A mini ES scalper's journal

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ycxc16588

I am creating this journal to record my thoughts regarding my daily trading performance and observations from time to time.


I have been paper trading since middle Oct this year through my ThinkorSwim account. Until recently, I realized some problem with TOS's paper trading algorithm, which could potentially impact real trading experience. It is relatively easy to do scalping with TOS's paper trading algorithm since the limit buy/sell order is guaranteed to be filled at bid/ask as soon as last trade occured at these limit order price level. However, this might not reflect the real trading situation. I've switched to another paper trading software, in which buy/sell limit orders are only filled at ask/bid price. This has definitely made scalping a lot more challenging. For example, in order to scalpe one ticker, the price has to move 2 tickers above whatever your fill price is. Although my basic strategies are not about scalping for the spread, I do have to prepare to give up 2 tickers for every round trip trade I participate.

Below are some my trading rules and guidelines.

I day trade Emini exclusively. I do not trade the first 1.5 to 2 hours due to some reasons. I live in pacific time zone and have to attend my day job before 8:30am. Another reason I am not trading the first hour from open is due to the large volatitity, which I am not confortable to handle at my current trading stage.

I close all my trades 10-15 minutes prior to closing bell at 4 pm eastern time.

My trading strategies are all based on price/volume action. I do not use any other indicator except FIB retracement level drawing tool.

Most of my winning trades are in the range of 0.5 to 1.5 points. My stoploss is rarely more than 1.5 points from my entry price. I use stoploss for every trade I enter. However, I don't necessarily wait for trade to be stopout at stoploss. This is another reason why I prefer slow and low volatity condition.

I try to trade only one contract, but occasionally I break this rule by trading 2 contracts when I see high probability setups. Overall, I trade single contract for more than 90% of all my trades.

I would stop trading any moment if my drawdown is reaching $200 during the day. I will take a break and review my trades during that day before I continue to trade again.

I try my best to come out positive everyday after commissions, but it is inevitable I sometimes have negative day. I am ok with it if 1. the loss is less tha average daily gain, 2. I didn't violate my trading rules.



Today is a negative day for me. My maximum daily drawdown went up to 175 at one time. I did come out with more winners than loser for the last 1.5 trading hour and managed to end the day with 75 loss.
 
12-11-2009
Here is the brief summary of today's trades.
Total trades: 14
winner: 8
loser: 6
winning trade range: 0.25-1.25 pts
losing trade range: 0.25-1.0 pt
net P/L: 1.75 pts.

I forgot to cancel one stop order after I've exited a trade. It has cost me 1pt for fixing the msitake.

There was a selling climax at 10:20 (central time), followed with a brief shallow retrace, which probably is mainly due to short covering. Expecting another test at swing low, I entered short after short covering faded. I covered at 10:40, and try to go long since selling volume is exhausted as compared to 10:20. My limit order was not filled. I waited for the brief pull back and entered long and exited when approaching double bottom neckline resistance level.

There is another volume spike at 1:18 after price breakout 1106-1106.25 resistance. I entered short at 1106.75 and covered at 1105.5 (1105.15 was a38% FIB retrace at the time. price broke 1106 .25 resistance prior to breakout).

At 2:40, price made move to break 1107.5, which it failed to break at 1:10. However, the vol at 2:30 were relatively low at this time frame. I entered short 1107.5 and covered at 1106.5 (I choose 1106.5 since it was the supply line established from 1 to 2 pm.). 1105 was a decent support and I went long at 1105.5 and exited at 1106 right before clsing bell.

Most my losing trades occured when price was rangebound between 1105 to 1106. I tried to enter trade before actualy breakout. I was not certain about the direction of breakout. I am still not very used to breakout momentum play with stop orders. However in retrospec, all later three breakouts were to the upside. Price broke 50% FIB retrace and went to test 61.8, then 78.6%, then eventually intraday high shortly after open. Those rangebounds were mainly consolidation biased to upside due to prvious price trend. When I entered trade to expect a breakout, I was actually a little biased to downside move since I thought EURO/USD would put more selling pressure on equity market. Apparently I misjudged the situation.
 
Quote from ycxc16588:

I day trade Emini exclusively. I do not trade the first 1.5 to 2 hours due to some reasons. I live in pacific time zone and have to attend my day job before 8:30am. Another reason I am not trading the first hour from open is due to the large volatitity, which I am not confortable to handle at my current trading stage.

I close all my trades 10-15 minutes prior to closing bell at 4 pm eastern time.

My trading strategies are all based on price/volume action. I do not use any other indicator except FIB retracement level drawing tool.

More...

I believe you are overtrading for the smallest moves and will end up churning your profits.

The first 2 hours and last hour contain the best moves. You can use volume and momentum to capture 3 or more pts, or you can enter counter-trend after the the initial move is exhausted.

If you use a 1-3 pt stop and capture a 3-10 pt move once or twice a day, your risk:reward ratio will take care of the rest as long as you wait for a confirmed trade entry (counter-trend entry when a strong move stalls or reverses, or quick entry in direction of a high volume move).

I'm very much an ES noob, but I traded like mad in my sim account for several months and scalping becomes very frustrating when you've left 3 or more additional points on the table again and again.
 
12-14-2009
total number of trades: 10 RT
net P/L: 3.75 pts
3 losing trades
7 wining trades

Started around 11:30 ET.

ESH10E spiked to 1113 last night soon after the Dubai news release. 1113 was retested later on, but failed to break above it. Future was sold down at open to retest 1105 resistance level from last friday.
 
12-15-2009

Total trades: 12 RT
wining trades: 8
losing trades: 4
net P/L: 2.0 points

Yesterday's close of SPX is ablove pivoting range. This morning SPX gap down below pivoting range and retest up pivoting range 1113 and failed to break thru. Today is bearish biased.
Open range 1103.5 to 1105.5 for ESH10.

From 11:30 to 1:30, price was moving nicely in a down trend channel. 1:45 to 3:15, price was moving in a tight rectangle. Here I lost 1 pt due to stoploss and another 0.25 pt due to timeout. At 3:10 price tried to break 1106 (ESH10) at 3rd time and didn't succeed. Entered short here, but covered too early. When price broke mid-day swing low at 1104, should have entered short as momentum play. Price stalled around 1103 after first selling climax at 3:20, entered long 1103.5 here andwas stopped out for 1 pt. Second selling climx occured between 3:40 to 3:45. Vol was higher than previous selling climax. Entered long again at 1101.5 at next doji close. Exit at 1102.5 at 38% retrace, which was the support prior to 3:40 second wave selling climax.

I entered today's selling climax prematurelly, which led to 1 pt stopout. For new swing low with higher vol (black marubozu), enter only when reverse price pattern forms, bullish engulfing/piercing patter/combined long-legged doji or hammer, or when price breaks the micro down trend supply line.
 
Sometimes, net gain/loss per contract per trade can be used to evaluate scalping performance.
For example, if daily average gain is 0.5 pt per contract per trade (daily net P/L devided by total number of contract traded), then the attached table gives you idea what the winning trade/losing trade ratio and target profit for each trade should be given different stopout points. Sometimes, the winning/losing trade ratio can also be viewed as winning/losing probability ratio and the net gain/loss per contract per trade becomes expectancy. The difference is winning to losing trade ratio is a known historical quantity, while probability is a value associated with each trade setup statistically.
 

Attachments

12-15-2009 FOMC rate decision day
My trading plan: no trade from 2:15 to 2:45 ET.

Total trades: 10 RT
winner: 8
loser:1
wash trade 1
net P/L: 4.75 pts

SPX open range 1113-1114, pivot zone 1109.73 to 1108.53. Gapped up in the morning, traded above open rangeg and then fell back. Shortly after 2:15,price broke down below open range and found good support at bottom of pivot zone later the session.

Before noon, the ESH10 looked like double top (the first top formed 5:15 am ET. Played short scalping until ~12:30 when price range became quite tight prior to Fed rate announcement at 2:15.
Shortly after 2:15, ESH10 sold down to double top neckline 1107-1107.5, bounced, hit supply line 1109 at 2:40.and reversed and broke below neckline afterwards. Went long after first selling climax aroun 3pm and again at 3:30. Exit trades 0.5-1 points at 23.6-38.2% retrace for 30seconds to a few minutes.


In review, the down move from double top neckline 1107-1107.4 was 4 points (1103 swing low) and the distance from double top 1111.75-1112 to 1107-1107.5 was also ~4 points. It found support at 1103 (SPX's bottom of pivot zone), and rebounded for 38.2% retracement. The selling was not extremely aggressive and it looked like a measured movement. Buyers stepped in as soon as selling pressure dimishes. There were 3 selling waves since 2:15. I was too focused on finding where price bounces, but could have gained more if had played the down trend movement.
 
Day trading vs intermediate term speculation
Some people might think daytrading is harder than inetrmediate term speculation. Some might think the opposite is true. Most intermediate term speculators are probabbly can be classified as swing traders. Day traders use scalping or swing or both. Many people probably have neither the patience nor the money to do intermediate term speculation. This is the case for me since I don't have enough capital to tarde future at intermediate term due to potential drawdowns.
For day traders, instantaneous gratification is a plus whether win or lose at least the result will be known immediately at the end of day. Another reason why I choose to practise daytrading is because it allows me to trade many setups many times again and again at small fractal and time frame. I am able to trade for skills without too much capital committed.
What is exactly the difference between scalping and swing trading? My observation is scalper aim at very small price move for very short time period. Scalper could buy low sell high or buy high sell higher as momentum trade. If hypothetically price moves 2 points without any retracement from entry, scalper would close the trade before any retracement or as soon as price momentum slows or any sign of weakness. For swing traders, they can hold their position thru retracement/consolidation and until trend reverses. For example, price moves 2 points, retraces 1 points and then moves another 2 points before reverse. It is total 3 points move that swing trader want to capture.
 
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