Idea: $850 with Two 1 Tick Trades

[ILoveSax 10]

My goal is to become a successful trader as quickly as possible. Since success breeds success. Once you are successful, then it becomes easier to be successful at the next step.

 

So, I am trying to perfect a 1 tick trade. (See profit below.) Here's my idea.

 

EXAMPLE: I see that the market has slowed down, and is trading in a very tight range, and gradually moving down: The action would be 1 tick up ($900.25), and then 1 tick back down ($900.00), back and forth.

 

This trade assumes that I have an advantage over the market, and know which way the trade direction is going. Which I may not have. LOL

 

Idea 1:

Create a programmed strategy to place 50 contracts, with a target of 1 tick, and a stop loss of 1 tick. If I want to go short: When the current price is on $900.00, place the trade directly above at $900.25). Benefit, if I am in the right direction, and it fills, I have saved 1 tick. I can actually make a profit, by immediately placing a buy at $900.00, when it hits or crosses. Biggest disadvantage: I may not get filled on my entry. Also, the trade may fill, and then continue on up to hit my 1 tick stop loss at 900.50.

 

Idea 2:

Create a programmed strategy to place 50 contracts, with a target of 1 tick, and a stop loss of 2 ticks.

Using the same strategy. Wait til the price goes to 900.25, and then immediately place the trade at 900.00. Benefit, it will most probably fill as price hits or crosses. The market is moving in the right direction. Biggest disadvantage: I have lost a 1 tick advantage, and now have to hit or cross 999.75 to make a profit. If the market continues on up, I will have a 2 tick loss atl 900.50.

 

I was doing this today on CL and GBPusd. Unfortunately, sometimes, I got in on the wrong side of the trade. LOL

 

Which do you think would be a preferable strategy, or do you have an alternate idea?

 

Aloha,

Randy

 

Profit. Take two 1 tick trades with 50 contracts (margin $20,000). 2 ticks x $12.50 x 50 contracts. Gross $1250 - $400 commission = $850 profit.

[brownsfan019 17]

My goal is to become a successful trader as quickly as possible.

 

That's all I need to know right there.

 

The beauty of this business is that the barrier to entry is simply a matter of cash. Anyone w/ a dream and cash can play.

 

My suggestion is to first realize that 'quickly as possible' will result in ruins if you think you can beat the market in a matter of days, weeks or months. It's not easy and quite a few give up before even turning a small profit. I would argue that it will take years to perfect your trade and in the meantime you have to survive long enough to make it.

 

The 1 tick to millionaire riches has been discussed in depth on the other trading forum (which is taboo to list here) so I suggest you hunt that thread out and read it. Some of the so-called elite traders visit it.

 

In theory, you've got a great idea here. And if you are right more than you are wrong, it might just work. But first you have to be able to tell the computer when to go short and when to go long and do that with regular consistency. If you are risking 1 tick to make 1 tick, then you'll need to bat over 50% winners to make money after commissions. If you risk 2 ticks to make 1 tick, you'll need to even more than 50% of the time. The biggest hurdle I think you'll face is your winning % b/c in a scenario as you've described, it needs to be high.

 

Now the other side of the coin is to create a more favorable risk/reward setup. Risk 2 ticks to make 4 ticks. Now the numbers are in your favor and your winning % can decrease a bit. Stretch that out more and more and you'll see what I mean. Of course, the larger your profit targets, the less likely they'll be easily achieved when compared to a profit of 1-2 ticks. Personally, I'm looking to risk 1 to make 2 on my trades. If I risk $1, I'm looking to make at least $2 on it if I am right. If I'm wrong, I can take 2 losing trades and then 1 winner to get back to break-even. If you risk $2 to make $1 and you lose 2 times in a row, now you need 4 back-to-back winners to break-even.

 

Good luck and keep us posted.

[Tams 20]

...Profit. Take two 1 tick trades with 50 contracts (margin $20,000). 2 ticks x $12.50 x 50 contracts. Gross $1250 - $400 commission = $850 profit.

 

 

sorry to disappoint you, you are not the first genius who came up with this idea...

[momentom 10]

Trading for a tick successfully was only possible on the trading floor. We could read the microscopic order flow. No Chance to do it electronically as you have no edge for a tick with a reasonable stop. With a larger stop, the losses will eat up any number of 1 ticks.

 

Electronically, you can trade order flow but you need to stretch it for more than 1 tick to be overall profitable..

[bakrob99 11]

Even if you do get it right ... with more than 50% winning %, how in the world will you make anything after commissions??? ... not too mention the odd fast move against you for some slippage to make up for.

 

Scalping the market for retail traders is the path to ruin ... It's not a road cause it takes longer to get to ruin than the road implies ... it's just slower and more painful like a death of 1000 cuts.... slowly bleeding your account to its ultimate margin call.

 

I spent several years when I first got into this business thinking I would outsmart the market. Now I make money by just following a not-so-clever system which follows trends and has a 66% winning percentage with a Risk Reward ratio slightly better than 1:1. Usually I take 3 -5 trades per day. That's it.

 

It's also a way of trading that works for me. It took me a while to realize that I am not a breakout trader. I wait for a market to move and buy on the inevitable pullback. Not too tough to figure out. Just follow your system's money management and as the account balance increases, increase the contracts in the trade. Reduce size when things aren't going too well.

 

Don't waste time trying to out think the market. That's my best advice to you.

[Joseph Connors 10]

 

I spent several years when I first got into this business thinking I would outsmart the market. Now I make money by just following a not-so-clever system which follows trends and has a 66% winning percentage with a Risk Reward ratio slightly better than 1:1. Usually I take 3 -5 trades per day. That's it.

 

It's also a way of trading that works for me. It took me a while to realize that I am not a breakout trader. I wait for a market to move and buy on the inevitable pullback. Not too tough to figure out. Just follow your system's money management and as the account balance increases, increase the contracts in the trade. Reduce size when things aren't going too well.

 

Don't waste time trying to out think the market. That's my best advice to you.

 

 

Can you give us any details on your strategy? 3-5 trades per day sounds like the volume of trading that I am looking for. Thanks!

[bakrob99 11]

Can you give us any details on your strategy? 3-5 trades per day sounds like the volume of trading that I am looking for. Thanks!

 

Sure. My strategy is pretty simple. I wait for the market to show some strength or weakness. Then I get in sync with that trend. I also look for the trend to change at points of expected support and resistance. (Yesterdays high or low, Overnight high or low, Prior Day's Close, Today's Open, 30Minute Range High or Low. These are areas that the market wants to test, and when a bounce occurs it will often go to the other extreme.

 

I enter into trends by waiting for pullbacks (for longs) to the midpoint of a Breakout Bar on any one of a 5, 10 or 20minute chart. I watch a 20K Volume Chart on the ES, 3K on the NQ. Look for consolidation, and then a wide range bar that breaks out of that. Sometimes I will add 2 bars together to form the breakout bar.

 

If you want to reduce the number of trade signals in a day, then switch to higher timeframe charts. Using my method to trade on a 5 minute would produce about 10-12 signals, on a 10 minute about half that and on a 20 minute around 3 per day.

 

I have included a chart of last week Thursday Oct 8 where I show 3 areas of consolidation and subsequent breakout of that area. When price returns (near to ) the area the Trapped Traders who are on the wrong side of the market are looking to get out of their position as close to break even as possible. It is their closing out of their trades that support this entry technique.

 

I have watched virtually every tick of the ES for the past 3 years and I now find it somewhat subconsious to see these occurances and know which ones to take, and more importantly which ones to avoid. I use manual trendlines to keep me on the right side of the trend, which are shown drawn the way I choose to draw them in the dashed grey lines on the chart. Don't even think about shorting an uptrend until you see a double top form and then price trade below it. This pattern occurred around the 11:30 to 13:00 time on the chart shown.

 

I use my Fib drawing tool to show me the 50% retracement point where I want to be a buyer, often 1 tick in front of it. Sometimes I will enter at market if price touches my limit order but doesn't fill me in a few seconds. I place my stop 1 tick below the low of the breakout bar or its combination. I look to exit at the 127% extension for 1/2 of the position and try to hold the rest until the 161% extension. If its a strong move, I will reenter on pullbacks which could have been done at 11:10 on this day as well as 14:00.

 

I will trail my stop only after the market moves at least 4 ticks on the ES n my favour. I will move my stop to 1 tick below the maximum adverse excursion which has occurred on that trade. Usually this is 2 -4 ticks. This reduces my risk and leaves my profit target in place. I won't move the stop again until my 1st profit target has been hit at which point the exit on the 2nd half is discretionary.

 

Do you have any questions?

[dam5h 10]

1 tick stop seems like suicide to me, esp if its a hard stop on your platform, but i have no real experience with market maker strats.

Edited October 12, 2009 by dam5h
misread original post

[thalestrader 14]

... do you have an alternate idea? ... Take two 1 tick trades with 50 contracts (margin $20,000).

 

Alternate Idea: There are a lot of hungry children out there right now. Go buy 20K worth of non-perishable food items and donate them to your local food pantry. You will lose your 20K anyway trading your proposed strategy, so why not do some good rather than simply pad the yacht fund of the CME's CEO?

 

Best Wishes,

 

Thales

[brownsfan019 17]

Alternate Idea: There are a lot of hungry children out there right now. Go buy 20K worth of non-perishable food items and donate them to your local food pantry. You will lose your 20K anyway trading your proposed strategy, so why not do some good rather than simply pad the yacht fund of the CME's CEO?

 

Best Wishes,

 

Thales

 

And get a tax deduction!

[JEHs 10]

Actually, most food banks have incredible buying power. A dollar donated to them buys 7 to 10 dollars worth of food, whereas if you buy the food, one dollar is one dollar. It would be better to just donate the entire amount to the food shelf and let them do the buying.

 

I am only commenting on the subject of giving to food shelves. I am not trying to be insensitive to the original posters question. I'm not going to comment on that subject.

 

JH

[jthom 10]

Gosh, this brings back memories of when I first started down this road. I guess we all have to go through this process.

[Joseph Connors 10]

Gosh, this brings back memories of when I first started down this road. I guess we all have to go through this process.

 

I'm curious .... in what way does it remind you of when you started?

[jthom 10]

Everything seemed so obvious. So simple. I didn't need a year under my belt before I became profitable, shoot this is a piece of cake. All I have to do is take 50 contracts for a tick or two a day and I'll be a millionaire. Oops, forgot that I need a 100000 account to handle the margin draw down. Oops, didn't realize that the price has to move two ticks to make one tick. Oh well, I'll just start with one contract and go for 3 ticks with a 3 tick stop... that's a good RR ratio right? Shoot price always moves 3 ticks against me and then turns around and hits my target, too bad I got stopped out. Oh I know, I'll use a larger stop, say 6 ticks. First trade a winner - 3 ticks! Yeah I've got it all figured out, piece of cake. Oops, second trade hit my stop, oops third trade hit my stop. Hmmm, now I'm 9 ticks in the hole. Jeez, I'll need 3 winners in a row just to break even. Hmmm, may be I don't have this all figured yet.

[Joseph Connors 10]

Everything seemed so obvious. So simple. I didn't need a year under my belt before I became profitable, shoot this is a piece of cake. All I have to do is take 50 contracts for a tick or two a day and I'll be a millionaire. Oops, forgot that I need a 100000 account to handle the margin draw down. Oops, didn't realize that the price has to move two ticks to make one tick. Oh well, I'll just start with one contract and go for 3 ticks with a 3 tick stop... that's a good RR ratio right? Shoot price always moves 3 ticks against me and then turns around and hits my target, too bad I got stopped out. Oh I know, I'll use a larger stop, say 6 ticks. First trade a winner - 3 ticks! Yeah I've got it all figured out, piece of cake. Oops, second trade hit my stop, oops third trade hit my stop. Hmmm, now I'm 9 ticks in the hole. Jeez, I'll need 3 winners in a row just to break even. Hmmm, may be I don't have this all figured yet.

 

 

Gee....that sounds familar!:o

[Joseph Connors 10]

Sure. My strategy is pretty simple. I wait for the market to show some strength or weakness. Then I get in sync with that trend. I also look for the trend to change at points of expected support and resistance. (Yesterdays high or low, Overnight high or low, Prior Day's Close, Today's Open, 30Minute Range High or Low. These are areas that the market wants to test, and when a bounce occurs it will often go to the other extreme.

 

I enter into trends by waiting for pullbacks (for longs) to the midpoint of a Breakout Bar on any one of a 5, 10 or 20minute chart. I watch a 20K Volume Chart on the ES, 3K on the NQ. Look for consolidation, and then a wide range bar that breaks out of that. Sometimes I will add 2 bars together to form the breakout bar.

 

If you want to reduce the number of trade signals in a day, then switch to higher timeframe charts. Using my method to trade on a 5 minute would produce about 10-12 signals, on a 10 minute about half that and on a 20 minute around 3 per day.

 

I have included a chart of last week Thursday Oct 8 where I show 3 areas of consolidation and subsequent breakout of that area. When price returns (near to ) the area the Trapped Traders who are on the wrong side of the market are looking to get out of their position as close to break even as possible. It is their closing out of their trades that support this entry technique.

 

I have watched virtually every tick of the ES for the past 3 years and I now find it somewhat subconsious to see these occurances and know which ones to take, and more importantly which ones to avoid. I use manual trendlines to keep me on the right side of the trend, which are shown drawn the way I choose to draw them in the dashed grey lines on the chart. Don't even think about shorting an uptrend until you see a double top form and then price trade below it. This pattern occurred around the 11:30 to 13:00 time on the chart shown.

 

I use my Fib drawing tool to show me the 50% retracement point where I want to be a buyer, often 1 tick in front of it. Sometimes I will enter at market if price touches my limit order but doesn't fill me in a few seconds. I place my stop 1 tick below the low of the breakout bar or its combination. I look to exit at the 127% extension for 1/2 of the position and try to hold the rest until the 161% extension. If its a strong move, I will reenter on pullbacks which could have been done at 11:10 on this day as well as 14:00.

 

I will trail my stop only after the market moves at least 4 ticks on the ES n my favour. I will move my stop to 1 tick below the maximum adverse excursion which has occurred on that trade. Usually this is 2 -4 ticks. This reduces my risk and leaves my profit target in place. I won't move the stop again until my 1st profit target has been hit at which point the exit on the 2nd half is discretionary.

 

Do you have any questions?

 

No questions. You explained it thoughly! Thanks! alot!

[ILoveSax 10]

Ok, thank you for all your replies. I do appreciate all the positive suggestions. I have decided that this idea could not possibly work.

 

I have no additional questions so this post can be closed.

Thank you,

[ILoveSax 10]

Thank you for your positive suggestion. This was a very helpful reply.

 

Best wishes

[Soultrader 12]

Thread closed due to thread starters request. Thank you