Scalping e-minis

Originally posted by Elysium
What is it that makes the switch from paper to real trading so difficult?

Is it something internal (fear of losing real money, not doing exactly the same as you did on paper, ...) or is it more of an external reason (hard to get filled at price, slippage, spread, ...)

Of course it's a bit of both, but on a scale of 0-10 (0 being 100 % internal and 10 being 100 % external) what number do you pick?
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A good analogy is a competitive sport...Be it golf, tennis, baseball, etc, etc...The individual sports seem the most applicable because there is no one to hide behind...So lets say golf...You go out to your course all alone and tee it up and every day you shoot 72 cause there is no one around, no pressure, no one to see if you hook one OB...So then word gets out that you are the hot shot golfer and all of a sudden there is a hell of alot more pressure...You start asking yourself "maybe all of these 72's I am shooting are just a fluke, maybe with people around I will really screw up"...Then all of a sudden you are in the local tourney and everyone makes sure they watch you tee it off and everyone wants to see the scoreboard when you come in to see if you REALLY can shoot 72...

Like any sport, practice and competition are completely different environments with uniquely different psychological dilemma's...Whether its our own self induced pressure or whether it is simply the adrenaline, etc, etc...Somehow it all translates into a learning curve...Learning how to remain focussed and centered when all of the emotions and self talk are negative...

Not to sound like a dime store Mark Douglass, but I have experienced this stuff in competitive sports and also as a trader...Fortunately for me, my trading is done in my home and there is no one around to sit and watch(lol)...But even if there were I feel that I have put in enough time to handle that properly, but it took a long time to get past the psychological stuff in the beginning and to accept that this was real...

There is no substitution for real competition...Trading with real money is real competition...Everyone who does it can attest to those emotions that are involved when you watch your P/L fluctuate up and down and know that it is for real and not just the practice round...

At least thats my take on it...
 
You summed it up very well at the end...It is very hard to overcome a $5 commission...It is a seemingly innocuous number until you start taking it out of both the winners and the LOSERS...And that is the key...IT is a FIXED cost, so no matter what happens win or lose, they are getting paid...

It really adds up when you scalp with some size...If you do 5's or larger and really scalp alot, you can be up around 50 r/t's in a heartbeat and if you are in the hole, the emotions to keep going to get it back become pretty powerful...I don't have much more to say on this subject, I stopped scalping awhile ago because the work involved on a consistent, every day basis was pretty overwhelming...I also came to a realization that many of the best scalp entries also turned into many of the short term swing entries or what I call "Micro Swings" were you typically find a 3-5 point profitable trade that never re-tests your entry...

But I will refrain from passing judgement on whether scalping is good or bad, because our mental environments are all completely different...My personal feeling is that you have to negotiate commissions down as low as you can go..And if scalping is your thing then going with a clearing firm and getting as close to THEIR cost is the real way to do it over the longer term...
 
Vulture,

Excellent posts! (You too, Profit).

My only question is this:

If I trade into the more major trend against one of the minor-trend pullbacks away from the major trend, and I pick up +2 ES points here and there, would you consider this scalping or daytrading?

aphie
 
Originally posted by aphexcoil
Vulture,

Excellent posts! (You too, Profit).

My only question is this:

If I trade into the more major trend against one of the minor-trend pullbacks away from the major trend, and I pick up +2 ES points here and there, would you consider this scalping or daytrading?

aphie
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Thats basically how it is done, if done consistently well...But you have to remember that the program trading really dominates nowadays...I hang out in chat rooms with some of the scalpers and just by eyeballing the short term time frames I see the dilemmas...Just look at charts from July after we broke the Sept lows and check out the volume and the continuation patterns...Those are "easier" scalps...Then check out charts from the Thursday and Friday of August options expiration and early into the last week of August...

Once you do that go back over some of the journals on this message board and see if you can find some pattern between profitability for many of these guys and the trading environment...It could give you some insights into good scalping action vs treacherous scalping action...

Also, from experience and observation, most scalpers pretty much can only trade one style...either they "fade" or trade the breakouts on the current swing...It is very difficult to do both even if you know one is better than the other...I talk to guys who have been scalping, daytrading, floor trading for over 20 years and rarely have I seen them divert from their "core" trading philosophy...So that is basically my take on it...
 
hardcash posted this classic by trend fader on one of the journal threads. It is the best thing I have ever read on this site.

"What is it that separates successful traders from unsuccessful? "

--- There usually is always 2 types of traders. Trader #1 has high % winners.. but their gains are minimal. And trader #2 is averaging over 2:1 profit/loss and is right under %50 of the time. The other factor in this equation is frequency of trades. Assuming what I said above is equal regarding the 2 traders above... the trader that will make more $ is the one that has more trades given X amount of time.

In a nutshell the point is.. you will be trader #1 or #2.. and the HARDEST part of trading is taking care of the frequency of trades. If you want to be trader #1 then you should be looking to trade more often... perhaps you should never avoid your signal (whether mechanical or discretionary). Trader #2 can be gun shy.. and stalk the market. Only entry when everything clicks.

Now here is what separates the winners from the losers. The pro knows that he is trader #1 or #2 and accepts this notion and his trade frequency will be subject to the rules set above and will find the balance of the proper amount of trade frequency. The losers.. will try to be trader #1 and undertrade.. or try to be trader #2 and overtrade (very common). The worst traders of them all.. don't know whether they are trader #1 or #2. (most common)

Many traders only focus on entries.. as I mentioned a lot on the thread. The exit is what separates the men from the boys. Decide whether you will be trader #1 or #2. Then before you consider working on entries... work on your exits. Do you want your exit to be a function of volatility, trailing, whatever? the more determined you are-- the better exit you will have. Decide what type of market (trending, choppy, whatever) best suits your exit strategy. Decide the type of profit to loss ratio you want. The pro's treat their gains as multiples of their loss. Then once you have determined all of this.. work on entries. What I I just mentioned above personally took me years to figure out.

In my honest opinion, and this is definitely controversial.. I believe that all exact entries sooner or later will be random, however market conditions.. trending or choppy will be here forever. Types of patterns, technical, mathematical, whatever.. that try to pinpoint exact entries never really last forever. So if you backtest... then use your entries as random, market conditions as a filter.. and the exit part as the constant.

If your system would still be profitable with random entries.. then you have found the holy grail. If you can improve the performance of your system with entries of your own (mechanical or discretionary) and hold your exit strategy and market condition filters constant in "realtime" trading then you will be a super trader.

Final note, what I just mentioned above is pure methodology. Once you know "who" you really are as a trader.. paper trade, paper trade, paper trade!.. then back it up with some hard earned money. Otherwise, you will be fighting a war thats already be lost.

--MIKE
 
I generally look at the 5, 10 minute charts to see where the more major trends are, and use the 2 minute charts for signals to jump in when there is a divergence from the main trend.

One of the things I find is that, if I trade into the major trend and keep a stop loss of between 4 and 5, I generally always get the scalp I am looking for. Now, if the major trend reverses, I may get stopped out, but that seldom happens (at least in August and today).

I haven't traded the index fund in all seasons, so I have yet to see its many flavors.

My goal starting out is to just survive when I switch over to real money and grab a point a day net consistently.

What really scares me are these occasional 5-10 point "supermoves" where the index just suddenly jolts up or down (usually in the first half hour).

I'm not going to trade in the beginning of the day with real money -- it reminds me to much of the wild-west. I will just try some high-probability scalps in the mid-afternoon and, if I'm good at that, rack up some extra ES points to venture closer to the openings and closings.

aphie
 
Profitseer,

I'm paying almost twice what you're paying for commission because I like the platform and reliability. When I was scalping for small amounts I couldn't do much better than break even. Now I'm making sure to take a profit quick on 1/2 and letting the rest ride.

From day one I've always thought of commissions as a cost of doing business, and if I can't make a profit after that cost then I shouldn't (and won't be) in the business. As Vulture said, you need to take that commission out of winners and losers. Hang in there!

Whamo
 
Whamo,

"Never be afraid to try something new. Remember, amateurs built the Ark and professional built the Titanic." -- Unknown
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Yes, but professionals were sailing the ark while amateurs were sailing the Titanic.

aphie
 
Originally posted by aphexcoil
Vulture,

Excellent posts! (You too, Profit).

My only question is this:

If I trade into the more major trend against one of the minor-trend pullbacks away from the major trend, and I pick up +2 ES points here and there, would you consider this scalping or daytrading?

aphie
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I would be interested in a post from a major emini scalper, but if you use concepts of suppport and resistance in your trading you are actually NOT scalping. You are not acting like a floor trader but are acting like a speculator (taking positions based on an anticipated future move in the market).

Given that, I'd like someone to come in and describe what true scalping really is, just so we can know how that market participant functions.
 
Originally posted by aphexcoil
Puffy,

No need to be mean -- we're all just human here.

aphie
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Not being mean. But if you are really going to trade with your friends' money, then you will have ex-friends.
 
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