The pit does have a feel - you can even be blindfold and go by volume and be able to judge the size of the trading "wave". Knowing who is on the other end of the order helps too so you can piggyback the known winners and heavy hitters. That's partly why pit traders usually make bad screen traders. Yeah algo's is the way to go for those who know indicators work and understand how to speed them up. Also graybox assistance can help big time to improve a traders entries and exits, and if you know what to look for the scalp entry can run for hours. Clever guy though to keep the human element imho if you are looking at longer term strategies.
Exactly. A "scalper" is trading on a small timeframe, and more frequent trading opportunities. ...but then there is something called money management and risk control. That means that different strategies are needed for different market conditions. Those who think that the same strategy is always applicable are going to blow up some time, and blow up quicker if they are scalpers since they perform more trades. If you understand that there are opportunities and market conditions that require thinking over different timeframes; then you are truly a winner adapting to any market, especially if you have sound money management for varying strategies. The key is adaptation - in every market. http://en.wikipedia.org/wiki/Adaptation
A good rule of thumb for ES is that commish and slippage will cost you (0.6)*nTrades in points. The 0.6 points includes 0.5 per trade (minus 0.25 each way for the spread) plus 0.1 for commissions of $4-$5 per RT. Over a large number of trades this adds up. If you take 40 random entries with a 1:1 RR you'll end up around 24 points in the hole. Makes for a good back-of-the-envelope calculation to see if your strategy is just random... For scalping strategies this means that your average profit (which includes losses) must be at least 3 ticks per trade.
How many contracts do you apply in your volume chart? I have been using a 2401 volume chart for a while now and I am really starting to like it.
You use that for ES I presume? Are you doing more of a position/daytrade with that volume frame or are you scalping? Thanks, MC
Yes that is for ES. I am more of a scalper than a positon/daytrader. I find 2401 volume chart especially usefull under consolidation and choppy conditions. Under these circumstances on a 1 min chart, it is often difficult to find S/R, new HH/HL or LH/LL or DB/DT etc. in the micro perspective, volume bars makes that less confusing I think. I also have the same positive experience with tick charts ( I us 377 ticks) under choppy/consolidation. I like to use these charts in combination with time based charts though, because I think it is often easier to see the whole picture with time charts, at least when the market is trending. Not nessecarily trending the wole day, but trending in a much shorter time frame. Anybody have any thoughts or ideas about these types of charts? When you find them the most usefull and when not to use them? Veggen
I scalp the YM using the 1 minute chart. I have used 144 tick prior and it worked pretty well depending on the amount of action that day. Volume bars I've never looked at very much before but I'll be checking them out. It makes sense as a scalper to focus on actual tick or volume based market data rather than time based. The one benefit I can see from time based is you can see when the volume is normal or abnormal much easier and I rely heavy on volume+price action. Thanks for the tips
Excellent posts! I love to scalp...but am finding I need to use more money and pick more expensive stocks to limit my commission costs. I have also been "squeezed out" of being able to close my position at the end of the day and found, to my amazement, that I made a bundle by allowing the trade a greater time frame. I've also noticed that many times I used to close out trades for money management reasons...but eventually the stock did what I expected. So for me, the trouble has been expecting something to happen in a certain time frame. And yes, flexibility is key. In a day like today, not alot of liquidity...harder to scalp in this environment.