ES results are best when scalping for a point.

Discussion in 'Index Futures' started by ud4l, May 10, 2009.

  1. ud4l


    For me its obvious. When trading the ES, its best to extract a point or 2 tops at a time.

    The conclusion I came to is this:

    The nature of the ES is very high volume, zero sum, profit taking at every turn, hence the extreme sloppy back and fill nature of the contract.

    So why fight it?

    I've done 10X better scalping for a point as opposed to holding for bigger chunks, 4, 5, 6 or higher..

    Pick any price on the chart and it seems like during the days trading the ES will touch any given level a few times.

    Again, why fight it? Just take advantage of its nature.
  2. That's how it is a very high percentage of the time but not 100% of the time. As long as you can avoid the "Niagara Falls Cascade Selling" that happens from time to time, you should be okay. :cool:
  3. ud4l


    I hear ya, obviously my statement being very general. You still need a trading plan but I just can't see holding for chunks.

    I've never been able to make that even remotely work. Its always been a disaster for me.

    Its amazing how quick you can build up to 5 or 6 points taking a point at a time while trying to hold for that in one trade has been a disaster, the shake outs, fake outs, etc will drive you insane.
  4. Depends on the method and type of day.
  5. The ES is is an index derivative. It's truly no different that trading SPY on lower-frequencies. Sure, there are microstructure issues, but that's of little impact on anything longer duration than scalping.
  6. bkoo869


    I have to disagree, but maybe that's because our personalities are different. I tried scalping 1 point for years, but lost consistently, and often brutally.

    My problems with scalping were these:

    1) the "best" (read: most obvious, and fastest to goal) trades were virtually impossible to catch in time
    2) often my trade would go exactly 1 point, then fail, so to get out I would have had to take only 3 ticks, but that would reduce profits by 25%
    3) some trades were catchable on paper, but in practice I would've had to enter market - but with a 4 tick goal, I couldn't afford even 1-tick slippage
    4) I figured out that the "best" stop was 1.25 points, or 5 ticks, 25% larger than my 4-tick goal
    5) occasional slippage of 1 or even 2 ticks on a stop loss (maybe this due to lag, as I trade from Asia)
    6) I sometimes lost 3-4 times in a row, so it would take 4-5 trades (since losses were bigger than wins) to make it back, and by the time I had lost 3-4 times in a row, I was not thinking straight, and was far too timid to take the next 4-5 signals

    Maybe I was doing it wrong, but I never could figure it out.

    Any system, on the ES, has good days and bad days. NOW, I trend, looking for reversals, which works best 3-4 days a week. Scalping, on those days, probably would not be good, or at least not as profitable (and would require much better timing and discipline than I could ever muster).

    Usually once a week, and sometimes twice, there is just a brutal all-day trend, with no reversal, and all I can do is keep trying and then walk away once I hit my daily loss limit. Those days, the best system is strictly trending. Unfortunately, the other 3-4 days, the ES just oscillates up and down, or skyrockets, then plummets, then ends up nowhere, so you make nothing (or get stopped out).

    I DOUBT there's any system that works well every single day, no matter what the market conditions (unless the system is part trending, part scalping, and intelligent enough to know when to switch)
  7. bkoo869


    That said, based on my experience, I'd have to say that if you're looking for a high percentage of winners, the best point goal for the ES is somewhere in the neighborhood of 1.75 to 2.75 points (7 to 11 ticks), with stop loss around 2.25 points (9 ticks).
  8. I just don't see the logic of scalping out for a point when there are multiple swings of four points or more on most days.

    A point is noise. Once one adds spread, commission, and lack of fills, there is little left in terms of profit.

    Of course it is hard to hold for large moves. If it were easy, just about everybody would be profitable.
  9. A 2 pt scalp after a 2 pt trend seems to be a "bread & butter" (simple & effective) strategy. There are other filters and techniques to implement with this strategy to increase the statistical probability of success with a Trend Scalp...

  10. +1. A mindless statement without an y proof, and ignoring all of the costs involved - slippage, commissions, risk, user/broker/communication error, data/system fees, the value of your own time.

    Not to mention the concept of cutting losses short and letting your profits run (even on short time scales). People who keep banking small profits will rarely do well.

    I have seen enough analysis of trading where small profit targets make a potentially profitable system unprofitable, that I cannot agree with the OP.

    You have to make a high % annually tjust ot overcome all the trading costs.
    #10     Jul 11, 2009