestion trade. I probably got in just a tad too early here. I would have preferred an entry on the bounce back up to 1.4765 that occurred just after I entered. My target was the 1.4750 area but I bailed on a stall at 1.4757.
2. Periods of consolidation can be extremely common in the lower time frames. A ranging zone seemed to be forming between 1.4750 and 1.4756. This entry was a long on the congestion support line. There was no immediate follow through so I bailed.
3. This is a bad entry. I got in too late when the support level gave way. This is when all the weak money was deciding to get in. Too late.
4. I’m happier about this as an entry point. Price came back up to the lower end of the congestion zone which should now provide some minor resistance. The resistance didn’t hold and I got out ASAP.
5. This was a wishy-washy trade. My rationale at the time was that a low might have been formed at 1.4745 and price was going to rebound back up towards 1.48. There was nothing too wrong about the entry and price moved in my favour by at least 4 pips. What irks me is that I didn’t consider this to be a counter-trend trade like I should have. My primary bias was US dollar bull, thus I was more comfortable holding short trades for as long as possible, while I only wanted to be in longs for quick points. I didn’t take my four pips and instead let it turn into a break even trade. This also prevented me from being open to taking a short at the 1.4756 level, the resistance area for the range.
6. Flustered by my cock-up with trade 5 I got aggressive and jumped in short here when it was just hitting the support area of the zone. Should not have entered here.
7. Tried to play the support level here by going long. Not really a great entry. Much safer to play the range in the direction of the perceived trend. Thus I should only have been entered shorts at around the 1.4756 level.
8. Held this trade too long. When it didn’t break in my direction within a maximum of 5 minutes I should have closed it. Instead I got caught in a bout of increased volatility that occurred just as the 7:00 hour mark ticked over. This would have been from mechanical trading systems on the higher time frames (hourly and above) entering and exiting trades. I must remember to be out of the market when the hour mark rolls up.

An expert is a man who has made all the mistakes which can be made in a very narrow field.
- Niels Bohr

Let’s hope I don’t have too many more mistakes to make.