sdoma

Yeah, I was pretty stoked to see a 240 pt selloff in the dow in 35 minutes. I sold on the open and closed shortly before the news release with a good profit, and I was actually a buyer on reentry to the IB. We'd had such a huge selloff, so fast that unless it was a market crash it was unsustainable and chances of at least a partial retrace were high. This was one of those days where I fired on all cylinders, and thank God. Anyway, the retracement appears to be sputtering. Interesting, I was hoping we'd have a sharp move up to finish it.

I was speaking primarily in terms of discretionary trading. That being said, even a mechanical system could potentially be optimized with these types of rules. If you backtest your system and look for streaks of wins and losses, and you find that on most days you suffer up to four losses, but on 3% of those days, you suffer many more losses, say 15, then it's obvious that you'd want to set your down side or cutoff at four losses. Has anyone analyzed their win and loss patterns? People seem to be telling me that they don't want to limit themselves, but wouldn't it be beneficial to eliminate your largest losing days? I think that if you are a discretionary trader, these types of controls can really increase your profitability and perhaps save your butt if done right, using the right protocols.

Ok, this thread isn't about: -Trading the morning as opposed to the rest of the day -The total amount of your account you risk on one trade -The structure of NADEX contracts -How hedge funds make money This thread is about whether or not you manage your intraday P/L and if so, how you do it and your rationale. If you want to argue that that is counterproductive, that's fine, but most professional firms make you do this and enforce that policy via risk managers. I'd be open to a discussion on its utility, but let's try to keep it germane to the topic.

That's not what he's talking about. He's talking about true scalping, buying the bid and selling the offer. That game is gone, it's all algo-driven. It was purely a speed-based game in the first place, so you shouldn't even consider trying to play that game anymore.

This could be due to many, many factors. This could be spreaders legging into something, missing the leg and getting out, or it could be an algorithm which wants to take a position but trades both sides to disguise which way it is betting. For example, it alternates buys and sells in different amounts, selling 5000 but buying 6000 for a net position of long 1000, but you won't be able to figure that out in time. It could also be an algo hedging another market, or simply scalping for ticks. It could be a combination of all of these. You don't know, you'll never know. Don't worry about trying to figure out WHO is trading, just try to figure out what the volume flows mean for your position. For example, in a sharp drop volumes per bar will often be low, and when you see the market stall on high volume that can be indicative of buying inflow and you should consider either getting out or bringing a stop close to the market. When this happens, markets can reverse and retrace very quickly, you want to be out if that happens, but you're still in if the market drops sharply.

What pit traders? Pit trading is dead, and most pit traders have been forced into retirement because they were unwilling or unable to adapt to the screen. Hell, the CME and CBOT consolidated their floors into one space.

How do you trade? You don't have to give away all your secrets, if you feel you have any, but your trading style is going to be the most important thing here, followed by the hours you can trade. The wrong market for your trading style not only can, it will break you. If you trade mean-reversion, I'd lean towards ES for you. If you trade for range expansion, crude would be my choice, depending on the amount of capital you have. Crude usually puts in a good range, but that means you will lose more when you make a bad trade as well as make more when you make a good one. Forgive me if you've already explained this, I just didn't see it.

I agree, you should never set a minimum profit which you must hit. My question was more about a kill-switch amount after which you stop trading for the day, up or down. Example, if you made 1000 trading 2 lots on the YM, you'd stop trading, etc. The reasoning is that if you have analyzed your results from many days of day-trading, oftentimes patterns emerge. For example, maybe you tend to give back a big part of your day after hitting a certain profit level per contract. Or maybe most of your losing days are within $300 per contract, but after that level you tend to experience large losing days. In this case, it would be beneficial to set a downside at $300. A lot of people set these limits anyway, but I find that using your own stats over time might yield a better result.

Your first reply was "worst thing you could do." I'm not being combative, I'm just asking for clarification on your position. I understand where you're coming from, but I want you to elaborate.

So you don't limit your losses when you trade? There's no point at which you call it a day?

I'm wondering if any of you use daily profit goals or downsides when you trade. For example, are you done after you lose $500, or take in $1000? Also, what do you consider profitable?

Something you might not have considered is that you are trading a breakout strategy on a stock index, a relatively choppy, mean-reverting market. Perhaps you should look at some different markets and see if your strategy is more suited to something else.

Not you, I was talking about the emini500 guy. He made a one line throwaway post and pimped his site. I actually like your blog entries and contributions.

My my, does your website contain more such nuggets of knowledge?

There's a saying about the type of trading you're looking at: You are picking up nickles in front of a steamroller. There are people who make money with this type of trading, of course, but before you get too deeply into it I want you to understand a few things: 1. The shorter your time frame, the better your technology has to be, and as you approach the state of the art, your costs increase astronomically. On the bleeding edge are co-located algorithms. These algos are so fast that their owners spend lots of money to get them as close to the exchange servers as possible so the light doesn't have to travel as far over the fiber-optic cables. Think about that, really think about it. An entrepreneur recently spent hundreds of millions of dollars laying an unbroken fiber optic connection from NYC to Chicago in as straight a line as possible to charge arbitrageurs out the ass to use it. For a human scalper you'll need a first class trading gig with multiple PCs, TT or Orc, a first class data feed and if possible you should be on a fiber optic connection. All this shit costs a ton of money. 2. Your margin of error is very, very small. Many scalpers' edge is a fraction of a tick per contract per trade. If you are off that day you will get blasted. You might as well stay home and masturbate. Sometimes you back test and it looks like there's an edge, but if you're a tick too optimistic on your fills you could actually lose money. You have to have the psychological strength of an I-beam. You hold one loss too long and there go your profits for the day, week, or month. You must be nearly perfect. I'd say, instead of a scalper looking at 2-3 ticks per trade, try to be a micro swing trader. Look for 10-15 ticks per trade, and be open to a run every once in a while. I know a lot of scalpers who automated or went out of business. These guys weren't scrubs, either.

You'd need more volume than that to make it worth it. The application fee is where you get killed, it's $2000. After that, the seats lease at different rates. Call the CME and inquire about a membership.

Or you could lease a seat on the CME that would lower your transaction costs to a dollar or less per round turn.

JESUS this action is fucking ugly!

That target has, unfortunately, already been hit in the overnight market. It is trading 12349 as I write this, 8:15 am CST. But, my rationale was a simple one, and was made on the contingency that we didn't rally hard overnight. That low is a somewhat significant swing point. It is also the top of a gap that has remained unfilled for some time now. On the 17th, the market tested that gap and reversed hard, on good volume. One of the core beliefs that drives my trading is that markets attempt to probe what traders consider significant price levels to see what business there is to be done there. If you can identify levels that draw the attention of the whole market, you can use them as targets with a decent hit rate. What happens when price gets there, of course is a much trickier thing to read. But to update my plan, for today I'm not as certain now. We've created a large gap, and the bottom of the channel is not so far away, but we could do anything from here. I just need to go with the flow, trade my levels and not get too attached to anything until the market tips its hand, if it does at all.

Interestingly enough, the dow is well below Friday's low, and is trading 12406 as I write this. If this weakness continues, the low of May 17, 12350, should be a solid target, and if prices can successfully auction lower, perhaps a test of the channel bottom at 12280 is in the cards. If the market rejects lower prices, auctioning into Friday's range is obviously what I'd look for. A more precise target could be Fridays VPOC, 12500, and perhaps a value sweep to 12542 if the sellers get caught with their pants down.

This is not entirely accurate. I've seen markets move and barely any contracts transact due to the fact that the passive orders on one side of the book were very quickly cancelled. In extreme instances, markets can go bidless or offerless.

First target was met, second target was within 15 ticks. The problem is that I have been looking for an apartment and that has been taking me away from the computer at various points in the day. Not being able to sit there for the whole session has wreaked havoc on my trading. I find myself rushing into trades, or missing them and then overtrading out of frustration. Here's a chart of the day's action:

Yes, would have been, but I got taken away from the computer due to a personal matter until about 9:15 central, at which point the down move was finished. I spent the rest of the day getting chopped up and trapped in this ridiculous rally.

Right now, we are at an interesting point in the Dow. It has been channeling down for a few weeks, but today it challenged the upper end of the range and closed not too far away from it. Tomorrow, that trend line point is at approximately 12,600, and yesterday's high is 12,616. There is a decent probability that the market will test that price zone, at which point I will be waiting for it to be rejected or accepted. I am hoping for a decent move either way. If price is rejected, I think yesterday's lows are a good initial target, followed by the midpoint of the channel, 12513 and 12445 respectively. Unless it really gets randy, I would be looking to be out at one of those price points. If we see a breakout to the upside, I would make use of my SUPER SECRET PROPRIETARY volatility targets (only $4,000 a month and worth every penny!). You also have a zone of 12666 - 12681 where I could see price probing. Of course, a third, and dreaded, scenario is a choppy inside type day. At that point, toss up bollinger bands or keltner channels and start fading.

Good morning traders! Anyway, you can see that price is gradually being pressed into your support. Swing highs are lower, and lower, and lower. If price can break through and hold beneath your support, I could see it going to 1295 in the near term. It all depends on how long you want to hold the trade. So, how do you plan to play this? Also, this is hindsight, since I didn't have time to post it this morning, but the scenario I envisioned worked out nicely. Before the start of opening trading, I envision what I believe are the two or three most likely scenarios. My first scenario today was the Dow breaking support and auctioning down to the top of the unfilled gap, at 12359. That level also happens to be the 100% fib projection, so we have some nice confluence there. This wasn't that easy to play, though. It looks simple here on the 405 min, but when we zoom down to the intraday data, you can see how there were a lot of fakeouts for a day trader. I put some numbers on the second chart. Match them up to these bullets. 1. This was when it seemed that my play would be fairly straightforward. We opened, auctioned up to the support from the larger chart, and immediately failed. 2. As you can see, however, it was not straightforward. Price made a low, then began to chop back up. This is when being a day player is nice, you can preserve some profit. 3. Market chops back up to support, tests, fails, tests again and fails, and auctions back towards the low. This is where it started to get tough. I was short, expecting at least a test of support, which it didn't quite give me. 4. Price accumulated and then broke out to the upside. At this point I began to turn bullish and looked to a gap fill. I played the retest of support and got chopped around a bit in the process. Market filled half the gap, at which point I noticed major amounts of selling in the order flow. Sellers came in in increasing numbers, absorbing the mo mo buying and gradually beating back the assault. 5. As prices began to turn back down, I was somewhat hesitant to jump back in short, but did so anyway with a trailing stop. 6. The market began to accelerate as it moved down, breaking that support yet again and auctioning to the low. 7. At that point, no significant buyers stepped in and the sellers pounded price through the lows. I didn't hold all the way to 12359, but I got most of it. I'm not posting this to brag. I made money, but not as much as I could have or perhaps even should have because of the fakeouts and choppiness of the move. However, because I knew this was a distinct possibility for the day's action, I was able to keep my head through the chop, switch sides when it looked like I was wrong so I didn't get pounded too badly, and eventually have a nice payday. I hope this helps some of the new people out there. This is what trading is. You have to be light on your feet. Creating a good plan is easy, as is making decent market calls. Trading those beliefs profitably is an entirely different story.