Lindsay's - Something to nothing scalping system

I have enjoyed TH's account of his winning CFD trading(and whole thread really), mine is less inspiring-but any comment appreciated!

Frustrated! I am just paper trading in my case!.. I started a month or so back with a view to use my charting knwledge cautious ...haha..to scalp a few points on a regular basis off a futures index or 2 on the 1 min chart. I am now suitably humbled as after several hundred trades I have confirmed that I have a negative expectancy, today I wiped out my maximum daily risk ($300) in less than an hour with a single contract on the ES.

What I have learned so far is;

I dont have the skill to trade in choppy markets
There is a huge potential to chew money up trying to get into breakout/down trades
I have fear of missing the start of a run-this keeps me in breakoutzones getting chewed
I have fear of losing a profit, difficult to let a winner run-this means I have to look for reentry if trend continues-many a run watched disappearing without a buy signal that is in my weaponry...I dont want to chase.
I am ok at exiting with a small loss, there is just too many of them.
Often, it seems as though my entries actually define a short term high or low, with immediated reversal and stop taken out...this has got to be telling me something, just not sure yet what that is


What actions do I now take?

Be discriminatory about what market conditions I trade-dont trade just because I can. I need a trending market.
I may move away from the 1 minute and try the 5 minute chart?
Learn to read the short term market emotion better, I currently trade off a chart with hotkeys and look only at volume and moving average or 2, and a glance at a longer term chart eveery so often.
MRC&co mentioned the phenomena of the market stalling and what happens next...I need to be able to read these moments and act with percentages in my favour. Might have to start using the DOM, which I have avoided as it seems so manic it can be unsettling.
Need more work on analysing patterns in the market(s) that I wish to trade.
Need to learn more about how global markets impact on each other,

What else?

Persevere! Persevere! More saddle time....
Oh and did I say dont trade choppy market periods!

The thing is I really love the challenge of this, and the active nature of it all, so wont be giving up.

lindsayf said:

Often, it seems as though my entries actually define a short term high or low, with immediated reversal and stop taken out...this has got to be telling me something, just not sure yet what that is.

Click to expand...

LOL AND THERE IS THE ANSWER to short term trading.

DON"T TRADE BREAKOUTS.

What is the percentage of time an index spends breaking out then trending?? A very small percentage of the day. The rest is chop. Learn to trade what the market does mostly. It aint breakouts.

Then the second "secret" is breakout starts from the other side of the chop. So you learn to trade chop you learn to get minimum MAE entries to breakouts.

Once you learn that all that is left is to pick the colour of your lambo :car:

I've never been able to move intraday breakout trading from paper. It just isn't profitable. Far better off trying to fade them.

Break downs on the other hand, have been tremendously profitable this year, and aside from opens, are the only things I've ever been able to trade intraday with profitability.

lindsayf said:

I have enjoyed TH's account of his winning CFD trading(and whole thread really), mine is less inspiring-but any comment appreciated!

Frustrated! I am just paper trading in my case!.. I started a month or so back with a view to use my charting knwledge cautious ...haha..to scalp a few points on a regular basis off a futures index or 2 on the 1 min chart. I am now suitably humbled as after several hundred trades I have confirmed that I have a negative expectancy, today I wiped out my maximum daily risk ($300) in less than an hour with a single contract on the ES.

What I have learned so far is;

I dont have the skill to trade in choppy markets
There is a huge potential to chew money up trying to get into breakout/down trades
I have fear of missing the start of a run-this keeps me in breakoutzones getting chewed
I have fear of losing a profit, difficult to let a winner run-this means I have to look for reentry if trend continues-many a run watched disappearing without a buy signal that is in my weaponry...I dont want to chase.
I am ok at exiting with a small loss, there is just too many of them.
Often, it seems as though my entries actually define a short term high or low, with immediated reversal and stop taken out...this has got to be telling me something, just not sure yet what that is




What actions do I now take?

Be discriminatory about what market conditions I trade-dont trade just because I can. I need a trending market.
I may move away from the 1 minute and try the 5 minute chart?
Learn to read the short term market emotion better, I currently trade off a chart with hotkeys and look only at volume and moving average or 2, and a glance at a longer term chart eveery so often.
MRC&co mentioned the phenomena of the market stalling and what happens next...I need to be able to read these moments and act with percentages in my favour. Might have to start using the DOM, which I have avoided as it seems so manic it can be unsettling.
Need more work on analysing patterns in the market(s) that I wish to trade.
Need to learn more about how global markets impact on each other,

What else?

Persevere! Persevere! More saddle time....
Oh and did I say dont trade choppy market periods!

The thing is I really love the challenge of this, and the active nature of it all, so wont be giving up.

Click to expand...

Well it is just as well you started off paper trading!!!
Try tightening your stops, and then let the market take you out

Your issue here really is just more screen time and getting more experience.
Back test extensively as well as live testing

It is a really weird time when you start out as there are so many ways and instruments to trade and everything seems good.

First you have to try exerything out on paper to find what style suits you and then what markets suit you.

Scalping may suit you, but you are better using /YM futures instead of Russell or ES futures.

Only advice I can give from experience is become proficient at one thing at a time. You have stated above I need to do this and this and this and this...all true but one thing at a time.

Don't risk your hard earned money just yet!!!

When I started it was just options, became proficient with verticals and covered calls - it was all I knew. I knew all about calendars, straddles etc - but just focused on nailing how to trade verticals and its combinations.

Later on when I had developed a positive expectancy I moved on to calendars etc.

Good luck!!!

TH you said
"....... breakout starts from the other side of the chop. So you learn to trade chop you learn to get minimum MAE entries to breakouts."

So you are saying that the true breakout run (if it is to occur) is likely to start from (say with a break up) the bottom part of the chop and go thru without messing about much at the resistance level? must go and have a look at a few charts. This being the case then my conclusion about not trading chop has the potential to destroy my trading before it begins....

At least it gave you a laugh

Mazza'
why do you suggest the YM futures instead of Russell or ES futures.? And you may be right..I do tend to juggle too many ideas at the same time..

thanks

lindsayf said:

Mazza'
why do you suggest the YM futures instead of Russell or ES futures.? And you may be right..I do tend to juggle too many ideas at the same time..

thanks

Click to expand...

Oops I was meant to say "maybe YM would suit you more than the other Russell or S&P futures".
My point was each market has its own characteristic.

I don't have extensive knowledge of how the YM moves intra daily, better let the others give you an idea on that.

its all screentime. the instrument, the chart, the indicator, its all irrelevant. you have to sit your ass in front of your screen and watch the ebb and flow for YEARS. over time you pick up the patterns, it is reinforced till it becomes intuition, add a dash of money management, and THEN you can start making money off it.

no book, no course, no black box, no algorithm designed by quantum physicists can do for you what your mind is already sublimely programmed to do. all you have to do is train it, all you have to do is watch.

and watch.

and watch.

Yeh, it's really a tough gig.

Firstly, I would start working out what important levels to put on your chart as support or resistance. Go through the daily chart, then the 30 minute, then 5 minute and see what levels have acted as support or resistance in the zone around where price willl trade today. Any gaps to fill? Any strong levels? Are levels being respected currently, or are they all false breaks? Are they being destroyed cause the selling or buying is to damn intense?

Then work out what you are going to do, fade them (place a stop a few ticks below it), fade a false break, trade for a break of a false break. Try trade the breakout.

Are you going to try and get on a trend by buying pullbacks in the order book, or waiting for a legitimate lower high in a down trend on the chart and trying to get on board that? How will you get on board that, buying it on the way up, or after confirmaiton? How wide will your stops be per trade and when will you take profits (how will you manage the trade once in it)? Do you want to scalp or try and ride the trend longer? What does a lower high look like on a chart in your market? What do turning points look like on each side, a roll over at the top, or a V bottom or what? How do you define trend, structure, HH, HL, distance between each new pivot high or low? Others use time.

What are other markets doing? Is Nikkei rallying but SPI not moving? Or are global indices taking off and SPI is now catching on after squeezing the other way? Is S&P moving up Friday arvo and SPI falling, unwinding of spreads throughout the week before the weekend (just found that one out). What other markets relate to your market? Are you trading Taiwan, then NASDAQ due to technology is probably important? Nikkei? Use Yen, HSI especially over cash close lunch period.

What order book patterns are there? Should you be fading every move once the order book grinds to a halt and keep cut and reversing down or up the trend or is it a clear trend but price action flicky and you should be riding it for longer as it's hard to scalp? Or frontrunning size that isn't being clipped? (easy to do this Friday arvo). Who is stronger, the buyer or the seller, or is it a battle and you should stay out? Do you see an iceberg (price level that keeps getting refreshed once it's hit) and what will you do? Trade away from it, trade for the breakout through it? Or wait for a break through it and then a squeeze back the other way? How will you determine what you are going to do? Is it an iceberg on the bid and intense selling coming into the iceberg? Prob better to short INSTANTLY when you see the iceberg is gone and stops refilling. Though sometimes they will put another iceberg straight on the next bid level below. Nothing is a certainty, only a probability.

Basically, you are in the process of creating your ENTIRE OWN STYLE!!!! This is a HUGE task! But you should be thinking of every aspect (though you prob don't have data for all the other indices, so maybe leave this part for now). Then comes discipline to implement your style and not fall into stupid traps or trade because you are bored or are sick of missing your opportunity to get on the trend so you end up chasing and buying the high or selling the low and begin revenge trading after that.

Good luck.

lindsayf said:

So you are saying that the true breakout run (if it is to occur) is likely to start from (say with a break up) the bottom part of the chop and go thru without messing about much at the resistance level? must go and have a look at a few charts. This being the case then my conclusion about not trading chop has the potential to destroy my trading before it begins....

Click to expand...

No. What I am saying is that,

breakouts trades give you crap stops,
breakouts trades give you too few opportunities during the day to make real money,
breakouts trades are for the clueless. (in an intraday sense)

If you learn to trade chops 30% of your good trades will turn into breakouts but by the time punters are jumping on the break you already have a 2R winner on your hand about to turn into a 5 -10 R winner if it is a real break.

Your stops are going to be much smaller fading moves rather than breaks.

If it isn't a break but just part of chop you can take a 2R win (example) on the other side of the chop.

If you are really sharp you would trade with 2 to 3 contracts minimum and take profit on 1 on the other side if you think a break is likely. Then move stop to BE.

Have a look at these two chart examples breakouts trader on top getting cut to pieces chop trader accumulating tics all day and still better position to ride the breaks.

EDIT Box is entry/exit, Horizontal line stop for entry.

That second chart of TH is very true and very interesting. This is where you really have to find what works for you.

It is an uptrend, TH is buying after a retracement and some confirmation that the uptrend is beginning again (on that second chart).

I personally, would wait for the order book to start stalling on the down move and then start buying. In an uptrend, I will want to be buying pullbacks, even if the price is still slowly moving down. But always with tight stops. I may loose a couple ticks and price will move lower. Then I will try buy once that new low move grinds to a halt. Hard psychologically to BUY when price is moving DOWN, but probabilities are you are going to end up on side eventually. This is where you can even (with more risk) average down, keep buying as it falls. You would not however, average down trying to sell the uptrend. That is plain stupid. Just buying down moves in an uptrend.

I actually know of one extremelly profitable intraday SPI breakout trader. But he also has quite a few more nasty tricks up his sleeve.

This is exactly the point though, you have to find what works for you, and this involves the whole style, including stops, managing positions, timing good entries.

MRC and TH..many thanks indeed..food for thought to say the least...the art in trading the chop would be the rapid identification of the tops and troughs and timing the entry..getting the stop size suitable....so differtn from what I have been doing ..tho at times I have tried to second guess my self and be what I thought was counter intuitive and that, in a very primitive sense touches on what you have described I think..which is not really counter intuitve at all!

Seems that it might be wise to stop focussing on breakouts, they will just happen from time to time with chop trading...having said that of course I would be aware of key S/R levels.

Another thing I have noticed about my trading is that I seem to have a bullish bias in that my stats show that my long trades are more frequent and better outcome that short trades, by a significant amount. So I need to work on seeing the short opportunities-looking at the sessions I have traded in retrospect there are plenty of shorts gone begging but at the time I just didnt see them?? This is probably because I have never shorted any instrument as my experience with cash money is in shares going long.

It would be fascinating to know more about those other nasty tricks your trader friend and others get up to...guess it is an absolute necessity to know something about the motives and methods of the big players in the market place.

Lindsay,

If your CFD provider provides mini-contracts - as opposed to full sized contracts -, this may assist in your development.

I think experimenting with strategies placing live trades with 1 mini-contract - implying minimal dollar risk - would be preferable to pure paper trading.

Best wishes with your journey.

A good thread thanks to the contributions from TH and MRC&Co.

Lindsay it will take some time to find your groove. May I suggest that you may be trading too much while you are starting out. It is more important to know how you want to trade (style), then find a technique (setup) to do it, then compile a strategy (plan) and then see if you have an edge (test).

Looking at TH's first chart I see that the first BO trade was only stopped out by the big swing down and this assumes that this trade was still open. At worse this trade was a BE result. I wouldn't have started another long until I was comfortable moving the original SL to BE. A short (break down) trade would have got the big swing down and have been very profitable.

Only two/three trades for me on this chart. This approach is not a scalping technique but more of a swing trading style.

Trembling Hand said:

LOL AND THERE IS THE ANSWER to short term trading.

DON"T TRADE BREAKOUTS.

What is the percentage of time an index spends breaking out then trending?? A very small percentage of the day. The rest is chop. Learn to trade what the market does mostly. It aint breakouts.

Click to expand...

Haha agree so much about not trading Breakouts. Fading them is the way to go; different reactions on stocks and equities imo.

Then the second "secret" is breakout starts from the other side of the chop. So you learn to trade chop you learn to get minimum MAE entries to breakouts.

Click to expand...

What's a MAE entry?

skyQuake said:

What's a MAE entry?

Click to expand...

MAE = maximum adverse excursion. This is the furtherest against you that a trade will go. eg. You buy at $1.00. Initial stop at 0.90. The trade moves against you and falls to 0.95 then volume comes in and the price takes off. The MAE is 0.05 or 5%. As a rule of thumb, good trades tend to have a low MAE.

TH is saying that by learning to trade chop you can better read breakouts and find them with a low MAE. I don't know how to trade chop and this is an area that I need a lot of practice in.

peter2 said:

May I suggest that you may be trading too much while you are starting out.

Click to expand...

Interesting suggestion. Would you like to expand on this? From my perspective I believe when you start you cannot trade enough.

All my life I have been involved in - Elite sports, learning & teaching artisan apprentices, and now trading which I consider a performance task. What these three things have in common is that through repeated practise and review comes improvement. Were intraday trading differs is that it offers a unique ability to practise and compress the learning curve from the accepted wisdom of "10 years of deliberative practice to develop expertise" into something much shorter. Because markets give you repeated examples in a very short period to learn through practise that if done sensibly (MM) will not fatigue you like a sports event or apprenticeship or for example musical instrument. What I mean is if you are on sim knock yourself out. Be creative and aggressive and find out what works but at all time review your results and still stick to normal MM rules just as if you were live.

I think if you are into it you will find you can learn a lot very quickly by doing. And doing often.


MR C & skyQuake are being trained by a couple of gun traders, ie doing their apprenticeship, I wounder how many times they are expecting his to hit the button per day??

TH certainly. Elite performers do practice a lot, but they practice perfectly. They practice to perfect their technique. An uncoached performer cannot know if what they are doing is correct.

In this instance I doubt Lindsay is practising his entries consistently, placing his stops consistently or exiting consistently. This comes back to his setup. If he hasn't decided to specialise on one strategy then it is understandable that there is doubt. Lindsay mentions using breakouts to scalp. IMO very very difficult and this has been highlighted in this thread. So if he wants to trade breakouts, then as you have correctly stated, there are not many each day (on average), he must try to find the high probability ones. He must risk more and try to get more from each trade. This is not a scalping technique.

An uncoached performer can only use their performances as feedback. If Lindsay trades less he is more likely to be able to critically review each trade and get the right feedback about his entries/stops/exits. The next step is of course doing something different. Lindsay is now at that stage, but needs ideas about what to do differently. This thread has provided some suggestions.

peter2 said:

An uncoached performer can only use their performances as feedback. If Lindsay trades less he is more likely to be able to critically review each trade and get the right feedback about his entries/stops/exits.

Click to expand...

That's the bit I don't agree with. Yes sure it has to be good practise and with good review time but the larger the sample you have the more accurate you analysis is going to be. And the more likely you are going to reach that "light bulb" moment when it just clicks as to what is a good trade.

I reckon the only way you can un-learn the crap in trading books etc is to trade 1000s of time to realize that its all Bullsh!t. Banging out 10 trades a day is going to take you an eternity to come to that point.

Imagine the feed back I get from my trading daily doing 200 odd trades a day then spending an hour after market reviewing that compared to someone doing 10 a day. After a year I have reviewed 40,000 trades compared to 2000. I'm not saying I have a 20 time better learning experience but I'm a lot better off than the 10 trades a day trader.

I do get where you are coming from just that when you are learning it is the best time to be creative and experimental. just to see whats possible.

Trembling Hand said:

when you are learning it is the best time to be creative and experimental. just to see whats possible.

Click to expand...

Good thread Lindsay

TH's advice above is probably the best you can get when still searching for a method that works.

For e.g. When you think its a long and you've just gotta buy so you don't miss the run, try shorting instead just to see what happens ......surprising how often you'll end up on the right side of the trade.....

Or try and make bad trades on purpose just to see how good your analysis really is.

Either way your gona learn some valuable stuff when things go pear shaped.


Only on the Sim of course ...... Every bad trade on a Sim could end up saving your a truckload in the future.

peter2 said:

In this instance I doubt Lindsay is practising his entries consistently, placing his stops consistently or exiting consistently. This comes back to his setup.

Click to expand...

Thing is with scalping, a lot of your 'set-ups' IMVHO, are not traditional set-ups most traders will take

Sometimes, you don't know why you enter. Price moving down, hits a HUGE iceberg, Nikkei starts to tank, SPI can't break iceberg. Nikkei continues it's downroar, SPI breaks iceberg, pauses for a second, then tanks. Are you going to write that down as a set-up?

A lot of scalping is feel for the order book, as well as reading the flow of price action on the chart. This is what I believe. Trying to put the two together. Look for chart patterns and work out how to get on them/out of them, through order book patterns. Sometimes, a chart will look sweet as, beautiful, but be fukcing impossible to trade cause the book shows no clear patterns, a lot of flicks and junk going on, always an impression there are both buyers and sellers in there (see today). And though you are reading the price action off the chart nicely, you get flicked/squeezed and stopped out of your attempted entries and end up loosing, even though you are right (if you have conviction you are right and are going to position trade it, you can let it run offside a bit further. Conviction can simply come from trend direction).

As for breakouts, I don't see what is so bad about them personally. If the trend is clear, it just stops to form a ledge (box or flag) and then keeps on it's merry way, get on board (if you are not on it already, you will have to take the flicks against you perhaps), or buy a pullback. But as TH says, safest is selling at say the high of the box, if your feel is price will break down through the bottom of the box as the previous trend was down and price still feels weak.

I'm starting to get to the point where I think scalping is a lot more feel for the price action as you can actually see the flow, not so much specific set-ups (which can be applied to any time period). This is the beauty of intraday trading.

I agree with TH, you just have to practice, practice, practice. The more, the better. Try everything and anything, only way to work out your own style.