I fully agree with you on this one, however, I would expand this to the factors that influence the markets as well. Statistics that cover just the ES would be to one dimensional for me. Sure. As you might know, the market can be devided into three subcategories: 1. Liquidity Provider/Market Maker: The guy that always offers two way markets at disadvantageous (for the taker) prices. 2. Toxic/Smart Flow aka. entities that sit on the sidelines until they see 1. making a mistake: - Predatory algorithms that snipe stale quotes - these guys: - arbitrageurs (structural, legal, pricing) 3. High alpha flow: Retail, basically ET Guys that just hammer away based on some system without edge. These people are the reason why payment for orderflow and commission free trading exists because it's worth more to trade against them than to take a commission. The main difference between 1., 2. and 3. is that 1 and 2 trade based on some evaluation model, meaning they know the correct price of the asset. Some compare the current price to fundamental valuations, others compare it to another asset, a portfolio or to a statistic. So when you think that $GME is worth 50$ and it trades at 450$ you have 400$ worth of edge and the only thing you gotta do is not blow up in the process of capturing it. In other words: 1 and 2 trades the assets current price against the current value of something else. Trades of group 3 are completly random. They have no idea of how a market works and think they can bamboozle highly sophisticated players with a couple of trendlines, a client based frontend and 4$ round turns. For my own trading, I'm mixing 1&2. I quote highly illiquid niche markes against a portfolio of liquid assets and I trade liquid assets based on my own valuation models. Everything is relative value, never outright, never momentum. When I get a fill, I know I have edge. I don't trade the ES but I give you a practical example just for the sake of it. A futures contract is not a delta1 product. Due to it's forward looking feature there is a difference between futures and spot called basis. Different to commodity futures it's pretty easy to actually calculate basis for cash settled financial futures because all you need is interest rates and - depending on the product - dividends. So it is pretty easy to figure out the price of the JUN ES by looking at MAR ES, which trades 10 points higher as we speak. A market maker simply punches in the basis figure based on his borrowing rates and can quote the JUN off of the MAR. Because it's so easy, everyone does it so competition is very fierce. Situation is different during expiration week when big players need to roll their position. Tickets are so big that you can sometimes catch mispricings as retail (with an autospreader and a good server location). So the market maker knows the correct price of JUN by looking at MAR. However, there might be some guy who gets a special borrowing deal aka. a more favourable interest rate. He can quote a different basis and be better on the bid side. And that's the competition. Can you do it as retail? Definitely no. Can you use that knowledge to your advantage. No, but for the love of god look at both contracts during expiration week, perhaps you snipe a good fill and lose a tick less. As retail you can, however, look at markets that are too small for the big boys, quote them and siphon liquidity from the big markets. And that's where I am your competition
As I day trade only - it's sufficient for me. I could trade other markets, but I would expect to spend some time updating my data and getting to know that market. For example, I track NQ and watch the ES/NQ spread, but I'm no expert on NQ and I've seen that some of the behavior or statistical patterns I exploit in ES are less frequent on NQ. I follow you. This sounds like a trader classification similar to what Harris described in Trading & Exchanges. The key distinction in that book for me was that between an informed/uninformed trader. Liquidity providers will lose to informed traders, but profit from trading with uninformed traders. Interesting. Mind saying which markets and what your trading frequency is? Feel free to PM me if you prefer that. There was a guy in one of the Market Wizards books who was possibly doing something similar in illiquid stocks. I think his trading frequency was rather low, but once he was filled he was virtually in profit. I don't trade the ES but I give you a practical example just for the sake of it. Good explanation. Thanks. Of course if you're trying to compete with this as a retail trader it's a losing proposition. I'm not trying to do this.
Day 6: Down again- will update after I get home later tonight of what I did right and what I did wrong. If I traded strictly NQ today, I would be up a lot....I may consider switching but for now I will stick with ES and anytime I do see a setup in NQ, I will play with 1 microlot.
Woukd strongly suggest small time-frame and less than flawless scalper technique and reading thr time and sales and dom, is a slow and painful way to get eaten alive. Would suggest that you look at trading intraday and higher time frame value auctions in. I deeply wish you the very best of luck with this mate. I'll be rooting for you
Day 6 Part 2: Account value- back below starting amount- $1543.13 Didn't like my performance today. I was battling between being green and red all day. Ended the day red due to time being up. Few things I could have done better today 1. Trade NQ only- would be massive green. 2. Trade less -few trades were really key setups. Others was noise. 3. Don't be trigger happy at the open. Play smaller at the open/Mondays to get the rust off/warm up before going back into key selectivity. I'll be back. I need to play like Livermore as if he was dead broke . Very very selective. Tomorrow is a new day. MNQ up 102 ticks- MES- -4 points ES Down 2.5 points
You seem to manage risk and drawdown fairly well. Your problem, as I'm sure you're aware of, is that you're just a few normal losing days from blowing up. An easy solution to that is to simply trade micros for a while. Regarding NQ vs ES it's an interesting question. I think it depends a bit on what you do (which is not entirely clear to me). But NQ does seem like a better choice for scalping. I've considered making a switch myself, but still on the fence. Alternatively, intraday swing trade the ES and scalp the NQ.
Day 7: During mid trading, I realized I couldn't get out of my position...I was thinking what is going on?? I knew my P/L wasn't low enough to get auto liquidated as before...but then I realized I did get auto liquidated as account fell below 30%. Yes, I could have made more but I also could have lost more. And who knows, I might have revenge traded until my account blew up. As dissapointed as I am not being able to trade rest of day today, I am excited to have this auto stop loss on myself. I can come back tomorrow with a fresh state of mind. Going forward I am going to be hyper focusing on only one ES trade a day. It has to be almost perfect or I will only play with micros. I am reinforcing more discipline to get account back to starting value as well as the $ stop being tighter as account value is lower. ES Down 5.25 points MES-Up 2.5 points MNQ-Up 13.75 points ZB Down 3 ticks
I will now be switching to micros as mentioned by you and others except for the most perfect trade as a punishment for myself.