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

[jl1575]

That is not a bad strategy at all. Especially in longer trends. I too scale in on a larger move as price moves my way and if I see enough pressures to keep the move going. Why? Because the market has inertia and I am betting it will continue far enough to be profitable for scaling in as it moves my way.

The problem is on slower moving days or tighter range days that strategy will have you losing over and over again as you buy one...moves 2 points in your favor...buy another...instead of continuing the move it immediately reverses 4 points and suddenly you are down 2 points on 1 and 4 points on the other. You had a chance to lock in 2 points on 1 but didn’t and now you are sitting on $300.00 dollar loss when it initially moved in your favor and you scaled up.

See, in works both ways in the world of scalping. Scaling up can be a double edged sword as well as averaging down. However, I agree if it is a powerful move there is no reason to not add to a position as it moves in your favor.

On slower grinding days or smaller range days averaging down and grabbing a point or two over and over as the market gives it to you then entering again as it drops below your previous profitable exit, then averaging down again taking profits again and doing this over and over has the same effect as compounding your profits. In effect you are grabbing monies as the market hands them to you then going right back in again playing now with your previous profit. Averaging down can work if you know when to do it and how to use and what to do when wrong. Probably 1/3 to 1/2 of my trades are of the averaging down type, another 1/3 of just straight scalping long or short with no averaging down, A very small amount are scaling in as it moves in my favor. The latter certainly is not my bread and butter.

It is one thing to theoretically write something out and another thing to embrace the strategy live. That doesn’t mean it won't work in select context but do that on every trade all day long and it will be a losing strategy. Too often a trader will find he scaled in as it moved in his favor and only to see an actual profit on his first entry dissipate into thin air just about the time he adds to his winning position. Then if a strong reversal takes place just as he entered on his second or third time He finds himself with a much bigger loss and is ready to kick himself for not grabbing his profit when he had a chance.

You gonna get maybe one or two good trends in a session to do what you are talking about above. Of course there are days in broad channels or ranges there will be more opportunities for doing so. But often you will just get a morning trend and an afternoon trend that might make what you are talking about feasible. So, if a trader is content to wait for those periods thats ok. But he is bypassing many many trading opportunities on the 81 five min bars of the ES. On most of those bars 1 and 2 point scalps can be made.

Myself I had rather make 3 or 4 two point scalps with size even if averaging down..make my money and go fishing. Instead of waiting all day for a strong enough BO to employ the strategy you laid out above. 5% to 10% of the session is gonna be strong enough intraday trends to BET the way you are describing above and to facilitate employing the strategy above, that you lay out. Given the fact that most BO attempts, of anything, fail employing that strategy, as a discretionary trader, all throughout the session will have a trader giving back actual (not hoped for profits) over and over.

See both (Averaging down), and (scaling in) on favorable moves have their pros and cons.

So, we have to ask ourselves what is most of a sessions price action made of? Trends and Successful BO’s which are conducive to your strategy or is it made up of PA that would be conducive to other strategies? Again, there is nothing wrong with doing what you say above as long as it is done in the right context. I do it but it is certainly one of my lessor used strategies.

One can’t Or rather shouldn’t just type a theoretical (even mathematical) concept up and expect that is the case across the board and that it is the strategy “par excellence”. Like anything else, used in the wrong context, it can be a horrible loser.

Many years ago when I was a young kid someone talked me into selling Amway. The chalkboard diagrams and the perfect presentations made it look simple to a young kid gunning to make some money. With great zeal I bought my kit and with excitement hit the road with $$ signs twirling around in my eyes. I quickly found out people didn’t give a damn if the LOC product could in fact clean, and I might add in seconds, black shoe polish smeared into a white hanky. Sure my live demonstration resulted in amazing looks and comments from them but as soon as they heard the price of LOC their amazement flew the coop faster than a chicken escaping a possum. I quickly found out them Amway demonstrations on the chalkboard or paper diagrams were not going to be so easy to pull off. Them dollar sign in my eyes were adjusted to cents.....


My Amway venture did not last too long. I found out the ones making those $ were the ones signing up folks to hit the streets and do the work of selling for them while they stockpiled and distributed the products to their many many little busy work ants feverishly trying to make them dollars twirling around in their eyes as the “for sure” presentations were the factor that induced them to the laborious process of trying to pull it off, in the real world of knocks and rejections.

And then you had all those big conventions highlighting the successful distributors rolling in the $$$ that would raise the expectation and hope of the beatendown..downtrodden..worker ants and it was almost like going to church...the atmosphere of those conventions. One could leave floating high on cloud 9 scrapping up enough energy for another 6 months of hitting the road doing you best while the distributors way up the line are on yatchs or cruises or expensive vacations. After a while one begins to wonder “what the hell is wrong with me.” Why can’t I make it. I seem to be as intelligent as them vacationing distributors. Why can’t I make it work? Is something wrong with me? Am I just a flop and failure in life? No! what has happened is you have been hoodwinked into a perfectly laid out strategy that doesn’t “fly” in the real world. And you have been using the wrong strategy for the context where the probabilities for success are very small.

Bottom line: if the methodologies I employ trading are gambling so are yours LOL. So we both take a chance and bet. You bet when the odds favor you. I bet when they favor my tactics and strategies which is most of the daily trading session.

So if you have the Tudor Jones paper posted to your trading monitor “only losers average down” you may wish to rip it off and replace it with “scaling in, as price moves in my favor is a losing strategy for most of the day’s session”

Happy Trading!

Volpri actually has a very good point in making his strategy sucessful: Often it is not that hard to identify the direction within a certain time frame, however the precise entry point is hard and tricky especially in volatile market, and if you set a narrow SL, you would often end up a loss before the price running in your direction. So Volpri's model would work after you identify a potential solid price channel, then you just enter the first trade in the channel's directions (L or S), and then the second, the third to get get an average advantage entry prices, then when price moves in your direction, you reduce and reduce and finally you reach a profitable outcome.

 

[David's faith]

Volpri actually has a very good point in making his strategy sucessful: Often it is not that hard to identify the direction within a certain time frame, however the precise entry point is hard and tricky especially in volatile market, and if you set a narrow SL, you would often end up a loss before the price running in your direction. So Volpri's model would work after you identify a potential solid price channel, then you just enter the first trade in the channel's directions (L or S), and then the second, the third to get get an average advantage entry prices, then when price moves in your direction, you reduce and reduce and finally you reach a profitable outcome.

Risky but true. It is what Al Brooks teqches too

 

[SimpleMeLike]

P.S. Grab them profits!

Hello Volpri,

I agree Grab them profits. I have been trying this lately.

Question:

1. Does it make sense to grab them profits even if I know the profit I am taking is less than my risk? I have been trying to hold for 1RR, but scalping just seems too tempting lately.

For example,

https://www.tradingview.com/x/4Htfx5mw/

On this chart my entries are at blue dot, stops at orange dot, and took profit at purple dot.
I took profit at purple dot because, well, it made sense to to take profit there, even though, I know I am supposed to be holding for at least 1RR and banking on a high win rate overall.

My risk is larger than profit. All 3 trades were winners. Thoughts please? I appreciate your response in advance.

 

[volpri]

Hello Volpri,

I agree Grab them profits. I have been trying this lately.

Question:

1. Does it make sense to grab them profits even if I know the profit I am taking is less than my risk? I have been trying to hold for 1RR, but scalping just seems too tempting lately.

For example,

https://www.tradingview.com/x/4Htfx5mw/

On this chart my entries are at blue dot, stops at orange dot, and took profit at purple dot.
I took profit at purple dot because, well, it made sense to to take profit there, even though, I know I am supposed to be holding for at least 1RR and banking on a high win rate overall.

My risk is larger than profit. All 3 trades were winners. Thoughts please? I appreciate your response in advance.

If your first trade was entered near the close of the bar Then your actual risk was very little as it was simply 1 tick below the low Of the next bar. Therefore your R:R was somewhere near 4:1 (reward to risk) as your actual risk was tiny. good exit mathematically. Your second entry was A long entry on a PB H1 assuming you got in near the close of the bar. Your actual risk is the low of next bar plus 1 tick and the risk was more than your profit, but considering you were long at the top of the range and a triple top it was wise to exit there even if R:R was not great.

Your 3rd trade appears to be short at a now established TR. However I would have been going long not short in the bottom 1/3 Or 1/4 of a trading range. Being you were shorting the southern edges of a TR you did well to grab your profits. It was almost a RR 1:1 trade as your actual risk was 1 tick beyond the high of the next bar. Since you are short and not long at the bottom of a TR I’d just grab any profit and simply not worry about R:R. You sometimes just gotta grab what the market gives you on paper or you will be giving it right back. After your exit there were a series of 5 bull bars then a pb followed by a series of 4 bull bars that probably would have hit your stop and given you a loss. So, what is better a profit with a not too good R:R or a larger loss?

You will find often times when scalping RR is not so good but high win rate makes up for it. After that second series of bull bars after your third trade exit I would be shorting in the top 1/3 Around where your SL was on that third trade an capturing the subsequent move to the bottom of the TR.

 

[SimpleMeLike]

If your first trade was entered near the close of the bar Then your actual risk was very little as it was simply 1 tick below the low Of the next bar. Therefore your R:R was somewhere near 4:1 (reward to risk) as your actual risk was tiny. good exit mathematically. Your second entry was A long entry on a PB H1 assuming you got in near the close of the bar. Your actual risk is the low of next bar plus 1 tick and the risk was more than your profit, but considering you were long at the top of the range and a triple top it was wise to exit there even if R:R was not great.

Your 3rd trade appears to be short at a now established TR. However I would have been going long not short in the bottom 1/3 Or 1/4 of a trading range. Being you were shorting the southern edges of a TR you did well to grab your profits. It was almost a RR 1:1 trade as your actual risk was 1 tick beyond the high of the next bar. Since you are short and not long at the bottom of a TR I’d just grab any profit and simply not worry about R:R. You sometimes just gotta grab what the market gives you on paper or you will be giving it right back. After your exit there were a series of 5 bull bars then a pb followed by a series of 4 bull bars that probably would have hit your stop and given you a loss. So, what is better a profit with a not too good R:R or a larger loss? A Profit

You will find often times when scalping RR is not so good but high win rate makes up for it. After that second series of bull bars after your third trade exit I would be shorting in the top 1/3 Around where your SL was on that third trade an capturing the subsequent move to the bottom of the TR.

Thank you 100 times volpri within 1 minute,
Your review helps

It seems as if I am not understanding actual risk correctly.

I need to do studying on actual risk because I have been logging my risk in my spreadsheet as my protective risk (protective stop loss minus entry) and then using that risk when calculating my R:R. I think Al talks about actual risk as well, I need to watch on that subject.

I agree on everything you wrote regarding grabbing those profits and logical profit areas regardless of RR I want. I can always prepare for another trade afterwards

Just to make sure I understand correctly. For the trade below (and this is probably not the best example entering at bottom of the range.
Entry at blue dot
Initial risk at orange dot.
Profit target at purple dot.
actual risk at red dot.

Initial risk starts at $320
Profit is $150
Actual risk is $80

So I would log RR of 1.875 (150/80) in my spreadsheet journal? Not 150/320 RR=0.46 ?

https://www.tradingview.com/x/CA7ncTdg/

 

[volpri]

Thank you 100 times volpri within 1 minute,
Your review helps

It seems as if I am not understanding actual risk correctly.

I need to do studying on actual risk because I have been logging my risk in my spreadsheet as my protective risk (protective stop loss minus entry) and then using that risk when calculating my R:R. I think Al talks about actual risk as well, I need to watch on that subject.

I agree on everything you wrote regarding grabbing those profits and logical profit areas regardless of RR I want. I can always prepare for another trade afterwards

Just to make sure I understand correctly. For the trade below (and this is probably not the best example entering at bottom of the range.
Entry at blue dot
Initial risk at orange dot.
Profit target at purple dot.
actual risk at red dot.

Initial risk starts at $320
Profit is $150
Actual risk is $80

So I would log RR of 1.875 (150/80) in my spreadsheet journal? Not 150/320 RR=0.46 ?

https://www.tradingview.com/x/CA7ncTdg/

Yes nearly a 2:1 (Reward to risk) providing on that red bear bar (your entry bar) that you entered near the close and price subsequently never went against you beyond that red dot, after the entry.


Now if you entered before the close of that bear entry bar and price went back up to near the top of that red entry bar then traded Down to the close where it did then obviousley your actual risk was more than the red dot area.

The point is how far did price travel against AFTER entry on ANY bar (including your entry bar), plus 1 tick until your PT exit. That Distance, in movement or money, IS your ACTUAL risk and the ONLY risk I consider when figuring R:R AFTER the trade is completed. The initial risk is not necessarily a true risk. Price never got there so how can it be? Mathematically your trade was nearly a 2:1 reward to risk. You really and truly only risked $80 to make $150. You never actually risked $320 to make $80 as price never went that far against you.

 

[SimpleMeLike]

After that second series of bull bars after your third trade exit I would be shorting in the top 1/3 Around where your SL was on that third trade an capturing the subsequent move to the bottom of the TR.

volpri,

For this example, I assuming your initial risk at orange dot and actual risk at red dot after exiting bottom of the TR?

For this case, I am short at the light blue dot, exiting at purple dot.

https://www.tradingview.com/x/vuEqgvvL/

 

[SimpleMeLike]

Yes nearly a 2:1 (Reward to risk) providing on that red bear bar (your entry bar) that you entered near the close and price subsequently never went against you beyond that red dot, after the entry. I entered short with Sell Stop order once the big bear red bar (entry bar) closed 1 tick below the low that bear bar. So the blue dot is nearly 1 tick below the low of that big red bar is where I entered short.


Now if you entered before the close of that bear entry bar and price went back up to near the top of that red entry bar then traded Down to the close where it did then obviously your actual risk was more than the red dot area. Agree, but I always wait for bar to close before entry using stop orders to enter.

The point is how far did price travel against AFTER entry on ANY bar (including your entry bar), plus 1 tick until your exit. That is your ACTUAL risk and the ONLY risk I consider when figuring R:R after the trade is completed. The initial risk is not necessarily a true risk. Price never got there so how can it be? Mathematically your trade was nearly a 2:1 reward to risk. Thank you for the clarification and perfectly understood

Thank you very much volpri,

See comments in red above.

Well, I have been calculating and entering my RR incorrectly, because I been using initial risk and set my reward equal to initial risk, and wait most of the time.

Thanks for the clarification.

 

[SimpleMeLike]

You really and truly only risked $80 to make $150. You never actually risked $320 to make $80 as price never went that far against you.

Thanks for clarification. I never though of it that way, and it makes sense.

So if after enter and price goes instantly (no pull back or price going Against me) to target, then my actual risk for that trade is $0?

 

[volpri]

Thanks for clarification. I never though of it that way, and it makes sense.

So if after enter and price goes instantly (no pull back or price going Against me) to target, then my actual risk for that trade is $0?

That is how I look at it. INTIAL risk is simply a PROJECTION, not reality. That is, I think this trade might go against me so I put my stop here (In x place) just in case it does. But instead as soon as I enter ..bam... it goes my way... I suffered no adverse movement so in REALITY I had no risk! That is what IS REAL and the ONLY WAY to accurately measure the real reward to risk, when tabulating it after the entry and exit are complete..IMO.

A word of warning though. Anytime a trade goes my way quickly with little or no ACTUAL risk I Grab profits EVEN MORE quickly. Why? I caught the move as it was already moving so it immediately swept me along. That also means there is generally LESS distance left in the move. To exit quickly, grabbing a quick profit is counter intuitive as the tendency is to attempt to hold for a bigger gain ( “as in this baby is going to the moon”) but suddenly price reverses or has a PB that wipes out all paper profits and one is left with eyes spinning in circles wondering “what just happened?” Going my way with little or no risk also means this trade is a good R:R so I could jump out about anywhere and mathematically preserve the treasured concept guru’s spout out of at least having a 2:1 R:R. ROFLMAO

I can take a quick 3 point scalp and have sometimes a good R:R as the trade immediately went 3 points my way after 2 ticks actual risk. So in the ES I risked $25 to make $150 per contract and I am out while the guru is waiting for his beloved 4:1 R:R based on his initial risk and soon finds himself eating crow as his SL gets hit because he failed to realize the PROBABILITY of price actually reaching his profit target before his SL. I’m on my way fishing while he is licking his wounds. Traders fail to assign probability to their trade after considering the larger and immediate context PA has drawn on a chart. A setup can be identical to another setup but the dynamics change according to the PA environment in which the same exact setup is found. PROBABILITY needs to be a part of the equation and not just oh..I backtested and this same setup gave me 60 wins out of 100. Everyday every chart changes and there are different dynamics at place.

Remember every move up or down is gonna have a pullback. It can be shallow or it can be deep. It is not a matter of IF but a matter of WHEN. So if you suffer no adverse movement..no risk...then chances are some or much of the move has taken place already and therefore a PB is “closer”. There are exceptions like in very strong BO’s say of a range or trend line and I just happened to catch it with my entry at the moment the BO started. I will follow that further before grabbing profit.