Continuing yesterdayâs commentary⦠After getting stopped out a couple of times trying to enter directional trades, I decided to spend some time practicing a scalping technique that Iâve been reading about. I know, Iâve previously stated that I had poor results in my prior attempts at scalping, but this technique appears to show promise and I may add it to my arsenal of trading tactics to supplement the longer-term intraday methods Iâve been trying to use. Still, Iâm not sure if Iâm ready to mix trading styles, or even if mixing styles is a good thing, period, so Iâm just experimenting with this for the time being. Only time and experience will tell. Anyhow, the technique is called Sabaki Micro-trading and it was developed by Dr. Richard McCall, the author of the book, The Way of the Warrior Trader. Dr. McCall was recently interviewed by Innerworth.com. The basic premise of the scalping technique is intensity through time compression. In other words, you trade very aggressively, but you limit yourself to just one hour of trading a day. McCall prefers the first hour of trading from 9:30 to 10:30 because he finds there are a lot of quick volatility swings in the opening hour, but the trader can chose any one-hour time period that he/she likes. The reason for the ultra short-term trading window is to limit both the monetary risk that stems from overtrading and the psychological stress of intense scalping. In fact, the key to the success of the method, according to McCall, is the strict adherence to the one-hour trading period. He claims to average 3-4 points a day with virtually no down days. I canât confirm this, however. So the usual âguruâ grain of salt disclaimer applies here!! His view of ES trading is that if you can get yourself to the point where you are consistently making 2 to 4 points a day with seldom a losing day, all you have to do to make bigger profits is to scale up your size incrementally over time as you become more comfortable with more contracts. So, basically, the last few trades I made yesterday were just testing out this guyâs scalping method. I wasnât super strict about the one-hour limitation. More I was trying to see if his combinations of technical indicators have any validity. Well the juryâs still out, although I did make 2 points in 3 trades. But three trades does not a valid sample population make. It just as easily been dumb luck.
Interesting, I thought about doing something like that too. I am a very night person and being on the Left Coast I am forced to get up in the middle of my 'night' which does not suit me very much, so I thought about doing it just for one hour in the afternoon. In a sense, it's not that stupid because you can concentrate better within one hour than 3 or 6, and in the morning it could be fine too, after 3-4 hours of sleep I would be semi-fresh enough to trade for one hour. Anyway, I would first have to automate my system strategy and these are definitely not market determined reasons, but this can still work if it helps you improve your performance for some other reasons.
You might want to try this out on some simulator first, this could lower your potential costs and prepare you better for real battles. If you are not good enough on a simulator, you will most likely lose money in real conditions. The opposite thesis does not have to be true.
I never heard about this guy but that is the way I trade and I like it. I don't know what he means by "agressively" but my experience tells me that taking more than 10 trades in one hour is called overtrading. Be careful, it is quite easy to blow an account in no more than 60 minutes (the trading window limit is nothing without discipline). However, I had some rare days during wich I was in total sync with the market, took about 20 trades and made a killing. I don't do that anymore because (for me) the expectancy is not there with such a number of trades. Actually, my net average daily profit equals my net average daily loss and my daily winning % is around 70. I'm waiting to increase my # of contracts to 2. Good luck with this but keep an eye on your longer-term intraday methods.
You guys need to see if you can get Nitro involved in this conversation. I stopped by the chat site for a couple of days and watched as he jumped in and out like a mexican jumping bean for 1/4's and 1/2's. Apparently he does this all day long pretty successfully.
After two nice uptrend days in a row, the market decided to throw a choppy consolidation day at us. Todayâs market activity was confined to a 10-point range. In the parlance of the followers of the âfloorâ method of trading that takes pivot and S/R levels into consideration, today was an âinside dayâ where neither the primary support or resistance areas were traded. These traders like these inside days because they set up the possibility of a breakout/breakdown day following it. I realize I sometimes talk like I know what Iâm doing, but really I donât. Yet. Iâm still learning, and Iâm making a best effort to learn. I plan to be as much a student of the markets 20 years from now as I am today. The good news is that I feel like Iâm starting to think more and more like a professional trader day by day, and less and less like a starry-eyed amateur. One thing Iâm certain of is that my discipline level is improving constantly. It wasnât long ago that I was losing $1k per week with machine-like regularity. Iâm just now getting to the point where Iâm having more up weeks than down weeks. But enough of that rhetoric, here are todayâs trades: ESZ2;BOT;1; 932.75; 9:54 ESZ2;SLD;1; 932.75; 10:16 +0.0 ESZ2;BOT;1; 932.25; 11:11 ESZ2;SLD;1; 928.50; 11:48 -3.75 First trade: Took a preemptive strike at the 30m breakout. Thinking: It worked two days in a row, why not a third time? Well it almost worked. At the time we were filling the gap, I decided to move my stop up to breakeven. Thought process: I want to see if we can break yesterdayâs resistance at 935-936 area. If we can, we may have a realistic shot at challenging the 942 primary resistance area. Not a bad r/r ratio to trade a breakeven stop for a shot at maybe as much as 8-10 points. Stopped out at breakeven. Second trade: Re-entry of the first trade on a MA crossover. Had a gut feeling that we might be able to get over that pesky 935-936 area. Placed stop at 928.5, just below the most recent minor low. I realized I would have to give this a little room to wiggle since I was knowingly buying into overbought territory on the 5m chart. Stopped out. Chop-o-rama. Iâm sitting out unless something dramatic happens. Iâm still up 2.5 ES points on the week, so Iâm not going to risk going negative this week unless there is a major reason to take another trade. At 3:20 today there were bearish divergences in Stochastic and MACD on the 5m chart. A 7-point selloff ensued. Crystal clear. Now, step back to the 10m chart and all of a sudden things are not so clear. My question is How do you know what timeframe to place your trust in? Do you look at, say, 3 timeframes and if 2 out of 3 say sell, then you sell? This rookie trader is confused. I was also looking for a TICK divergence, and there was one between the 3:20 high and the high made an hour before that. However, it wasnât a major divergence to my untrained eyes. In addition, TICK bounced off the upper Bollinger Band. Now even I could see that. While all this was happening, TRIN bounced off its lower BB and started to breakout to the upside. Gee, still so much more to learn. Daily results: 2 RTs P/L â3.75 Week ending 11/12 results: 13 RTs Points: +2.5 Net P/L after commissions: $43 Thanks everyone. I learned a lot this week, and even got to enrich my account equity by 43 bucks!! Have a good weekend.
I fully agree with you that you can overtrade in just an hour's time. He's actully very selective within that 1-hour timeframe, perhaps taking 2-4 trades. What I meant by aggressive is that he trades as many as 20 contacts per trade. You start with one or two contacts and build up slowly as you get more skilled. Also, he always enters on a market order, never on a limt order. Here's a few brief excerpts from his interview on Innerworth.com For example, we may only seek to get anywhere from three to four points in the S&P E-Mini, but we may only need to get 2, 3 or 4 points, and thatâs fine. Thatâs all we need. Other people trade all day long and they may be trying to get 15, 16, or 20 points, something like that, but we donât do it that way. Efficiency is the premise of micro or Warrior Trading; the emphasis is on being economical with your time, your efforts, and your exposure. So by using this narrow window of time, weâre able to get x points or x cents of profit, and then we are done for the day. Thereâs not as much fear implied; there are not as many decisions to make, and by narrowing down, they are able to make better decisions consistently. In contrast, other people, instead of doing the 3-5 points at two contracts, trade all day long, and by making their statistical mistakes over a period of time, they erode their account. If 3-5 points is enough, one can now just scale up to make more profit. Today, my son Ben, for example, just bumped himself up to six contracts. Thatâs exponential growth. Today, he made the same 3-5 points, but made more money overall. Once you develop the skills to achieve a 3-5 point gain, you can just scale up in order to make greater profits.
Nice commentary, Corallus. Congrats on a positive week. Think of all the fun you got to have, too. Thanks for reporting net of commissions. That's the honest way to do it -- honest to us and yourself. Good luck next week. I'm rooting for you!
Very good observations. I was not watching the market past 3PM very closely because I was done for the day, but to me it looked like a sell-off around 2:30 even if yesterday I was more inclined towards a positive close on the morning dip, but that was not what the market was telling me about 2:30. Not much upside momentum at that time. Still I would not jump in for a short ride, yet, but about 3:20 it was a different story. Your reasoning based on TICK and TRIN was perfect and a very good timing too. You are destined to make it big in this business I now wish I paid a closer attention to the market about 3:20. It was a classic entry using TRIN and TICK and stochastics. It just does not get any better than that. When I start my discretionary trading for good (still only playing for fun), I will make this one of my core setups. I used them before trading OEX options. There are also some other setups involving TICK. I will mention them some other time if I see that they work for ES too, used them for OEX options only and they involve smaller time scales (1-2 min). BTW, 5 min chart is enough for this type of trades, IMO. I use 5 min TICK and TRIN charts and look at 2-5 min ES charts. If you see it in a 5 min chart that's serious enough. To pinpoint your entry you may want to use 1 min ES charts. But start from a bigger time frame.
You know what really pisses me off. Every time I think I have discovered something a few days later I find someone talking about it here. I figure when it shows up here its too late.