Techniques for Day Trading the ES, NQ, YM, MES, MNQ, and MYM

[volpri]

March 23,2020

Here is a trade where I averaged down long. Was wrong and had to take a loss of just over 250.00 Then I right away more than doubled up and reversed directions getting the loss back plus ended over $900.00 to the good in just a few minutes.

See I know, that on any single trade depending on the tactic used and the context I have usually, at best, a 60% chance that it will be a profitable trade and a 40% chance that I will be wrong. In some cases using SOME tactics it is almost reversed. That is, a 40% chance of being right and 60% chance of being wrong but in those trades IF the 40% chance of being right pans out more money can usually be made. Usually two legs or more of movement will follow in such cases.

So, what was the basis of this trade? We opened RTH's at 8:30 and basically went sideways for about 20 bars. Before we got 20 bars sideways, on the 9:20 bar I averaged down short 3 contracts from around the middle to the upper half of what looked to be a developing range but not yet confirmed as so. I usually want to see 20 bars sideways to confirm it is a range.

I then covered all 3 contracts 3 bars later for around 130.00 profit. On the 20th bar from the open I deemed by this time price was in a probable range. So, I started trading using range tactics. Since price was on the 20th bar trading in the lower 1/3 of the range I started going long on the 21st bar and averaging down as price moved against me. I was expecting it to possibly breach the bottom of the range on a failed BO attempt then reverse and head back up to the middle or top of the range, where I could exit with a profit. But, by the 10:20 bar I am 4 contracts long and losing over 200 dollars. I waited for the next bar to see if the BO attempt south out of the range was going to be a successful BO, or not. By the 10:25 bar I decided there was going to be more downside as price did not trade back up into, or towards the range. And that bar also closed outside the range like the BO bar (prev bar) and it was also a bear bar. So, I exited my four contract position at around a 250.00 loss. I immediately reversed and went short 9 contracts at one wack (see red triangle) On the next bar 10:30 bar I added 1 more contract short thus making my total position short 10 contracts. Three bars later I covered my shorts on bar 10:45. By this point I had recovered my loss and was now in profit over 900.00. Regardless, of what price does afterwards this is how I exit when I think my original premise is now wrong and reversing to get back my loss quickly and make some money.

Bottom line, if I use averaging down I have to be "johnny on the spot" to exit and reverse when wrong. And just go with the market.

 

[toby400]

'Reverse when wrong'
I agree that being on the spot and reacting without hesitation are crucial ingredients of scalping

 

[volpri]

'Reverse when wrong'
I agree that being on the spot and reacting without hesitation are crucial ingredients of scalping

It is hard for most traders to exit and reverse when wrong. But it becomes easier if a trader can train himself/herself to not look at the money or points but to focus strictly on the process of trading according to ones strategy and tactics. One way, if scalping, is to hide the currency and points indicator. Some DOMS have an option to do that.

 

[Turveyd]

It is hard for most traders to exit and reverse when wrong. But it becomes easier if a trader can train himself/herself to not look at the money or points but to focus strictly on the process of trading according to ones strategy and tactics. One way, if scalping, is to hide the currency and points indicator. Some DOMS have an option to do that.

Cause they fear the reverse will also be wrong therefore there loss could of been a profit and there new trade will be a loss also, tricky mindset to get over.

I tried hiding the money once, thought I was up, checked end of day, massive red, strange how you forget the losers and high 5 yourself for winners.

 

[volpri]

Cause they fear the reverse will also be wrong therefore there loss could of been a profit and there new trade will be a loss also, tricky mindset to get over.

I tried hiding the money once, thought I was up, checked end of day, massive red, strange how you forget the losers and high 5 yourself for winners.

Lol yeah I wouldn’t recommend hiding it until a trader has confidence in his system and seen it pan out enough to be consistently profitable. Then one can eliminate price so as not be a distraction. Or after each trade is completed RT then make it visible momentarily so you can get a mental note of how you stand at that point then hide it again before taking the next trade.

 

[volpri]

When I did the reversal in the chart above I was down around 250 or so and by the time I added the other contract on the next bar I was down even more. But if you look at the chart on the bar I that I took my loss on ..well ...it stayed below the BO point (bottom of the range). And it closed, as a bear bar, near it’s low. And the next bar stayed below the BO point also and it closed near it’s low with tail on top. Together this was indication of further weakness and good enough reason to continue holding my reversed position.

 

[Turveyd]

DAX Slowing M1 range wise 20SL might be okay, NQ still looks to strong for me, I'll post some live trade charts, explain method better.

Nothing else to do next 3 or 6 weeks, so might aswell focus on trading, locked in but will ride Mountain Bike a lot

 

[volpri]

Ok

 

[volpri]

I want to post the trades I took yesterday and make some comments. While all the trades were winners on barely paid for the commissions. All but two traded utilized averaging down. One is an example of averaging down in deeper pullbacks. Here is a RTH’s 5 min chart showing all the trades.

First notice a big gap up on the open. That indicates strength. For the first 3 hours no low ever went below the low of the opening bar. After the initial opening bull bar the bears tried to reverse it and close the opening gap. They could not and this setup a high probability of price evolving into a Bull Trend From The Open (abrev T1BU). When that first deeper PB between 9:30 and and 10:05 price resumed up. The low of the Pb never touched the EMA. From the open the odds that this bull trend from the open would be in the form of a SPBL trend (small pb bull trend) instead of a strong bullish BO was evident by the overlapping bars even as price moved up slowly. By the end of that larger PB around 10:05 it confirmed likely SPBL trend because price stayed above the 20 Ema.

In SPBL trends the tactic is to average down on PB and exit above or equal to your first entry. This is scalping. And it can usually be done with a high win rate.

Another tactic that can be used is to keep adding long on pb’s toward the 20 Ema, holding them until a reversal or deeper PB ensues, then exit the positions. Sometimes the SPBL will last the ENTIRE session without any deep PB’s. In such a case, a trader can hold his position and keep adding to it on PB’s until near the close and then exit. This is call a SPBTD (small pullback trend day)

So, lets say a trader adds a position long after that first deeper PB on that 10:10 bar which is a H3 (high 3 is the third time a bar goes above the high of the previous bar after a Pb). Why is it a H3 entry? Because the first PB after that little move up is bar 9:30, a bear bar, that goes below the low of the previous bar. The 9:40 bar is the first attempt to resume the trend. Then the 9:55 is the second attempt. The third attempt is the 10:10 or a H3 attempt and it resumed the trend. I didn’t trade that H3. I already had a long position on bars 9:20 and 9:25. I exited that position on bar 10:25 after that H3 mentioned above.

So, utilizing the tactic of holding and adding on pbs a trader would keep doing this until the close of bar 11:45 and then just exit as this PB has bigger bars, indicating it may be a deeper PB that could eat his paper profits up. Certainly by bar 11:50 he would want to be out if utilizing the buy..hold..add to strategy in SPBL.

I prefer the first tactic of averaging down on pb’s to towards the 20 EMA AND SCALPING out once the position goes above my initial entry. Then I wait for another PB and do the same. I am a scalper by nature and just prefer trading this way. It makes for a high win rate and I am adding to profits and I often get to compound.

Around 11:40 a two legged deep PB started that lasted until 1:10. Then the last two hours of the session was a resumption of the SPBL trend. It is not uncommon for a Deeper PB to happen around this time but more often we see it happen around 1:15 to 1:45. When it does happen earlier like in this case then we often get a reversal and a continuation of the previous bull trend around 1:30 or so that will continue until the close. But often there is no deep PB until 1:30 or so, then a reversal that starts back the bull trend closer to the close. More will be said about these deeper PB’s shortly and how to trade them.

Ok. I have given an overview of the day and it’s structure. Next in subsequent posts I want to focus on the individual trades I made this day and make some comments about them.

 

[volpri]

Please look at the chart above for MES that shows the days PA structure for the entire RTH’s and all the trades I took this day 24 of March. It is important to try and determine early on what the day is likely to be so as to pick the trading tactics I will use. Is it a spike and bull channel from the get go? Or a trading Range day? Or a small pullback bear trend day?...etc. I use different tactics for BO’s than I use for spike and bear channel or for trading range day. I use the tactic that exploits the PA structure for the day. The earlier I can detect the probable days structure the better off I will be when deciding what tactics to use for the remainder of the session.

Now I took this trade ON PURPOSE to drive home some points:

1) Don’t scale in as price moves in your favor. In general while scalping MES or ES for 1 to 10 points using a tactic of scaling in as price moves in your favor (like I did here scaling in long) is not a good nor viable way to scalp these instruments manually. I prefer taking my profits jumping in and out multiple time. The gurus (bless their pea pickin heart) mean well but “cut your losers short and let your winners run” is a sorry, no good, loser tactic for manual scalping. I change that to: “average down into your losers and cut your profits quickly”

By scaling in instead of averaging down and trying to let profits run I had to wait about 60 minutes to make $10.00. That barely paid the commissions on 5 contracts. Whereas, if I would have exited that scaled in position when I had 200.00 profit then AVERAGED down on that next PB and exit it 2 bars later for another 200 dollars or so AND then averaged down again(blue) and exited those on that 10:10 bull bar for another third 200.00 I would have pocketed around 600.00 minus commissions instead of 10.00 minus commissions.

Lessons to learn:

1) Generally (there are some exceptions) don’t “scale in” when manually scalping these instruments.

2) Averaging down is a much better strategy for scalping than scaling into winners. It is much more profitable and tends to render high win rates.

3) When manual scalping grab your profits quickly before the market causes them to disappear and make you hold thru a drawdown just to then breakeven (like in this case). Jettison the much taught concept of “let you profits run and cut your losses quickly.” Instead, if the larger context and immediate context and immediate patterns support doing it then “average into your losses and take your profits quickly.” You can always enter again if price continues after you exited. GRAB those profits. This will result in having a kitty to play with early on in the session and the ever confidence builder of a high win rate.

HOW NOT TO SCALP