Good Morning Volpri,
Thank you sir for the response and well wishes.
Good luck with your trading as well sir.
Techniques for Day Trading the ES, NQ, YM, MES, MNQ, and MYM
- Thread starter volpri
- Start date
Thank you sir for the response and well wishes.
Good luck with your trading as well sir.
“We often create our own luck.” Doing what works for each of us. Each of us are different. What works for me may not work for you and what works for you may not work for me. That is life. That is trading.
I just want to remind folks that the open, the close, and the range (difference between high and low of the bar) of each individual bar are important in the immediate context (say the last 5 to 10 bars) in which they are found when trading, using bar by bar analysis. They have something to say about who is stronger ATM the bears, or the bulls. That is why it is important to wait for the “close” of the bar on most trades.
There are exceptions to this such as when averaging down in a TR. Say I am shorting a TR where price is in top 1/4. I like to average down as price keeps moving towards the top and against me, and will often do so before the bar closes, if it has moved against my position sufficiently to make it viable for adding more to the losing position. For instance, I don’t want to average down on a 2 tick move against me in the ES. BOTH the present volatility AND my initial PT have something to say about how far price moves against my initial position before I will add more to the existing losing position.
For example if I am looking for a 1 point profit and price moves against my initial position 1 or 2 points I will likely add and hold waiting for a bounce that will give me a profit on both entries but at least a profit on the latter entry and a BE on the first entry. Since the scalp is for a 1 point which I consider a min scalp I want in and out quickly.
There are exceptions to this such as when averaging down in a TR. Say I am shorting a TR where price is in top 1/4. I like to average down as price keeps moving towards the top and against me, and will often do so before the bar closes, if it has moved against my position sufficiently to make it viable for adding more to the losing position. For instance, I don’t want to average down on a 2 tick move against me in the ES. BOTH the present volatility AND my initial PT have something to say about how far price moves against my initial position before I will add more to the existing losing position.
For example if I am looking for a 1 point profit and price moves against my initial position 1 or 2 points I will likely add and hold waiting for a bounce that will give me a profit on both entries but at least a profit on the latter entry and a BE on the first entry. Since the scalp is for a 1 point which I consider a min scalp I want in and out quickly.
Here is a post I made in Padutrader’s journal (Tribute to Brooks). Just thought it good to repeat it here.
It has to do with counter trend strength specifically related to PB’s. And how to identify when a PB is likely ending and a continuation of the former trend is forthcoming. I. Other words; how do we discern when a PB is ending resulting in a continuation of the previous trend or when the PB is just the first leg in a reversal? What are some of the signs to look for to make this determination? This post deals with the signs for the continuation aspect not the signs for a reversal aspect. Padutrader says you need to look for countertrend strength. He is correct. Here my post in his journal:
“Exactly. That I call a PB reversal. As I have mentioned in my own journal. Take for instance, a bull trend that has a PB. First of all, the PB was caused by bulls taking profits or bears attempting to reverse the bull trend into a bear trend, or a combination of both (more likely). So, how do you decide if the PB will fail and the bull trend will resume or if a reversal of the bull trend is happening and the PB is just the first leg of the reversal?
Like you said you need to see some counter trend strength. You want to see some sign that a reversal of a reversal is taking place. The first reversal being the PB. The second reversal being an attempt to reverse the PB. So, what do I look for?
In a bull trend that has a PB, I want to see a bar in that PB closing above it’s midpoint and preferably a bull bar (a close higher than it’s open) but can be a bear bar…just a weaker attempt to reverse the PB, AND preferably with a tail on the bottom of the buy that is 1/3 to 1/2 or more of the bar range (or most of the bar body bullish) AND better if it is a decent size bar relative to the other bars in the PB.
Going long on the next bar (first entry) has a high probability of making a profitable scalp of at least 1 point and often much more as the original bull trend continues after the PB reversal. If there is any doubt a trader can wait for a second attempt to reverse the PB, before going long. The problem with waiting is the second attempt may never come! The market can take off fast from the first attempt ….faster than crap through a goose. And the trader misses out on a reversal of the reversal.
To help me determine if I will go with the first attempt or the second attempt to reverse the PB I will take note of the slope of the original bull trend. If it is fairly steep and the previous PB’s (f any) are minor PB’s AND there are no large exhaustion bars (indicating a possible ending of the original trend a a morphing into a TR or bear trend) then I am quite happy to go long on the first attempt to reverse the PB. With a SL in place LOL!”
If the original trend is a bear trend….well just take those concepts presented above a figure out how to apply them in a bear trend.
It has to do with counter trend strength specifically related to PB’s. And how to identify when a PB is likely ending and a continuation of the former trend is forthcoming. I. Other words; how do we discern when a PB is ending resulting in a continuation of the previous trend or when the PB is just the first leg in a reversal? What are some of the signs to look for to make this determination? This post deals with the signs for the continuation aspect not the signs for a reversal aspect. Padutrader says you need to look for countertrend strength. He is correct. Here my post in his journal:
“Exactly. That I call a PB reversal. As I have mentioned in my own journal. Take for instance, a bull trend that has a PB. First of all, the PB was caused by bulls taking profits or bears attempting to reverse the bull trend into a bear trend, or a combination of both (more likely). So, how do you decide if the PB will fail and the bull trend will resume or if a reversal of the bull trend is happening and the PB is just the first leg of the reversal?
Like you said you need to see some counter trend strength. You want to see some sign that a reversal of a reversal is taking place. The first reversal being the PB. The second reversal being an attempt to reverse the PB. So, what do I look for?
In a bull trend that has a PB, I want to see a bar in that PB closing above it’s midpoint and preferably a bull bar (a close higher than it’s open) but can be a bear bar…just a weaker attempt to reverse the PB, AND preferably with a tail on the bottom of the buy that is 1/3 to 1/2 or more of the bar range (or most of the bar body bullish) AND better if it is a decent size bar relative to the other bars in the PB.
Going long on the next bar (first entry) has a high probability of making a profitable scalp of at least 1 point and often much more as the original bull trend continues after the PB reversal. If there is any doubt a trader can wait for a second attempt to reverse the PB, before going long. The problem with waiting is the second attempt may never come! The market can take off fast from the first attempt ….faster than crap through a goose. And the trader misses out on a reversal of the reversal.
To help me determine if I will go with the first attempt or the second attempt to reverse the PB I will take note of the slope of the original bull trend. If it is fairly steep and the previous PB’s (f any) are minor PB’s AND there are no large exhaustion bars (indicating a possible ending of the original trend a a morphing into a TR or bear trend) then I am quite happy to go long on the first attempt to reverse the PB. With a SL in place LOL!”
If the original trend is a bear trend….well just take those concepts presented above a figure out how to apply them in a bear trend.
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Volpri,
If you going to discuss the profit/reward, it is good business sense to discuss the risk (or stop loss placement) in the same sentence or in the next sentence.
What is X in the sentence below?
"Going long on the next bar (first entry) has a high probability of making a profitable scalp of at least 1 point with a risk of X point risk"
No set amount in terms of points. I use PA based SL’s and the size of the SL is dependent on the current volatility of the market. Usually they (my initial SL’s) are a previous swing high/swing low but if I am in a trade with a large strong BO spike bar I may set the SL at 50% to 70% retracement of that large bar and not at the previous swing low swing high.
My SL’s are adjustable as are my PT’s. That adjustment from an initial SL to a modified SL is generally based on the dynamics of any movement after my entry. I am keen on two concepts:
1) The price that was made.
2) And the “How” it was made. (i.e. the dynamics)
Scalping often appears to have a fairly poor R:R ratio. If based in the initial SL. However, if one trades high probability trades the “actual” SL can often times be very small. The actual SL (actual risk encountered) is defined as the MAE plus 1 tick. So, the actual distance in points or ticks the market went against my position PLUS one tick before it went in my favor and made my PT.
In summary, I place my initial SL’s based upon previous PA and the present volatility. That placement can be modified depending upon the dynamics of movement after my entry.
After the trade is over if I am inclined to I will figure my R:R on what the market actually handed to me while the trade was on and that is not based upon my initial SL. It is my actual risk I endured during the trade. Therefore, I often times will have a 4:1, 6:1, 8:1 or more, reward:risk (actual) when scalping.
For instance, say I buy 1 contract of ES at 4300.00 it goes against me 1 point then moves in my favor 4 points and hits my PT. My actual R:R is 3.75:1 on a 4 point scalp.
Nevertheless, seldom do I even look at, or even consider R:R. That is an exact mathematical equation, that on it’s own, leaves out probability. Anyone that has traded for any reasonable amount of time is very cognizant that the markets are anything but exact math.
Many times a trader will say “I will not exit until I reach my min R:R.” “Price must hit my PT before I will exit.”
So, say his min is 2:1. Say he takes a trade risking 1 pt for 2 pts profit. Say in the dynamic of the trade, after his entry, it goes against him 1tick then goes in his favor 1.5 pts then stalls. He refuses to “take”the profit because he is stuck on his 2:1 R:R (reward to risk) based upon his initial SL. The market then goes against him taking out his SL. He could have had a profit with a good “actual R:R” (3:1) instead he is marking up one for the loser column. I think R:R is highly overrated especially when it comes to scalping. I am interested in a few things:
1) high win rate
2) locking in Profits as I can always enter again compounding.
3) the probability of the trade hitting my PT before it would hit my initial SL
4) knowing where my max loss point is at that would indicate to me my read is off and my premise for making the trade is wrong therefore, I just need to get out and go in the correct direction.
5) At the end of the session I want my profits to be greater than my losses after commissions. Significantly enough to make it worth my time that I invested in trading that particular trading session.
6) When employing averaging down as a tactic I like to make a profit on all contracts when averaging down if only 1 tick on my first entry to cover commissions for it. That said, that is not always possible when averaging down. Say I averaged down 6 ES contracts. I may make money on 4 contracts and lose on 2 contracts but overall make a decent amount on the trade.
There are other things too but in general I am looking at these things.
Not wishing to complicate things but I often will have more than one initial SL. The one I end up using as my max loss depends on the dynamics as price action unfolds AFTER I made my entry. Algos are known for swiftly moving taking out SL’s creating buying opportunities then just as quickly reversing back to the previous point. Not so much that they are gunning SL’s but the are creating buying opportunities. One’s SL just happened to be in their way LOL. I wish to stay out of their way hence my initial SL’s are based on previous PA and previous volatility but often include a second bigger SL IF the present volatility suddenly increases dramatically. If that newly increased volatility then has FT (follow through) then I am more apt to bite the bullet and take the loss. And go in the other directly usually doubling up in size and quickly getting my loss back usually with sone additional profit.
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My post #1607 may shed some light on this. I do not fixate that much on R:R (reward to risk) as all the gurus do. I am more interested in the probability of my trade hitting my PT before it would hit any SL I would devise. And if I can maintain a high win rate then all things come out ok in the wash. I automatically know that scalping is generally going to have a fairly poor R:R ratio based on the initial risk but if I am good at reading the PA I often get a very good actual R:R. But sense the market is full of uncertainty, I don't want the darn market taking me out because I had a too tight of a SL. I have no desire to bleed to death by a dozen paper cuts. I want a fighting chance at the game. My redemption is taking profits as the market hands them to me and staying out of the way with a big enough SL that will give me that fighting chance of making that profit instead of being sliced to death a dozen times to get one decent slice of the cake.
For instance, I took 9 trades yesterday. All winners no losers.
Great post Volpri
Hello volpri,
This is good work and nicely written.
Thanks for the reply. I perfectly understand your position regarding the high probability.
Another advantage of focusing on high probability trades and high win rate, is the mental approach of being Right on a day to day basis. Being right a lot helps the mental as well. It definitely helps me mentally.
Questions:
1. Does having a high win rate help you mentally?
2. Does having a high win rate helps you believe that your price action skills is getting better and bring you more confidence to continue scalp trading"
3. Please explain what having a high win rate does for you personally?
4. In your professional trading experience, do you believe that beginning price action discretionary traders should focus on high win rate (scalping)? And please explain why?
5. If a beginning price action trader starts scalping with the aim of continuous focus on small profit targets and risk adjustment based on price dynamically changing in real time AND the trader overall PnL is not increasing over XXX amount of trades. What do you suggest or recommend to this trader?
Thank you,
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