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Hello Traders,
What is the point of 10pips as minimum scalp size for forex market?
As long as trader is ok with commissions include spread and of course good at reading price action, I think he can scalp 5min EURUSD almost every bar.
10pips as minimum seems too large compare to the size of commissions and also daily average range.
(My broker charge me $5 round turn per lot and around 0.1pips spread for EURUSD)
I did quick math and it shows me 2pips as minimum scalp size is reasonable as 1point for Emini.
(Even though if they change me 1pips spread, 5pips seems reasonable)
Now I'm really confused.
Thank you.
Average bar in forex is bigger than 10 pips. If, for instance, you buy for a scalp at the high of a bar your stop-loss is at the bottom of it, so probably more than 10 pips away. Because scalping (= probability around 60%), risk should equal reward so your minimum profit target should be at the same distance to make the trader's equation positive.
So if you want a positive trader's equation with a 2 pips profit target you need to have a 2 pips actual risk, which means your trade is triggered and the MKT breaks out without looking back, which is great but it doesn't happen many times a day. Even if it happens more times than usual, the other trades that happen to have an actual risk above 2 pips will shatter you.
Once said the above, just note that what I said is pure theory, so now just try and scalp for 2 pips and see if the theory gets validated in practice!
That’s a good point.
If I’m watching 60min EURUSD, yes average bar is bigger than 10pips and I never choice 2pips as minimum.
But 5min EURUSD specially these days such a tight range market (past 20days average daily bar size is 67.6 pips), If we apply the Al’s guideline which is 5-10% of day’s range as minimum, 3.4-6.8pips is the reasonable size. So, 10pips seems big also from volatile aspect.
Personally, I like the idea of 10pips for Forex Market. After I use this rule I became able to see support and resistance at 10pips from reasonable entry signal witch is important candidate of take or stop. Also one of my inadequates overtrading is over, I simply trade only when it’s high volatility.
Yes, anyway I try. Thank you!
But 5min EURUSD specially these days such a tight range market (past 20days average daily bar size is 67.6 pips), If we apply the Al’s guideline which is 5-10% of day’s range as minimum, 3.4-6.8pips is the reasonable size. So, 10pips seems big also from volatile aspect.
Yes, this is not a rule, just a guideline as you said. The important matter when deciding reward is the other two variables of the trader's equation. 10 pips and 4 points are widely used scalp profit targets so that is why it is good to take them into account. Yet if your signal bar is bigger you have to shot for more or your will lose money in the long run until you are very good and can shot for a reward smaller than the risk, which needs a probability above 80% to make it work.
You can’t change only reward besides changing risk or probability. I’ll keep it mind 🙂
