Using a Timer during scalp plays

Thanks for all the great suggestions, everyone!

I decided to use the 3-minute timer for scalping, and based on all your suggestions, I created a set of rules that go with it. One of the main rules involves using bracket orders with a mechanical stop loss that executes immediately upon entering the trade combined with pre-set profit-taking orders that will execute prior to a stock moving into a Halt (I might allow about 10% of the shares to be open-ended on the upside in the event the stock Halts and goes parabolic. I haven't decided that yet. Not a big fan of halts). The other helpful rule is that during the 3-minute timer, I can't execute trades on any other stocks and I can't even research other stocks. I have to focus only on the stock in play, along with the tick, candle formations, volume bars, time&sales, price action, and level 2. This prevents overtrading and excessive multi-tasking.

So far I have used it for 28 scalping trades over the past two trading days, and both days were green and I hit my daily goal easily. I realize the sample size of N=28 trades is very small, but I will update this thread after running at least a few hundred trades through the 3-minute timer technique. Even after these 28 trades, I am already feeling more relaxed when trading, I'm not averaging down during trades, and I'm using more reasonable position sizes. My downswings during the day are much lower, and I don't have to dig myself out of a deep hole from a series of losers that were too large. One possible downside that may be developing is that my winning trades are slightly smaller than they were before. I will see if that persists. But for the past two days I hit 3X my daily target yesterday and 2X my daily target today, so I'm good with that. From a risk management perspective (which was the whole point of this for me personally), things appear to be working well with mechanical stop losses, faster exits on losing trades, less multi-tasking, and a significant reduction in overtrading.

I was trading with mental stops before, and engaging in some bad behaviors as a result. It doesn't really matter if I am profitable 16 days in a row and then blow up my account on one very bad mental stop trade. There are some amazing scalpers that can trade with mental stops, I'm just not sure if I am one of them.

At any rate, all of this discussion and your suggestions have proven very valuable to me! Great brainstorming and thoughts to ponder.

You folks are awesome, collectively, individually, etc.

--Vanman (living & trading out of a dirty white van down by the river).

p.s. feel free to blast away at the strategy and tell me how screwed up it is. Then I can incorporate some more rules for the system, or consider scrapping it altogether.
 
I'm doing all my trading in a Roth IRA to avoid tax implications and wash sale rules, so I can't short individual stocks. But I do occasionally trade 3x leveraged inverse ETF's like SOXS, SPXU, and SQQQ, which is essentially shorting the semi-conductors, S&P500, and Nasdaq respectively. I really like to do mean reversions with these three inverse ETF's when the markets are whipsawing and scalping individual stocks is difficult. These mean reversion trades take quite a bit longer to play out than regular scalps. Usually anywhere from 2 minutes to half an hour. I haven't decided if I will use the 3-minute timer on them. I will have to do some backtesting first and trade them in a simulator.
 
vanman72001 said:
I've been doing a lot of post-trade analysis of my scalping (mostly scalp low-float stocks up huge on the day).
My holding times are generally seconds to a few minutes and average out like this:
Avg Winning Duration: 2 mins 7 seconds
Avg Losing Duration: 37 seconds

After crunching the numbers, it looks like my most horrible trades where I lose a ridiculous amount of money are when I hold the stock for more than 3 minutes. I could literally have saved over 50% or more in losses on the majority of those trades by setting a 3-minute timer at entry and then closing out trades that remained below my entry price once the timer goes off.

Does anyone else use a timer when scalping? What are your thoughts?

If I am in a winning trade, I have usually already scaled out of the majority of my position by the 3-minute mark anyway. So should I just close out the winner at the end of the 3-minute timer? Would I be better off just putting the remaining shares of my winner at break-even or just under a support candle to see if I can catch a move that spikes even higher before scaling out the rest of the way?

By the way, I've been green every day for 14 days in a row with my scalping, and I'm on a nice run for sure. The account is up over 30% in those 14 days. I just want to fine-tune things so I don't have a nasty loss that kills 10% or more of my gains in one day. Mechanical stop losses can be helpful, but they can be tough to implement during scalp plays for a variety of reasons. I'm thinking a timer might really help, especially combined with a mechanical stop loss that is far enough away not to get triggered by a nasty market-maker who is just running stops slightly below a support level.

Any suggestions would be much appreciated!
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For the time being, I suggest you to exit on that 3-minute timer.

I suggest to investigate usage of different trailing exits once that 3-minute timer hit.

I use trailing exits once price move on my direction. Using time-based exit cause -ve expectancy for those affected positions in my methodology but your result may differ due to our our different approaches towards the market. The only time-based exits that I use are when market is near closing time of the day or high impact news release or as specified in my schedule.
 
ironchef said:
He shorted using SQQQ for example.
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Yup seen he mentioned that.

Don't know if that involves interest, to short, like common stocks but you do realize there is no interest on futures (as another posted on another topic claimed)?

I would presume SQQQ doesn't have any, but its not my game.
 
The brokerages don't charge interest on the 3x leveraged inverse ETF's like SQQQ, SPXU, and SOXS because I am buying them, not shorting them. These inverse ETF's rise in value when the markets they represent are falling in value. If I buy 1000 shares of SQQQ for example, I want the Nasdaq to start falling in value so that SQQQ will rise and hit the VWAP where I take profits in a mean reversion play. I'm long in the SQQQ position, but essentially I am shorting the Nasdaq. I really like trading a lot of the 3x leveraged ETF's this way, and not just the inverse ones. It's relatively easy to do on a 5 minute chart using Bollinger band signals and candlestick formations, and it's easy to spot trades that offer a 2:1 or even 3:1 reward/risk ratio. Plus there is a ton of liquidity in these ETF's (SQQQ did over 140 million shares today) and the spread is usually 1 cent so there is almost no slippage.

I doubt I will use the 3-minute timer on mean reversion trades because the price movement is slower (can take anywhere from a few minutes to half an hour or longer to mean revert) and it's easy to find a support level under a swing point low, especially ones with hammer candlesticks or dojis or bullish engulfing candles where one can put a mechanical stop loss. With the stop loss in place, you can then go on and scalp individual stocks while you wait for the mean reversion to do its thing. The mean reversions are not super profitable, but I have had days where 1 good mean reversion will give me 50% or more of my profit target for the day. And occasionally these 3x ETFS will blast through the VWAP line all the way to the upper Bollinger band, and you will get a 6% or more gain on the trade, which is more than quadruple my daily profit target.
 
SunTrader said:
Yup seen he mentioned that.

Don't know if that involves interest, to short, like common stocks but you do realize there is no interest on futures (as another posted on another topic claimed)?

I would presume SQQQ doesn't have any, but its not my game.
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No interest but there is an expense ratio of ~1%. Negligible if you day trade but significant if you hold it long term.

For me, if I want to short QQQ, I buy a put instead. But that is just a personal preference.
 
I misinterpreted the title, but will add that since I've started closely watching the time in terms of seconds left within a 1 minute candle, Ive saved myself lots of losses waiting to trade earlier/later in the candle based on its formation.

Example: shooting stars ... usually dont confirm the pattern until the candles almost closed. If you bought on the uptrend early you might be looking at a loss.
 
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