Position Entry Methods

P

pspr

I was going to make this thread a Poll but there are just too many variables to sufficiently list the options. Also, I would like responses to my question to only relate to electronic exchange contracts such as the ES, YM and NQ.

First, let me say that my trading is mostly scalps with actual entry signals taken off 1 or 2 min charts. My trades usually last ten to 30 minutes or sometimes longer on intra-day position trades on trend days. I think there are many on this forum that look for the same types of trades as I and probably face the same delema I do each time we try to put on a trade. For instance, today was a profitable day for me but could have been much more so had I been able to enter some trades that I missed for the reasons below. I think we could use some help/suggestions on the problems I outline from those here who have struggled with this and found a good compromise or solution.

I think THE most difficult aspect of trading for me is deciding the best entry/order method to use to put on a trade. After I receive or am obviously about to receive a trade signal, I usually wait for the market to show me with price action that it is turning my direction before attempting to enter a trade. Lately I always enter with a limit order at the then present bid or ask or maybe one or two ticks better depending on my thoughts of the price action. But by doing this, too often I either miss a very good trade because the market moved too fast for my order to be filled or I was trying to get a tick or two better than the market would give. OR or I enter too early only to see the market continue moving against me only reach my stop which is usually 1.25 to 2 ES points. Or I chase the market a few ticks only to see it come back to my original desired entry price and sometimes get my now closer stop. Also, chasing causes me to either put my stop at an undesirable place or widen it further than I would like which hurts the risk/reward ratio when I am wrong.

With that being said, what have you found to be the BEST way to put on your trades to try to avoid the above problems as much as possible? I've listed a few questions below that might help you frame your response in a way that pertains to my situation.

1) What time frame do you find best to determine actual order entry if not on a 1 or 2 min chart?

2) Do you enter with a RESTING LIMIT ORDER away from market prior to any trade signal?

3) Do you enter with a MARKET ORDER when your signal is triggered regardless if the price has moved far from the open of the signal bar or moved away from the signal bar close too quickly?

4) Do you enter with a LIMIT ORDER at the current market offer when buying or bid when selling? If the market moves away from your limit price before you're filled do you move your limit or just cancel the order and give up on the trade if the market moves away after so much time?

5) Do you enter with a LIMIT ORDER at a price that would give you an acceptable risk from where you would want to place your stop? And, if the market moves away from your limit price before you're filled do you move your limit or just cancel the order and give up on the trade if the market moves away after so much time?

6) Do you enter with a STOP or STOP LIMIT order waiting for the market to begin to move in your direction before committing to the trade? If so when do you determine you should give up on the trade if not filled?

7) If you answered 'yes' to question (6) above do you use a fixed initial STOP or do you use a wider stop than a couple ES points or based on some other logical area?

Of the above examples, which do you find works best for you? Or, please elaborate on any other successful trade entry method you wish to share.

There are some great traders here on ET and I would appreciate their comments. Thanks to all in advance for your thoughts on this matter!
 
Quote from pspr:

With that being said, what have you found to be the BEST way to put on your trades to try to avoid the above problems as much as possible?
More...

Sounds like you're asking the wrong question. The problems you've encountered seem to have less to do with the type of order you use than with entry criteria that aren't specific enough to tell you exactly when to enter. Or, if they are specific enough, you're not following them, entering too late, entering too early, chasing, etc.

Therefore, if you want to avoid all the problems you've listed, be specific enough with your criteria that you'll be comfortable taking the trade when your criteria are met. If you can get to that point, it really doesn't much matter what type of order you use, though under some conditions a limit order will help you contain your risk.
 
Quote from pspr:

I was going to make this thread a Poll but there are just too many variables to sufficiently list the options. Also, I would like responses to my question to only relate to electronic exchange contracts such as the ES, YM and NQ.

First, let me say that my trading is mostly scalps with actual entry signals taken off 1 or 2 min charts. My trades usually last ten to 30 minutes or sometimes longer on intra-day position trades on trend days. I think there are many on this forum that look for the same types of trades as I and probably face the same delema I do each time we try to put on a trade. For instance, today was a profitable day for me but could have been much more so had I been able to enter some trades that I missed for the reasons below. I think we could use some help/suggestions on the problems I outline from those here who have struggled with this and found a good compromise or solution.

I think THE most difficult aspect of trading for me is deciding the best entry/order method to use to put on a trade. After I receive or am obviously about to receive a trade signal, I usually wait for the market to show me with price action that it is turning my direction before attempting to enter a trade. Lately I always enter with a limit order at the then present bid or ask or maybe one or two ticks better depending on my thoughts of the price action. But by doing this, too often I either miss a very good trade because the market moved too fast for my order to be filled or I was trying to get a tick or two better than the market would give. OR or I enter too early only to see the market continue moving against me only reach my stop which is usually 1.25 to 2 ES points. Or I chase the market a few ticks only to see it come back to my original desired entry price and sometimes get my now closer stop. Also, chasing causes me to either put my stop at an undesirable place or widen it further than I would like which hurts the risk/reward ratio when I am wrong.

With that being said, what have you found to be the BEST way to put on your trades to try to avoid the above problems as much as possible? I've listed a few questions below that might help you frame your response in a way that pertains to my situation.

1) What time frame do you find best to determine actual order entry if not on a 1 or 2 min chart?

2) Do you enter with a RESTING LIMIT ORDER away from market prior to any trade signal?

3) Do you enter with a MARKET ORDER when your signal is triggered regardless if the price has moved far from the open of the signal bar or moved away from the signal bar close too quickly?

4) Do you enter with a LIMIT ORDER at the current market offer when buying or bid when selling? If the market moves away from your limit price before you're filled do you move your limit or just cancel the order and give up on the trade if the market moves away after so much time?

5) Do you enter with a LIMIT ORDER at a price that would give you an acceptable risk from where you would want to place your stop? And, if the market moves away from your limit price before you're filled do you move your limit or just cancel the order and give up on the trade if the market moves away after so much time?

6) Do you enter with a STOP or STOP LIMIT order waiting for the market to begin to move in your direction before committing to the trade? If so when do you determine you should give up on the trade if not filled?

7) If you answered 'yes' to question (6) above do you use a fixed initial STOP or do you use a wider stop than a couple ES points or based on some other logical area?

Of the above examples, which do you find works best for you? Or, please elaborate on any other successful trade entry method you wish to share.

There are some great traders here on ET and I would appreciate their comments. Thanks to all in advance for your thoughts on this matter!
More...

Hi pspr,

I never heard of a scalper that holds a position 10mins to 30mins or longer.

I know 5 scalpers at this forum and they use those tick charts (those chart intervals that are less than 1min).

Chart providors like Ensign, NeoTicker and others offer tick charts.

Outside this forum...the successful scalpers I know also use tick charts also...

and they use limit orders or market orders depending upon the market environment at the time of the trade.

(Note: I don't know how they determine when to use a market order or when to use a limit order)

Simply, trying to scalp via 1min or 2min charts is a mountain of difficulty to climb.

I'm not saying it can't be done.

I'm just saying I talk to a lot of scalpers...some losing money and a few making good money in the Eminis and they don't recommend chart intervals like 1min or higher.

Also, those scalpers use FIXED stops...usually no more than 1.50 points.

Last of all, I've heard a few times from them and here at ET...

to make consistent money at scalping...

you need a high win rate along with very very cheap commission rates.

NihabaAshi
 
Hi NihabaAshi,

I guess I don't 'scalp' according to strict definition. By saying "scalping" above I mean if I enter a trade at 10AM I'm generally not intending to hold it for longer than 30 min or so unless we are in a trending day. So I guess I don't mean "scalping" in my original questions. A normal expectation of a trade that works for me is from 2 to 5 ES pts. or so depending upon how the day is trading and given recent ES market action. I think many day traders here are looking to capture moves of this size. Whether that can be called scalping, just daytrading or what ever, that is what I am trying to convey. My software provides tick charts but the trades I'm trying to take don't lend themselves to this nitty gritty. For what I'm doing I am absolutely certain that 1 or 2 min charts combined with 5 min, 30 min and daily charts for trend, etc. is where I need to be looking.

The primary question I am trying to get some input to is, what entry methods are other "day traders" finding that works effectively for them? Are those who are successful content to use limit orders and miss many trades or do they find being more aggressive at getting into the market works best, or do they prefer to use stops to enter by entering when the market starts moving a certain amount their way? In short, what's working for them to get into the market while keeping risk on the trade managable?

I know there isn't a straightforward answer without knowing a lot about the methodology being used which would require many pages of info and debate which I would like to avoid.

I guess, bottom line, what I am asking of those successful daytraders (not very short term scalpers of a few ticks) is what method of position entry did you wind up using with your methodology (without actually disclosing or going into detail about your method). My interest is more in numbers of who does it this way vs. who does it that way so by the shear preponderance of comments some of us may determine that we are killing ourselves with just this one part of our trading when we should be looking at some other ways of getting into the market.

For instance, if one entered his trades when a certain fib level was hit they could say they 1) use a resting order at the fib level (before the market gets there), or 2) They enter a limit order when the fib # is touched and either cancel the trade if it moves away or maybe will chase it 1/2 pt. or what ever), or 3) They enter a market order as soon as the fib is hit regardless of fill, etc. And they may qualify #2 and #3 by saying they wait to see how the market acts at the fib before entering such orders then they do it this way.

I think statements like that (don't have to mention fibs though if that is what one uses) from those who are successful will go a long way to aiming many of us in the right direction of trade entry. I'm not asking for ones rocket science method, just what trade entry method wound up working best for you?

Does that make sense?

Quote from NihabaAshi:

Hi pspr,

I never heard of a scalper that holds a position 10mins to 30mins or longer.

I know 5 scalpers at this forum and they use those tick charts (those chart intervals that are less than 1min).

Chart providers like Ensign, NeoTicker and others offer tick charts.

Outside this forum...the successful scalpers I know also use tick charts also...

and they use limit orders or market orders depending upon the market environment at the time of the trade.

(Note: I don't know how they determine when to use a market order or when to use a limit order)

Simply, trying to scalp via 1min or 2min charts is a mountain of difficulty to climb.

I'm not saying it can't be done.

I'm just saying I talk to a lot of scalpers...some losing money and a few making good money in the Eminis and they don't recommend chart intervals like 1min or higher.

Also, those scalpers use FIXED stops...usually no more than 1.50 points.

Last of all, I've heard a few times from them and here at ET...

to make consistent money at scalping...

you need a high win rate along with very very cheap commission rates.

NihabaAshi
More...
 
Well, whatever you're doing it ain't scalping if you're looking for 2- 5 pnts. 2-5 on the es is hard to come by unless your entry is absolutely perfectly positioned. Consider this reality,price on the shorter timeframes is mostly noise in it's completion of the longer timeframes, like following a tadpole around in a creek. The es are perfect for true scalpers, instant fills on size for a tick or 2. This action creates the tadpole affect, if you're looking for 2-5 this has to put you thru some changes once you're in. Look at the 1's, 5's 10s' today and see where you should have been when and what the clues were, the longer TF tells you where the shorter TF is headed. Study some and make a decision not to freak under shorter TF circumstances, you have to decide what gear your driving in and percieve and play in that gear.
Unless you're playing size use limit orders on the minis as mkt. orders have to be converted to limit by you're broker or globex. If you're going long and want in take the ask limit.
Don't anticipate fib or s/r levels, make them prove themselves.
 
PSPR.... I trade very much like you have described.... I trade stocks using short term trends that occur during each day.... I have 2 possible entry points on the 2 min chart.... a narrow range or a pullback that occurs after the trend has formed. I always use a limit order at bid, ask or last trade depending on how I see the trades executing. Almost all of my entries are filled when I enter a trade during a narrow range..... However, if I wait for a narrow range to confirm direction, some of my trades are not filled. The same problem happens when I enter after a pullback. For a pullback trade, I wait for the pullback and then buy when price returns to the original trend. And I would suspect it would be much harder to get filled if price is running.

So, you might want to look at where you are trying to enter and the consequences of how often you get filled.


toucan
 
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