ES: How many setups do you trade? Trading only the open?

[Georgii]

Thanks for answering, SPT, you're exactly the kind of person I needed to hear from.

I gather you're using a very small time frame to be making so many trades. What is the basic idea you focus on: trend following, breakouts, reversals? How did you develop your methodology? Do you adjust your take profits/stops with market volatility? Also, how do you stay so focused over 20-30 round trips? That must eat a lot of commissions!

 

[SPT]

Thanks for answering, SPT, you're exactly the kind of person I needed to hear from.

I gather you're using a very small time frame to be making so many trades. What is the basic idea you focus on: trend following, breakouts, reversals? How did you develop your methodology? Do you adjust your take profits/stops with market volatility? Also, how do you stay so focused over 20-30 round trips? That must eat a lot of commissions!

I use 500 tick chart because I want to see the bars progress as volume piles up.

I will always stick with 3 ticks target / 3 ticks stoploss.

I like 1 to 1 ratio for scalping. There is nothing wrong with making 3 ticks and market takes off and advance 20 ticks. Don't be greedy.

As I mentioned before I add more contracts for more money and I never increase profit target.

Stuff you mentioned: trend following, breakouts, reversals, I think these are for position traders for longer profit target and stoploss.

Since all I need is to advance point A to point B (3 ticks) without hitting my stop. I need to ride with momentum.

This is too short to call it anything you mentioned above, but if I have to label it then I guess it is a very quick trend following.

Avoid trading on previous high and low because simply they are unclear which way the price will advance; therefore, in between previous high and low are the best in my opinion.

I have a lot of volume so commission is very negotiable currently only paying 25 cent one way per contract. (please don't ask which broker it is)
This excludes exchange fees and I will soon be getting an IOM membership.

As long as I have success rate of 54% or better, I will at least breakeven. This should be even lower with the membership. I've been getting success rate about 65 ~ 70%

Hopefully these information help you develop your own strategy.

Good luck with your trading!

 

[Georgii]

Thanks for the reply SPT, I've always been impressed by people who are able to make such small trades repeatedly. I don't think, at least at this stage, that I could trade that way easily. I'm looking to gun for 1.5-2 point moves at a time.

I'm curious how did you develop your technique and your logic? Did you just spend many hours studying charts after market? Did you evolve from another style of trading?

Also, do you just look at the tick charts or do you also read the tape/DOM? A lot of super short term traders in my experience are also into DOM.

Lastly, are you a limit order entry person or do you do market/stop orders, or does it all depend?

I'm not looking to copy, I just like to always ask people how they develop their methodology as it might give me some more insights on how to better work on my own ideas. Thanks again!

 

[DonKee]

DonKee, I'm curious, do you have sub-categories of your setup or do you look at each trade in the exact same way? Also, what are the longest stretches you have where you haven't got any signal that you would take?

Same parameters for every trade. Once you do this for awhile, you'll get a good feel for entering these set-ups. Usually, there's going to be anywhere from 5 to 15 trades per day depending upon how active the market is.

I need to keep things very simple and not have some kind of 10 person conversation going on in my head.

 

[SPT]

Thanks for the reply SPT, I've always been impressed by people who are able to make such small trades repeatedly. I don't think, at least at this stage, that I could trade that way easily. I'm looking to gun for 1.5-2 point moves at a time.

I'm curious how did you develop your technique and your logic? Did you just spend many hours studying charts after market? Did you evolve from another style of trading?

Also, do you just look at the tick charts or do you also read the tape/DOM? A lot of super short term traders in my experience are also into DOM.

Lastly, are you a limit order entry person or do you do market/stop orders, or does it all depend?

I'm not looking to copy, I just like to always ask people how they develop their methodology as it might give me some more insights on how to better work on my own ideas. Thanks again!

I actually started with 2 point profit target with 1 point stoploss because on forums people always emphasize on larger reward risk ratio of at least 2 to 1. Sometimes it worked well sometimes it didn't. I got pissed off on trades where I was up 3 ~ 7 ticks then suddenly it reverses and hit my stoploss.

This happened a lot to me maybe entry was wrong (?) and I decided to trade more like a sniper style. Either I kill you or I die syle That's why I ended up 1 to 1 ratio.

I always traded the market on time and I recorded myself trading. After market was over I replayed what I did for possible improvement. I think this helped a lot. It might be tedious, but hardwork pays off.

I trade large enough contracts that sometimes not every portion get executed on same price. In order to avoid this, I look at DOM for exact timing. Probably since you will start with one contract this shouldn't be a problem so if I were you, I would just focus on chart.

Since I need momentum, timing is the key for entry so I use market/stop orders.

It is also a good idea to have a higher tick chart for zoomed out version for major support and resistance line typically previous high and previous low.

 

[Georgii]

DonKee, thanks again for posting about your strategy. So basically you're just looking to catch a good pullback all day long in either direction that you get.

SPT, very impressive that you managed to create such a rapid fire strategy. So basically you're just looking for 3 tick pops or 'mini breakouts' as the market is aiming for a specific level, buying high and selling higher type of idea.

I agree that the whole 1 pt stop 2 pt target isn't an easy thing to swing, it sounds nice on paper but in the end it all balances out. Some people just get very selective and only take A+ setups, but then you end up with very few setups.

Regarding DOM, I keep hearing conflicting stories (as with all other trading tools). I've been tempted to learn it down the road, to see if it can add any value to what I do, but I'm always concerned that it doesn't really contribute that much anymore these days. Also, I'm at a loss of how to learn it. They have some four figure courses and stuff, but as usual I'm always suspicious of commercial offerings.

Thanks again for sharing!

 

[SPT]

DonKee, thanks again for posting about your strategy. So basically you're just looking to catch a good pullback all day long in either direction that you get.

SPT, very impressive that you managed to create such a rapid fire strategy. So basically you're just looking for 3 tick pops or 'mini breakouts' as the market is aiming for a specific level, buying high and selling higher type of idea.

I agree that the whole 1 pt stop 2 pt target isn't an easy thing to swing, it sounds nice on paper but in the end it all balances out. Some people just get very selective and only take A+ setups, but then you end up with very few setups.

Regarding DOM, I keep hearing conflicting stories (as with all other trading tools). I've been tempted to learn it down the road, to see if it can add any value to what I do, but I'm always concerned that it doesn't really contribute that much anymore these days. Also, I'm at a loss of how to learn it. They have some four figure courses and stuff, but as usual I'm always suspicious of commercial offerings.

Thanks again for sharing!

I think there is no right or wrong answer here. Just go after what you are good at. I tried many many strategies and theoratically 2 to 1 Risk Reward ratio was the best method since I only needed at least 35% winning rate to breakeven.However, it just did not fit to my style.

For DOM, in my opinion, should be utilized only if you are trading large enough contracts otherwise I don't see a point because DOM is very manipulated these days putting fake resting orders to look more attractive and suddenly big resting order goes to the other side.

Hopefully you research enough to get the best strategy for yourself

 

[Georgii]

Thanks SPT, I'm working my research war right now

Two last questions if I may:

How did you learn to watch the DOM and what are your favorite trading books?

Thanks for your time!

 

[SPT]

Thanks SPT, I'm working my research war right now

Two last questions if I may:

How did you learn to watch the DOM and what are your favorite trading books?

Thanks for your time!

For DOM, just a lot of experience.

You simply can't learn by words. I probably read most of famous trading books out there, but non helped me out so I cannot recommend any.

Just like learning tennis for the first time, you just have to grab a racquet and swing at the ball. It wouldn't be a perfect shot, but if you put enough time, eventually you will get there. Do not try to take any short cuts. With this said, never buy anything on internet for courses, mentoring or indicators. They will suck the time and money out of you.

Like I said earlier, do not put too much emphasis on DOM because they are only good for trading mid two digit contracts.

This is what I would do if I were you:

I recommend Sierra Chart platform. It has a replay function for practice at any time.

I would set the time at 9:30AM ET and trade for one hour. I would record a video of your screen while you trade. After one hour, watch yourself trading.

Do this over and over again until you are successful in simulation.

Hopefully it helps!

 

[Georgii]

Based on my experience I totally agree that there's no one textbook that is a magic bullet. The problem, though, is you need some anchoring point to begin with. Like DOM for example, when I'm looking at the ladder, all I see are numbers going back and forth. There is no logic to what is happening at all, and without that you can't start to put any patterns together unless perhaps you stare at it for a very, very, very long time.

Either way, I'm not too concerned about DOM right now as you mentioned, I was just wondering if I should bother sometime down the road with it because some claim you can get better entries with it. At this point though, I agree it would be too distracting.

I do have Sierra Chart and I'm very pleased with it.