The losing doesn't last...but...neither does the winning, however, it's important when you're not doing so well to have the belief and the knowledge that things will turn themselves around. And that is what I had this week and that is exactly what happened.
It was a strange week to trade as the DAX made a new ATH (All Time High) and when it does this, in my limited experience it makes for some quite erratic mornings with candles whipsawing back and forth from Bullish to Bearish. This also seems to lead to a lot of range bound mornings too. In these conditions, as you may already know, my strategy tends to not perform too well and is vulnerable to this erratic volatility. With this in mind I decided to tweak it a little bit to better fit the movements of the market. Now this doesn't mean I've changed my entry criteria nor am I using smaller stops. Instead, I am scalping but not in the traditional sense.
I am scalping my stops. What do I mean by that exactly?
It's actually very simple and the logic (my logic) seems to me at least to be sound.
When I first started trading I was a nervous scalper. As soon as a trade was 4 or 5 points in profit I was desperate to close it, but this lead to a lot of missed opportunity and a lot of points left in the market. As time went by I changed my mindset and I changed from that scared little scalper to a trader who now, has an actual exit strategy, and who will not only sit through the discomfort of a trading going against him, and will accept and embrace that loss, but who will then FTS if it stops him out. That's a big old change. But when the market is erratic, FTS is not always the best move. In fact on my wall I have some posters I created, and one of the lines I read every morning before trading is -
Always remember to Flip the Switch but be aware of the market as it may not always be the right action. Sometimes, you may just need to close the trade and wait for better signal.
So this leaves me pretty much with the only option, and that is to scalp. But as previously mentioned this can, and does leave on occasion, a lot of points in the market. Now I know my job is to make points, and I do not have to make all the points, so I should be happy and grateful for any profit, which I am. But a good trader adapts and will look to maximise a situation, and for me, traditional scalping was not the answer. So instead of closing the trade when it is 7 or 8 points in profit, I do what I call 'scalp my stop'. Basically when a trade reaches those 7 or 8 points of profit I move my stop to breakeven. That's it. No magic move. No complicated strategy. Nada. I move my stop to breakeven. This means that yes, I get stopped out quite often when as previously mentioned, the market, and the individual candles are quite erratic, but it also means, that should the market take off, I am still in the trade. I haven't closed it prematurely for a handful of points, instead, I've given myself the best chance of making way more points, say on a spike, than had I simply scalped the trade in the traditional sense. It means on a particularly erratic morning I will also be taking quite a few more trades than usual, but given the nature of the market on a day such as that, this is to be expected.
So this is what I did this week. I scalped my stop on quite a few days and made quite a bit more than had I simply closed for 4 or 5 points like a normal scalp. This I believe, for me at least, is much more favourable than normal scalping, because my strategy hasn't changed. It still shares the exact same entry criteria as my core strategy and I have the exact same initial stop level when opening the trade. It's just the timing of moving that stop which has changed.
It's so simple it seems almost ridiculous, but as is said, it is often the simplest things in life which are the best.
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