To beat the bots and HFT’s via “manual” HFT trading (ROFLMAO), IMOO (in my opinion ONLY) a trader who is scalping 1 to 8 points in ES, up to 12 pt or so on more volatile days, has to be psychologically prepared to break, at minimum, at least three cardinal rules, namely:
1)
the first rule to break: never average down aka only losers average down.
A scalper of say ES must learn to average down, or scale in, whatever his heart desires to call it. Without it the bots and HFT’ers will eat his cake, his hat, his shirt but leave him his pennies. By “learn to average down” I mean knowing which context to do it in (the larger and more immediate contexts), and “how” (size and frequency..i.e. adding on targets). He may make a profit on all his average down contracts or he may make money on all but the initial entry. Or he may lose on his first two entries but still end up with a profitable averaged down trade. The important thing for a scalper is to “make money” and have a high win rate. He only has the session to end profitable.
2)
The second rule to break: Cut your losers and let your profits run.
A scalper of the ES needs to learn to “grab” his profits as the market gives them to him. Be johnny on the spot. Forget dreams of a big run. Yes, at time they (big runs) will happen, but more often than not a trader will have a scalping profit...get greedy for more...hold on, or even scale up adding to his profitable position, only to find that minutes or seconds later “Shazam” it has dissipated before his eyes, the trade has soured, and when it gets like buttermilk he can’t stand the pain anymore, so he makes some jalapeño cornbread (his SL) and eats it, crying, as it burns going down. If a big run does occur a nimble scalper can always get back in, usually compounding profits at the same time (by getting back in at a better price than his previous exit...i.e. in a bull run at a LOWER price than his previous scalp exit before the run continues.) A scalper just has to train himself to do so and execute.
3)
the third rule to break: be concerned with INITIAL R:R calculations. Instead, use appropriate PA SL’s (according to present PA being drawn on the chart taking into account the present volatility) not set dollar amount for SL’s. Instead of being concerned about
initial R:R be more concerned with
actual R:R (how far the market went against you before it gives you a scalpers profit.) and
actual PT’s. Often times you will be able to exit with a profit on a 3 or 4 or even 10 to one on
actual risk. Just take it! Don’t worry about what happens afterwards. As said in #2 above you can always get back in.
In addition, remember that context..context..context (larger and immediate) is much more important than any single setup used for entries and exits.
A scalper should use the traders equation to vet
probabilities of a trade rendering a profit as opposed to a loss. Mentally do the equation or actually tabulate it by writing it down. Don‘t take a trade if he can’t see a positive traders equation. He will find that some of the best looking setups fail because of poor context and some of the worst looking setups succeed because of good context. Probabilities calculations must be correlated with contexts.
Finally, if a trade moves against the trader he must have pinpointed, in his mind, a point where he will accept that his premise is wrong....i.e. a “give up point” if you will. And he must have a plan in place on how he will recuperate his losses, as quickly as possible. For me, that is usually doubling up or tripling up on a setup in the new direction. A scalper has to make back his losses quickly as he is flat at the end of the session, therefore he is constrained by time to get back into profit before the session ends. This is especially true on averaged down positions. He must exit them immediately if his “give up” point is reached.
My journal explains this stuff in a bit more detail.
https://www.elitetrader.com/et/thre...-trading-the-es-nq-ym-mes-mnq-and-mym.336259/
