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

Food for thought.....


“At one point, when you become consistently profitable in the markets, the success you might be craving so much right now will not matter to you as much anymore – trust me, it becomes less and less impressive. Winning trades become boring, losing trades equally boring– not void of emotions, just boring! You will feel the need to reiterate that sense of striving for something you care about, and trading will not provide you with that anymore. There comes a point where it becomes just a means to an end. Notice at this juncture that very few people are going to say, “oh, I’m done, I met all my goals, and now I am just going to sit down and do nothing.” Even when things go as well as they can go, the search for happiness and the very drive to keep boredom and dissatisfaction away continues. So in this context, many people have begun to wonder whether or not a greater and deeper form of well-being exists. A form of well-being that is not contingent upon merely reiterating one’s pleasures and avoiding one’s pain. Is there a form of happiness that exists in the midst of old age, before one’s desires get gratified, in the very midst of life’s vicissitudes, death, trading losses, etc..? I think this question lies in the periphery of everyone’s mind. For the longest time, I have been pondering on that question. And I challenge you to do so as well. Start observing your thoughts, your desires, your feelings, your behaviors... and become the observer of your own life. Believe me... by doing so you will discover many things about the nature of living. What I have discovered over the years, after doing so much introspection, is that happiness is not a place you go to. Happiness is not a person; it is not a trade, it is not a successful career. Happiness is not a dream you achieve. Happiness just is! We can create lives that are truly worth living given that these lives ineluctably come to an end. And, the capacity for us to see those changes and to live those lives is largely dependent on the frame we put on the present moment. No matter where you are and no matter what you do; no matter how you look and no matter how much or less you have, you will find fulfillment in your life the moment you drop your self-concerns and focus on what is here and now. If you are not happy in those specific situations; if you are not happy with what you have and with who you are now, you will not find happiness by merely reiterating your pleasures. You may delude yourself into thinking otherwise, but in the end, you will go back to feeling miserable and unfulfilled. If there is a form of happiness that exists that is not conditional, then it should be found in the present. It is difficult for most of us to accept this fact because if we do, we will have to wake up and take responsibility for how we feel and for our actions. We will have to take responsibility for our own lives, and this is challenging, more so scary. For those of you who are on this journey of self-discovery and self-mastery, as time goes by, and as you travel farther and farther in your journey, you will discover what happiness is all about– and what is not. You will see that it is not money; it is not big houses, shiny cars... It is not even found in people but rather in having a meaning, a purpose in life, larger than your sense of self. It is always about giving, about sharing what is best about ourselves with others, because, when we do so, we offer others the possibility of happiness and well-being. Nowadays, I find my purpose by living simply and by reducing my physical footprint on this earth. I also share a portion of my profits from my different endeavors to charity whenever the markets are good to me on any specific year. I find my purpose by writing and helping other traders not merely survive but make real changes in their trading because I know success in trading is possible for anyone. I am a living proof that anyone can do this. I don’t have anything extraordinary... I don’t possess I don’t possess any special talent. I am just a regular guy who didn’t give up.”


Excerpt from Yvan Byeajee’s book: Zero to Hero: How I went from being a losing trader to a consistently profitable one—-a true story
 
Price Action:

1) PA is static as in charts that have already been drawn. And it is dynamic, i.e. charts yet to be drawn and how they are being drawn. In the latter what is important is the “how” they were drawn. The former serves to glean visual ideas for possible strategies and tactics and is the extent of possible backtesting on PA. The latter highlights the principle of flexibility and adaptability.

2) It is nigh impossible to code PA.

3) It is nigh impossible to backtest PA other than the visual backtest as mentioned above. See ….the “dynamic” throws the monkey wrench into the test. Every time.

4) PA consist of principles to be learned about price movement. Concepts about price movement.

5) Setups are a sort of tactical mechanisms for entry and exits including SL’s to be deployed within PA principles. But they are uncertain, and needs be, by nature. Because they are employed in uncertain PA. Everybody is looking for the elusive certainty tgat simp,y cannot be found. The gurus harp and harp..”sure fire system…backtest 5 years…easy $$$…buy now..but wait…if you buy within the next 10 minutes…bonus # 1 bonus #2 are yours, absolutely free! Don’t miss this once in a lifetime offer! Hurry! Call that number on your screen! Now!

As much as traders long for certainty (if I do this then this will happen) and guiding rules carved in stone, it is a fleeting goal NEVER to be fully obtained. That is right I said NEVER.

6) PA is a fog we “learn” to navigate in. We do not know whence the fog came nor how long it will last, nor how thick it will be. We can only watch the “dynamic” as it unfolds and adjust our navigation upon what is happening.

7) Why is PA a fog? Why can it not be backtested? Why can’t it not be boiled down to concrete rules for entry..exits..and SL’s? Because of the innumerable variables inherent therein.

8) PA ALWAYS draws breakouts, ranges, channels, trends, pullbacks, wedges, triangles, flags…etc. and other patterns.

9) Every chart will have any number patterns or combination of patterns of number (8) above.

10) BUT NOT ALL ….BO’s are the same, dynamically, as they are happening. Not all ranges are the same. Not all PB’s are the same. Not all wedges..triangles..flags…etc are dynamically the same. Not all SL’s can be the same nor work the same because of the dynamics of “how” PA by it’s nature, tends to be. Coding PA is nigh impossible. Certainty in PA is virtually impossible. Trying to backtest PA is unachievable…and a waste of precious time and energies. IMO a cursory visual glance of a static chart can serve as a guideline to the extent of possible backtesting that can be done on PA. That is a sort of visual backtesting. For the purpose of gleaning “possible”, workable setups. But there are just too many variables. There is entirely much fog for backtesting of PA to be a feasible activity? Too much uncertainty. Too many players. Therefore:

11) The best we can do is glean and learn how to respond in the dynamic as things are happening.

12) As concerns watching a single market or several: much of that concept depends on what kind of trader one is. For instance, as a scalper of 1 to 8 points in the ES I see plenty of trades to be taken; everyday. Nary a day goes by that one has to set on their haunches waiting. Not if one has a toolbox of tactical setups to deploy as the dynamic is unfolding. Do I use a screwdriver right now in this market? Do I use the vice grips? Do I use an open end wrench? Do I use a skill saw? A chain saw? A saws all? Do I average down? Is the dynamic indicating scaling in on a losing position is a probable good tactic, given the context of static PA even as the dynamic is unfolding. Does the dynamic imply that scaling into a winning position to be a decent scenario (as employing such a tactic can fail as often as it can succeed) as doing so can even work against a trader? Looking at the static (the chart already drawn for the session) and the dynamic (how it is being drawn) where do I place my SL? Do I move my SL’s or leave it? I know…I know..the gurus say never move it. Never average down…always scale into winning positions. Press the trade! (whatever that means…LOL) ….incessant echo’s thru the trading universe, never to be quieted.

13) IMO IT IS MUCH MORE BENEFICIAL to spend one’s energy and time developing tools to employ as the markets unfolds dynamically. I will often change my mind and on a dime, exit and turn, doubling up in the opposite direction, because of the dynamics taking place at the moment. Yes, I will employ tactics and strategies based in a large part upon static charts, using those as mechanisms to spot possible setups, entries, exits and SL’s but the dynamic…the “how” that price is being made and the “how” the chart is being drawn is of upmost importance to me. As to whether I will “stay the course” or change my mind even doing the opposite, or perhaps moving PT’s…SL’s…or just plain getting flat and waiting for more info.

I DO NOT BELIEVE IN NOISE IN THE MARKETS NOR DO I BELIEVE I CAN BOX THE MARKET IN WITH A SET OF RULES, OR PLANS. I believe there is a reason for every movement whether it be 1 tick or 100 ticks. That doesn’t mean I can always know the reason but by correlating the static with the dynamic I have a better chance at deciphering what is happening, the why, and the probabilities of the direction for the next scalpable move. I believe I must have several tools at my disposal and the skills to use them. I believe I must be flexible to change on a dime and employ a different tool, and lay one aside, even if only for the moment. Such is the modus operandi of a scalper.

PS …most don’t define scalping as 1 to 8 points like I do on normal days and 1 to 12 points on more volatile days but that too is a matter of opinion!
 
volpri said:
I believe there is a reason for every movement whether it be 1 tick or 100 ticks.
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Imo, this is a false assumption, you believe a reason but can never predict it.

Imo, what you believe is hindsight analysis, after the fact you recognize a pattern and then assume because you see the pattern it must have a reason at the time the tick was formed.
 
I believe in noise, reason: The majority of traders are clueless, hence why there is randomness and noise in the mix.
Price is not always right.
The reason I make money (and Buffett) is because we know price is often wrong.
 
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There is always a reason for every movement. Whether that movement has probability of continuation is to be deciphered and conclusions arrived at and action or no action decided upon. One doesn’t need to know the reason for the movement to initially structure a trade, whether 1 tick or 30 ticks, but what is more important is to recognize “how” the movement was made.
 
themickey said:
I believe in noise, reason: The majority of traders are clueless, hence why there is randomness and noise in the mix.
Price is not always right.
The reason I make money (and Buffett) is because we know price is often wrong.
More...


Based on that logic, the market is nearly all noise and nearly always priced incorrectly. From hour to hour, day to day, very little if anything, occurs beyond perception changes, forget material changes, that would warrant large movement in underlying issues and associated indexes. It's nearly all noise according to you. Yet, your portfolio fluctuates every day. Hopefully you will never need to exit the market.
 
themickey said:
I believe in noise, reason: The majority of traders are clueless, hence why there is randomness and noise in the mix.
Price is not always right.
The reason I make money (and Buffett) is because we know price is often wrong.
More...
It depends upon one’s perspective and trading strategies. What is the reason for when you and or Buffet lose money?

If ones perspective is fundamentals then price is not always aligned with fundamentals. But neither is fundamentals always aligned with price LOL hence Buffet at times loses a few million.

As concerns an intraday trader price is always right but “how” it was made is of far more importance. As an intraday trader you fight price and over the long haul you will lose. That is why day traders keep losing. They fight the obvious. However, what can be off for day-traders is timing, hence averaging down or doubling up and reversing can be useful techniques, if used properly, in the right contexts.
 
There are 81 bars on a 5 minute ES chart. Most days there is usually a scalpable trade, or more, on EACH one of those 81 bars, if viewed on a lower time frame. In other words, a “discernable” trade within the 5 min bar can usually be detected if one dials down to a lower time frame to see it. The reason I stick with 5 min TF is I don't have to be in such a rush to decide and thus less likely to misread. There are plenty of trades most everyday to take on the ES. Way more than enough. For instance, a good size bull bar on a 5 min chart closing on its high is usually a BO of something on a 1 min chart. Often that 1 minute BO has two legs to it hence, at least one scalp can be taken, even if done so on the second leg of the BO, on the 1 min chart. All it takes is watching the price on the 5 min chart and observing the dynamics about “how” the bar is being formed and where price is lingering as time is counting down on the 5 minute bar…where it will likely close…etc..then also observing a 1 min chart to identify entries, exits, and SL’s.

The same sort of relationship can be made with say 5 min bars and 15 min bars. Or 15 min bars and 30 min bars..etc. Lessor amount of trades will present themselves at the higher two TF’s but still enough opportunities to trade for the day. PA is PA regardless of the TF. I like 5 minute TF because I don’t have to feel rushed to decide. And it is harder to structure an initial entry..SL…and PT trade on a 1 min TF. Not much time to decide.

Again IMO as a scalper there is no noise. Only a static chart of past recent 5 min PA and other TF’s of PA , dynamics of actual present movements, and projected probability of near future movements. It all has meaning but at any point in time, new dynamics can enter in the market, hence making quick adjustments and flexibility are skills to be practiced and learned by scalpers.

An this takes time and practice to hone. And at times balls of steel. Finally, psychological development becomes necessary too and is in the mix.
 
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