Quote from bilbod:
What is your definition of noise?
To keep numbers small and simple, lets say there's an instrument that's trading at a price of 5, but its in an uptrend so you think it's heading to 10. You enter at 5 cuz the chart looks good.
This is noise (each line represents a new tick)
5
6
5
4
5
4
5
3
5
6
7
8
6
5
8
6
5
4
3
4
5
5
6
7
8
9
10
It almost gets there. You're at 8. But then it goes back down to 3. Then it putzes around for a while more not doing anything except taking out everyone's stops.
So if you had a trailing stop, you lost out. (unless you had a huge trailing stop which doesn't seem to jive with this thread and the idea of not letting winners turn into losers). If you took partial profits on your way to 10 (say at 8), you probably still wouldn't have held as it dropped down to 3 again.
So to me, "noise" prevents successfully taking partial profits. And placing stop orders (unless you use HUGE trailing stops, which, I've been reading some articles suggesting that stops actually hurt your overall profit unless they are in fact HUGE trailing stops).
My point is, the only way to actually make profit and not get stopped out when using a tight 2-3 tick stop, as recommended, is to pick the absolute bottom or top.
And even if you do that, you'll still get stopped out on the way up (assuming you're long) due to "noise."
In other words, unless you're on the right side of a news release, price never makes big moves without retracing 2 or 3 ticks at least at a time, many times, during its movement
I just opened a 3 tick chart of the ES (which took forever to calculate, seriously, I had time to make a sandwich while I waited) and there's a ton of noise. 7 minutes' worth of data stretched out across my 22" monitor in approximately 1500 bars. This is part of some bigger trend somewhere else, but it's all noise. +1, -1, +2, -1, +1, -2, +1, -1. And multiple bars are appearing per second so there's no way to scalp it (without automating and perfect fills).
Actually tho, this is pretty cool. I wish I had a system fast enough to actually trade off of this chart.
Mike's trading style is that every trade starts out as a scalp.
That always looks good when I look at historical charts. I think "gee, if I had only entered there where the slope changed, and set a stop 1 tick below each candle as they were formed, I would've made a ton of money!"
Except it never actually works that way when I try it for real.
Joe Ross has a similar trading style he wants to get paid for every trade so as soon as possible he cashes in part of his position to cover costs and give himself a small profit. His stop moves to BE on the balance.
I trade single contracts. I can't really do the partial profits thing. I figure I should get good at making money with one contract before I increase it.
Anyway, I guess I just don't understand how scalping is possible with out picking (temporary) tops or bottoms and eliminating "noise."
Two is too much risk for me right now.