The Ultimate DAX Scalping Discussion Thread!

S

Scientist

OK folks, many questions and discussions have come up regarding scalping the DTB Eurex-based DAX, scattered all over T-REX's scalping thread etc. In order to leave those alone, here is a new thread, to discuss things about scalping this index, on-topic and exclusively.

This thread shall revolve around scalping the DAX, so "swing" style day traders aren't welcome, and asked to open their own threads. The kind of trading discussed here is volatility-oriented trading, basically trading exactly that which "day traders" call "noise", so it should be quite clear to most people what is meant. Trading this way involves mainly reading tapes, reading depth, and watching short-term momentum and index correlation differences, rather than charting or TA indicators.

Let this be said forward: I will answer questions, if they are good, but will overlook those that aren't. I have better things to do with my time these days than answering silly or simple questions which you can have answered elsewhere or by using the search feature in the top right corner. I want this to be a top-quality thread, with top quality questions and answers, so those that aren't, are ignored. My reasons for this thread are for both the benefit of others as well as my own - Namely to do exchange with other scalpers, and hopefully learn a few good things to improve my approaches. So please respect that any writings out of line with this philosophy and purpose will not be given attention, since they are a waste of your and my precious time.

I will also contact moderators to keep this thread clean, so trolls, save your breath and go somewhere else. Negative comments and remarks etc will not be tolerated, only positive, constructive contributions shall remain, so we get ahead, not backwards. Many thanks for your consideration.

Warmest Regards - And Happy Discussing! :)
Scientist.
 
1. Are you using indicators to spot oversold or overbought situations?
2. If not - why not?
3. Do you follow Eurostoxx50?
4. If yes - who leads the way, Dax or Eurostoxx50?
5. Do you follow the US indexes?
6. If yes - which one is the best to follow?
7. Do you follow EUR/USD?
8. If not - why not?
9. How do you trade the news?
10. How do you trade the open?
 
To answer easyrider's question and clarify my approach a little (probably more than I should - LOL) I will re-quote a recent PM to brother Baruch:

How, OK, where shall I start? Well, I've given you most of the things I look at in T-REX's thread just then.

Foremost, I'd like to clarify that I mainly scalp - I am in the market most of the time, and tend to stop-reverse on the smallest instance, most of the time break-even or -1, -2T or so, not more!

This is a very "commission & exposure aggressive" style for a beginner. Personally, I call scalping the most conservative style of all, because your % of capital exposure at a time is so tiny. While this definitely clashes with common perception, it is mathematically true, besides the fact that most things successful traders do seem to go against common belief, anyway. This also makes mathematically sense, since 95%+ of traders lose. So, the other 5% must be looking at things quite differently. This is my story, and I'm sticking to it. Yet, be warned about scalping - for someone who doesn't have this down par, it's a great way also to bleed to death very very slowly. Therefore I recommend simulator trading only, until you have it down really well.

Mainly, I will look at the DAX market depth most of the time, glance over to the GBL, ESTX, CAC, ES (when US has started), and see where DAX is relative to them. Is it lagging? Leading? If DAX is ahead of the others, chances are high it will make a little pullback, such as 3-6T, in order to let the others catch up (in reality, it's just a relative overbought/oversold). I would enter such a pullback with a limit order, going for continuation. 99% of the time, I will enter only on limit orders. I may chase the market for a couple of ticks, but still only limit. If the train's missed, I won't jump on, but rather look to reverse my mind straight away, to fade that move. Because if I wanted to jump on, chances are others will have done the same - Therefore overextending price. Pure Darwinism!

I find it a little easier once the US markets open. One of my favorite strategies is to watch the US tapes closely then (ES & NQ) and fire DAX scalps at the smallest movements on them. 70 contracts bought at ES just rolled through? I may fire a long immediately, and take out a few ticks - Or even points! The amazing thing is that DAX seems to follow the US tapes very closely - While price (and it's footsteps; charts) on the DAX may still be quite different at times. Yet, the tape movements tends to inspire DAX most of the time. The more amazing, the small ES & NQ tape movements seems to be leveraged on DAX. Honestly, you see like a pretty small number of green's on the ES tape, with one tick movement maybe, and next moment, the DAX will jump several ticks or even points!

Well, it's needless to say that at the smallest (tape) movement the other way, I will be out again equally fast (as fast as possible!) Generally, if the next tic doesn't go my way, I'm out again. Well... But: Kleinvieh macht auch Mist!

Anyway - There's some things for you to think about.

Scientist.
 
Agree with Scientist on DAX/ES similarity. I suspect the same firms trade both at the same time with automated programs.. hence the similarity.. (but if DAX is in a down trend and ES is starting an uptrend you sure get some strange moves!)
 
Quote from Baruch:

1. Are you using indicators to spot oversold or overbought situations?
2. If not - why not?
3. Do you follow Eurostoxx50?
4. If yes - who leads the way, Dax or Eurostoxx50?
5. Do you follow the US indexes?
6. If yes - which one is the best to follow?
7. Do you follow EUR/USD?
8. If not - why not?
9. How do you trade the news?
10. How do you trade the open?
More...
1. Generally not.

2. Why not? Because they generally don't work so well on the DAX. The DAX seems to be more of a "secondary" market, as it follows other, larger indexes, such as the US markets. The ES, for example, are extremely autonomous, because they're essentially "it", i.e. they are the big bunch. So, correlation is a nicer reference here, this is your advantage. Your disadvantage is that OB/OS indicators can often let you down. But, if you like them, use Stochastic, periodicity 5,5,2 on the DAX 1min or 5min. It works OK. Keltner bands are also a nice TA tool for S&R if you really want TA tools. It's really up to you.

3. Follow? No. But I do refer to it.

4. Who leads the way? Neither. They take turns. But generally, ESTX is stronger, for it's more dense, therefore more "stable" or "valid". Hard to find a word for it.

5. Yes, but only after the US market opens.

6. ES, NQ and YM, ES and NQ take turns in preference.

7. EUR/USD can be a crucial strength indicator, yes. But I don't watch it often (enough), I probably should, would get hurt less.

8. Well, I do use it.

9. I don't trade news, for I don't have the infrastructure (Bloomy / Reuters)

10. The open on DAX is generally very "feel-based", and requires a lot of flexibility to change your mind immediately. Yet, it gives the best opportunities of fast, sustained moves. I mainly watch depth, tape and a 30s or 1-min chart during this time.

S
 
Quote from Baruch:

Are you Mark Velocity number 2? Or do you trade different from him?
More...
LOL - No, surprisingly enough my method is quite similar to him in some ways. To figure out the differences, I think you'd need to do deeper research, i.e. ask more specific questions or listen carefully.

Yet, Mark has a main focus on news plays, which I don't do at all, so that's a major difference!

Another is that Mark goes only for the smallest moves, while I generally try to do larger, parallel trades as well. I tend to stay in a trade until it proves wrong, rather than exiting as soon as I have a certain target, such as 5 ticks. If you're patient in the DAX, you can stay in and do 10+ point rides at a time occassionally. I don't think Mark does that. He grabs his profits very very quickly. If it's a better approach, I don't know. He does better than me, but perhaps it's because he does a little more volume, has lower commissions, very good technology and a lower ping to the Eurex exchange, as opposed to me (I live in Australia and have a ping of ~330ms)

S
 
Quote from madf:

Agree with Scientist on DAX/ES similarity. I suspect the same firms trade both at the same time with automated programs.. hence the similarity.. (but if DAX is in a down trend and ES is starting an uptrend you sure get some strange moves!)
More...
Interesting notion what you're saying about the correlation. Yet I don't suspect arbing would make that much sense, since the DAX is too small for proper, professional scale arbing (yet I might be wrong).

Certainly you get some very very strange strange moves when DAX doesn't follow ES. That's why I clearly said that "DAX doesn't need to follow ES on the chart, but will often still on the depth, in terms of short-term movements." It is not a good idea to try for longer-term (2 minutes+) moves if the markets are in disharmony, since it becomes unpredictable and volatile. Symptomatically, the ES will win the tug-of-war though, dragging the DAX behind it like a stubborn child. Also, the DAX has hardly any influence on the ES (in my experience). But the NQ has plenty of power over ES, it often tends to lead it, dragging ES behind, since it has more conservative, primary market underlyings, rather than the tech-heavy weighting of NQ. This is a bit like with the Nemax50 in Germany. Nemax is the "Neuer Markt Aktien Index", where the German "Neuer Markt" refers to "New Market", namely the more volatile tech stocks, internet companies and other more speculative games - compare YHOO, EBAY etc in the US.

S
 
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Quote from Baruch:

So you make a living trading the Dax with no other weapons than price and volume?
--------------------------------------------------------------------------------

Oh, yep. Definitely primarily. Add order flow and correlation, and few more charts, and that's plenty!
I've made a living on ES & NQ like that for quite some time, too.

However, if you really want some TA things, I do have a few things that I use occassionally, such as an 18EMA on the DAX 5min, I find it to be a nice enough S&R tool to have it on the chart. I've also used Keltners and LSMA bands and a few other things, but essentially, I only look at these (in approximate order of importance):

- Volume
- Depth of Market
- Tape (Time & Sales)
- Price
- Intermarket correlation (US: ES, NQ, YM, ZN; EU: DAX, ESTX, CAC, GBL)
- Intraday "floor" pivots (and their divisions)
- Trends on larger TF (15, 60, D)
- Fib Levels on larger TF (15, 60, D)

I essentially used exactly the same (all above) tools for the ES that I now use for the DAX, no kidding. It took me about 2 days to do the switch from ES to DAX, I couldn't believe it myself. Essentially, most futures markets are pretty similar in the basics, but as soon as you use indicators, you need to adapt them etc, which makes things more complicated - another reason for not using indicators. You might wonder why "price" is only on place 4 - well it really is. At best! I believe, contrary to local opinion, that price is NOT "king". Price, at least on arbed futures, is secondary or tertiary to me, as opposed to my primaries volume, supply, demand and order flow. In fact, most of the time I fade the excess movements in price which diverge from underlying S&D, volume etc, that's how I do it.

S
 
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