Day-Trading 2.0 for small traders

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I got 4/5 last night on the euro. I am a scalper and have both psychological and logical reasons for preferring to take small profits. I don't use indicators apart from a long ma and a short ma. I adjust the timeframe to try and match the frequency of the market.

I trade indicies and F/X, provided you can "see" the market, I don't think it matters what you are trading [provided it has liquidity]. I tried ticks but found it didn't make much difference to my trading in practice.

Thanks for all the posters especially jjrvat. This thread has really helped me out with setting stops.

My 2c on trading is that it is an incredibly simple process that seems to get overcomplicated. You only need 4 pieces of information entry point, direction, exit win and exit lose. You should be able to get around a 50% success ratio by tossing a coin so you only need something that slightly tips the odds in your favour [to overcome the spread and other fees]. Therefor if you getting a lot less you should look at your strategy. IMO removing indicators and simplifying is a good place to start.

Also I don't believe that any algorithmic trading system will yield profits over the long term or that back testing is of any use.

Cheers
 
I have to agree with most of what your saying there. Simple IS best (most of the time anyway). Not too sure about that algorithm comment though. And I think theres probably a few people/companies who would disagree with you too. (with the results to back it up)
 
I ve been trading for a while and its great to find a place that devotes some time to scalping.

Re algorithms, if they existed people wouldn't sell them, they would use them to make unlimited profits. I've given up trying to develop one. I agree with one the the previous posters "the devil is in the detail"...
:)
 
Once again I agree with part of what you say. Those algo's/systems on the market are mostly nothing but snake oil and fairy dust. The guys with the ones that work wouldnt sell them for anything because they do make them good money. Everything has its limits though.
 
Hi womblevader,

I think your comment of psychological reasons for being a scalper is interesting, especially if we look at yesterdys moves on the dow for example.

Massive directional moves , but the psychological challenge of being able to deal with 10 pt scalp x 4 trades which will give a very good result in normal trading days compared with what was actually available for picking using the jjrvat's PBP.

Many more trades were available and with 30-50pt runs for the taking. The inevitable demon of greed, to try and get them all or as much of them, trades and points, comes to the fore.

I have found that for me, trying to trade all the opportunities can on some occasions work but still come out with +40pts , having given back several trades through the day only to be at a position which I was 2 hrs into the trading day.

My conclusion is to try and fit trading around my psychological makeup/profile call it what you will.

The profit target for the day and then done, seems to work better for me,knowing that my target is achievable usually in a couple of hours why try and take everybodys lunch off the table as well as mine.

If I want to up the monetary rewards, increase the contracts (within psychological limits here also). Because as we can see the PBP can follow the market in the direction it moves and let the little lady bestow her low hanging fruits. There is a degree of consistency in the PBP which is robust and reliablewhich gives confidence in the fact that you will get the relatively low achievable target.

Trying to compare it with something I am familiar with, is one of my businesses. I have a mobile phone business and I found that without any sweat I could sell 3 mobile phones per day minimum, I know that they will be sold, like I know there will be pullbacks in a trend throughout the day. I masy have to wait until mid afternoon to sell all of my phones like I may have to wait until midday trading to have achieved my 40pts after losing one winning three and so on.

Which brings me back to yesterday
how did the scalper "done for thedayers:" get on once the market dropped and how did they deal with the negative demons on their shoulders?

And how did the scalper get on who tried to take each pullback, as there were a few pullbacks with good signals but they then got stopped out.

Sorry about the length of the post but maybe it can exorcise some of our demons/psycho problems.

Richard
 
womblevader
Thanks for all the posters ... This thread has really helped me out with setting stops ...

Thanks for your comments. You are the first person in this thread to acknowledge the key relation between price analysis (a consistent PBP) and better stops. Most of the time, stops are analyzed as a predefined rule that are only dependant on money management. However in my opinion, stops are not only dependent on MM, they are integral multifaceted variables that go beyond pure capital risk. A stop has to come “natural” (it doesn’t mean a subjective variable) and it will reflect the validity, efficiency, consistency and sustainability of a PBP.

I don’t want to go in details now but I will continue when I write the next post on developing a PBP.

triplepack

... Sorry about the length of the post but maybe it can exorcise some of our demons/psycho problems...

First, thank you for your kind words. Second, your post pointed out to some of the real psychology issues a small trader faces everyday and contains a lot of very relevant issues for a PBP. I will elaborate in detail on your comments when we talk about “trading psychology”.

jjrvat
 
Hi jjrvat,

I will be looking forward to your posts on this subject very much as I believe that the psychological aspect is one of the frailest elements of a trader. Once a trader has established the consistency within a comfortable framework of trading (e.g.PBP) this weakness becomes strengthened as success becomes a positive feedback loop and all of the misgivings of the previous mindset give way to a confident mindset which then feeds itself.

e.g. Be comfortable in yourself that 20 ym points per day will come your way, then walk,so what if there are another 100 on the table, there will be days where there will only be 60 ym points on the table.

Richard
 
1. Stops

I now look at where the stop position should be placed first when contemplating entering a trade. Once I am happy with the position of the stop that I think about the risk return to get my 6pips, usually between 1:1 and 2:1.

2. Reasons for scalping

I live in New Zealand which is pretty much in the opposite time zone to the rest of the world ie US markets open at 1:30am. I used to get up and trade them but the vampire lifestyle was not sustainable.

3. Difference between scalping and other trading styles

As far as I can tell very little, as long as you are trading profitably and without wild swings in your trading account I don't think it matters. You can play $100 a pip trying for 6 pips or $6 a pip trying 100 pips and the result of a win is the same ie $600.

I prefer the method which has the least volatility which for me is the scalping method.

Cheers
 
good call on the stops. some trades just dont make sense, regardless of wether its a legitimate entry or not. Im experimenting with different profit targets, but if your stoploss is 15-20 ticks away, its not really worth going after 5-6 ticks.....
And I dont believe in adjusting my stoploss to less ticks to fit the r:r ratio. It is where it is

(I only trade 1 lot at a time so reduced size isnt really an option at the moment)
 
I must agree with JJvrat's last post on stops. Since I've started basing my stops on PBP and not on R/R my success rates went much higher. I still have my psychological issues and lack of consistency but where it comes to myt stops, they are clear and a lot of times they save my trade, I rarely get my stop hit and then the price goes in my direction. Most of the time, if my stop got hit then we have a big revarsal. As I said before risking 10-12 ticks for a 6 ticks gain is a good enough ratio when it comes to PBP.
 
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