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Scalping ES, need help


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Scalping ES, need help

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  #31 (permalink)
Legendary Market Wizard
Chicago Illinois USA
 
Experience: Advanced
Broker: IB, ToS
Trading: /ES, US Equities/Options
 
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To be fair, I do not know Jigsaw or their methods, so I cant be too critical of something that I do not know/understand. Also, there is more than one way to swipe a few ticks. Add to the mix the fact that as a market maker, both nasdaq and floor, I never looked at a chart. Charts and indicators never had a place until I was "upstairs". I certainly did fine before charts AND I certainly went through MANY things that DID NOT work for me along the evolutionary road to right here.

FWIW, this is the most competitive field and perhaps the most difficult "career" there is.

That said, If I was going to make one suggestion for you to consider it would be a "market internals" screen. This can give an insight into where price might be going. Feel free to ask any questions...nothing is assumed.


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  #32 (permalink)
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ALC77 View Post
I'm not stuck on 1 tick -- I'd love to be able to make more, but I've been led to believe that scalping is the quickest way to get profitable.

@ALC77, I have no personal experience in this type of extremely fast, extremely short-term trading to capture ticks, but @wldman does, having been a professional at it. As he put it:


wldman View Post

FWIW, this is the most competitive field and perhaps the most difficult "career" there is.

What I do know is that, in literally years of reading journals on this site, I have not seen one that I can remember where the trader succeeded at this type of trading. This doesn't mean that it can't be done, but I wonder about what you said, that "I've been led to believe that scalping is the quickest way to get profitable." I think it can work for a very few people, as many things probably can. But you are going up against some really good competition: traders who have been pros at this for years (or decades), and high frequency programs that will do better at grabbing a tick than any human trader.

I don't want to discourage you, but I'd say the odds are with the other side in this arena.

I do think there is opportunity for short-term trading for very small targets, and Jigsaw has an excellent reputation; I would suggest broadening out and reconsidering the extreme version of scalping you have been trying. Most traders who refer to themselves as "scalpers" actually look for more ticks and have a much better risk/return profile from doing so.

Sorry I can't give specific advice -- it's just really not my area -- but the one thing I can suggest is to not try to play the exact game that the pros and the algos are already very, very good at. You probably can do better with a wider perspective and longer time/tick horizon.

Good luck. No type of trading is easy. I hope you can find a niche you can exploit profitably and well. It could be what you're currently trying, for all I know. I just wanted to suggest you reconsider your options a bit.

Bob.

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  #33 (permalink)
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On the desk (nasdaq) we never scalped. The thought was that we can take in inventory at wholesale and put inventory out at retail. The spreads were wide 3/8 of a point and order flow was our friend. We positioned things when we took a position more because of anticipated order flow than because of any stock specific item.

On the floor I only scalped when it was the most efficient way to get to neutral (hedged or flat) Many locals could scalp pretty well and would do it to "make a paycheck". Often they were "spreaders" so when something did not fit and there was no anticipation of two sided order flow, the scalp got you paid. The way I was trained in options was to look elsewhere...someplace other than where most of the crowd typically looked. So that was reversal, conversion, box, roll.

Reversal is long put, long stock, short call...so if I was buying puts, rather than look to sell those or other puts, Id look at stock and calls. Box is spreading off the risk in the same ex cycle either down strikes or up strikes. Roll is doing the same but in a future ex cycle.

The futures floors were more "scalp-centric" and many of the locals made unbelievable money doing it. Of course this all started to die as hand held monitors came in. Guys upstairs would know about intra market orderflow and nudge pricing based on the firms position and client needs...essentially the beginning of the end for open outcry.

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  #34 (permalink)
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wldman View Post

That said, If I was going to make one suggestion for you to consider it would be a "market internals" screen. This can give an insight into where price might be going. Feel free to ask any questions...nothing is assumed.


can you expand on this.. I've never really looked into using anything like this

I've looked at TRIN but thats about it

-P

"Truth is not what you want it to be; it is what it is, and you must bend to its power or live a lie"-Miyamoto Musashi
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  #35 (permalink)
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ALC77 View Post
Can I ask what you use to determine what the immediate direction is before you enter a trade?

I use two charts I have a 4500 tick chart for placing trades, that chart has a 21 ema that I make sure my entry candles close on one side of the line (above for longs , below for shorts)

I also use a 5 min chart with a 21 ema,60 ema and 200 ema I really only use this for finding V bottom plays and the 200 ema is normally what I trade in the direction of, yesterday was a good mean reversion day we have a sharp drop so my goal with longs was get back to the 200 ema and then wait to see

-P

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  #36 (permalink)
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ALC77 View Post
I am attempting to scalp the ES for 1 tick at a time. I am using YM as a correlation to ES. I don't use charts at all. I am only using Jigsaw DOMs of ES and YM side by side (John Grady style) with a time and sales of the ES. I am trying to not be like the typical retail trader so that's why I am not using charts or indicators. I am trying to trade what I see right NOW like I hear so many successful people talk about. I have journaled and figured out my biggest problem, but I don't know how to solve it. I keep getting the direction wrong in the immediate term. I see it's going up with volume, I go long, get filled, and then much more often than not, I get ran over for 2+ ticks if I can't get out in time. What can I add or do different to make it over the hump with the biggest problem area for me? I know the YM is a great correlation but it moving much faster than ES makes it very difficult for me to keep it all in perspective. I'm getting tired of seeing red, day after day.

You have received some great responses here, so I don't necessarily need to add mine. All I will say is you are getting a toxic fill more often than not and it is hard to recover from that. You are late to the party. Late being seconds which is an eternity for the algorithms.

And just as a side note, you mentioned "...like I hear so many successful people talking about". It is extremely rare for successful traders to give away the exact method of how they trade. Most will skirt around how they really do it and leave some sauce on the side. So just because somebody says they are successful at something, it doesn't mean they are, or it doesn't mean there isn't another piece of the puzzle they are not telling you.

@iantg is one of the greats with respect to dissecting price / volume and can give you a much better explanation of toxic fills and how to potentially recognise / avoid them. He might be able to help you, but I don't want to put words in his mouth but I am sure he will weigh in if he feels there is something constructive to add.

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  #37 (permalink)
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What you say about leaving some sauce on the side IS SPECIFICALLY TRUE. But there is both a nefarious and a genuine cause. Speaking only for myself. I have NEVER intentionally left something off with an intent to conceal. Sometimes that happens, especially with people that have something to sell. When it is intentional, regardless of the reason it is nefarious.

Often people communicate based on their specific consciousness...meaning that things can get left off because they are assumed. The error is in the calculation that others have the same consciousness. In other words everyone does not have the same shared experience or specific knowledge. Omission is an error of construct, not an effort to conceal or mislead.

-Dan



JonnyBoy View Post
You have received some great responses here, so I don't necessarily need to add mine. All I will say is you are getting a toxic fill more often than not and it is hard to recover from that. You are late to the party. Late being seconds which is an eternity for the algorithms.

And just as a side note, you mentioned "...like I hear so many successful people talking about". It is extremely rare for successful traders to give away the exact method of how they trade. Most will skirt around how they really do it and leave some sauce on the side. So just because somebody says they are successful at something, it doesn't mean they are, or it doesn't mean there isn't another piece of the puzzle they are not telling you.

@iantg is one of the greats with respect to dissecting price / volume and can give you a much better explanation of toxic fills and how to potentially recognise / avoid them. He might be able to help you, but I don't want to put words in his mouth but I am sure he will weigh in if he feels there is something constructive to add.


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  #38 (permalink)
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I may be able to add a few things of value. I started a public microstructure thread a while back specifically for the ES. That should help shed some light on the relationship between volume and price in a more granular way.

But the TLTR is this. It is very easy to predict the next tick up or down. It is very easy to get filled on the wrong end of this. (toxic fill). But it is damn near impossible to get filled on the right side of this and get the one free tick. All of the volume you see in the DOM is mostly just people waiting in the queue to get near the front of th line so when the winning side fills 10% from the line, they are in the 10%. These people also have to be fast enough to land a cancel when the shit hits the fans too. Retail traders on any platform co-located or not will neither have the data feed (MBO), the real time processing power to know where they are in line at any point in time not the ability to land a cancel when it matters.

So to cut to th chase the real equation you are solving for is this.

1. All your fills will initially be toxic. Some maybe just one tick, but others 2 to 3 ticks initially.
2. If and when you tick back to positive, you will likely be too slow to get out half the time, so you will likely need to be up > 1 tick to capitalize on just the one tick.
3. So your initial risk is always going to be 1-3 ticks negative just to enter. Your stop loss needs to be further out than this or you will hit it 70% of the time no matter what.
4. Your reward of 1 tick will often require a 2 tick positive move.... This after you were in the red initially.
5. So ultimately with retail tools, your alpha will have to cover at least a 60% win rate just to barely break even. And this assumes you have a seat license and can get rock bottom commissions.
6. For bonus points, my microsctructure thread has examples of a roughly 53% -55% win rate that can be obtained with the right approach to volume analysis taxonomy. So all you have to do is come up with a 5% edge and you could theoretically break even.

Best of luck!

Ian

In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
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  #39 (permalink)
Glasgow, Lanarkshire Scotland
 
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Really interesting thread here and some great contributions.

I can’t really offer much in the way of advice as I’m still not profitable but I’ve basically just stopped pursuing this technique.

I’m also a Jigsaw user and came from the bonds trying to implement John Grady’s technique and training. I’ve had a number of stop starts for a number of reasons but more recently I’ve been attempting very small scalps in the ES - basically as Pete talks about in his pretty famous scalping video.

I was also spurred on by hearing how successful Gary Norden is at this - but remember he’s been doing it for decades and I think looks at thinner markets than the ES. The ES is a complex beast with a number of different participants after different things. Volatility recently seems to be well above what I personally can keep track of and I found that if I say and watched I could read things pretty well but the second I got involved I’d have to market myself out to contain losses.

The one tick drill isn’t meant as a strategy for actually trading and Pete is pretty clear on this, even when you talk to people who employ techniques similar to this it’s usually within a wider strategy. I found on a sim I could make it work to a degree but due to toxic fills, volatility and poor reading skills combined I personally would get chopped up.

I’m not saying it can’t be done, but I couldn’t do it. I spent a couple of weeks doing the observation skills and came out just trying to leg into momentum moved, this is what stands out naturally to me, but I still find it really hard in the ES, so I’ve headed back over to the bonds where I can keep up - although volatility there is good right now, although I’ve been considering looking into spread trading rather than outright s, truth be told though I feel I’d just be method hunting if I did that.

Don’t beat yourself up over it by the way - you’re DOM skills have probably improved massively through this even if you do decide to pursue an alternative strategy.

I’d be really interested to hear what Pete’s advice would be, I just tried tagging him here but not sure if it worked, maybe reach out to him. One thing I’d say is head over to the Jigsaw trading room and just ask, they really are a good bunch with vast experience in the ES and with the ladder - stick around and you’ll learn a ton, particularly when the market is quiet or at the end of trading when people can get into chatting about your query rather than having to focus mainly on trading.

Regards.

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  #40 (permalink)
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ALC77 View Post
The reason I want to scalp is that it seems to fit my personality:

(1) I don't like a lot of risk. The longer you are in a trade the more of a chance of an "unplanned event" = more risk.

(2) It seems like it would be easier to get smaller bits of profit vs waiting hours for a larger move that may never come.

(3) More occurrences = more practice time. More occurrences will desensitize a person from the "thrill" of trading. I want to remove or minimize my emotions from trading.

If you are having to spend 3.5 ticks round trip to break even then that is NOT the broker for a scalper. Scalpers MUST have a round trip rate at below the cost of 1 tick of the instrument they are trading. For instance: Tradefutures4less.com (A Stage 5 Trading company) charges $3.38 for a round trip on the ES as their HIGHEST rate. Their rates can go as low as $2.90 for a round trip on the ES, based on volume. ($12.50 - $3.38 = $9.12 profit per tick). Yes, having resting orders in the book is mostly how I trade, so there is no slippage for me. I either get filled or I don't.

You might take a look at this guy's trades (mark101rrrr) on Jigsaw Leaderboard. It's quite remarkable. So I guess it can be done. I scalp the CL for 1 tick early in the day before the market opens. But I don't trade it as well as this guy does. Many of his trades are 0:0 time in/out. I've asked about it - no answer from anyone to date. It may be an auto bot on the MT4 or 5 platform. I mapped over 100 of his trades, reviewed them in replay - I made a video of replay so I could slow it down to see if there was anything on the Jigsaw DOM which would give some insight into the strategy. Occasionally, I saw something. Most of the time, not. In any case, you should take a look - you can download the details of all his trades.

I think it's curious that no one other than myself has asked about it - at least to knowledge, no one has.

https://www.jigsawtrading.com/leaderboard/

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