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Webinar: Understanding Order Flow with MarketDelta Footprint and Anthony Drager


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Webinar: Understanding Order Flow with MarketDelta Footprint and Anthony Drager

  #21 (permalink)
 
BeachTrader's Avatar
 BeachTrader 
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I just watched a recording of this webinar (I work full time so I never get to see these live). It was great! Anthony explains things really well. I now have a much better understanding of why the markets move like they do, how traders get trapped, etc. He also really made me think about trade targets, i.e. it is much easier to make 20 ticks on the ES by trading 4 lots to 5 ticks than trading 1 lot to 20 ticks.

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  #22 (permalink)
 
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 josh 
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BeachTrader View Post
He also really made me think about trade targets, i.e. it is much easier to make 20 ticks on the ES by trading 4 lots to 5 ticks than trading 1 lot to 20 ticks.

It is most definitely faster to make the 20 ticks, but the risk is also 4x greater, with slightly more overhead in transaction costs. Anthony referred to a 20 tick ES trade as a "home run" so that should give you an idea of his time horizon--extremely small. To have such a short time horizon one must have a very high level of accuracy on the entry, with probably something like a 70-80% win rate to consider it a viable way to trade. I think that in general, most traders would do well to have a well-timed entry, but do it such that the idea of the trade has a larger potential target/profit. Many traders already tend to take the best trades off way too early, and the challenge is that no matter how big the profits are, the loss part of the equation has to remain smaller. So if you reduce the target to 5 ticks, the losses need to be smaller too, or else ridiculously infrequent. I'm not advocating only going for large wins; but I'm saying that if the market happens to be strong and you're in it, and you have the tiger by the tail, why get out at 5 ticks when you could wait 5 minutes and double your money?

Trading 4x size with smaller targets sounds easier, but I think actually trying this approach for a week or two and being honest with the results will often lead to the conclusion that it's much easier to jump in and out, with such a "zoomed in" view, and the scratches and 1 tick losses add up a lot more quickly with such an increase in size, and that at the end of the day one can easily become lost in the trees.

With my own anecdotal experience (and therefore perhaps meaningless to anyone but me), I have had the easiest time making money when the market actually makes some move in my direction, and this is whether it's a range day or a more directional day. Money can be made scalping for ticks, but when I do this, at the end of the day I wind up feeling like I have worked WAY too hard for less than if I had just observed what the market is trying to do as a whole and gotten with that move, while at the same time taking profits and adding back in when reasonable. I think that these pit-turned-screen traders often have a hard time seeing beyond a few ticks because the role of most pit traders was the middle man and the game was for a few ticks. But we are in a different world than existed in trading even 5 years ago, and the game is not the same as it was 10-15 years ago. Sorry for the ramble, but only an honest trial of this approach will tell you if it's a worthwhile approach for you. Practice tells me that generally, it's harder work for less money, though it certainly can feel safer because the time of market exposure is shorter. But that's only my experience, and may differ from yours.

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  #23 (permalink)
 
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 Big Mike 
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My position is simple: scalping is many times more difficult than day trading.

Mike

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  #24 (permalink)
 
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 BeachTrader 
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Yes I am not a scalper either. But I will consider scaling out a little earlier and not always going for the home run. I believe Anthony said he leaves the last third of his position for the 5 points or more. I will re-watch it.

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  #25 (permalink)
 timefreedom 
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Big Mike View Post
My position is simple: scalping is many times more difficult than day trading.

Mike

And... I'll bet you a dollar that I can tell you what the weather will be in a given location 20 minutes from now. But I wouldn't bet you a nickel on a prediction for tomorrow.

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  #26 (permalink)
 
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timefreedom View Post
And... I'll bet you a dollar that I can tell you what the weather will be in a given location 20 minutes from now. But I wouldn't bet you a nickel on a prediction for tomorrow.

The point is clear from your example, but weather is in no way similar to financial markets. With the weather, anyone can tell you what the weather will be like with 99% accuracy 20 minutes from now. But reality shows that most traders cannot predict where the market will be 20 minutes from now with much better than 50% accuracy; and, in that equation there is volatility to consider, so just predicting it will be 10 ticks higher in 20 minutes is not enough--we must predict that it will not go down 30 ticks and back up 40 ticks to achieve that +10, for example.

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  #27 (permalink)
 timefreedom 
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josh View Post
The point is clear from your example, but weather is in no way similar to financial markets. With the weather, anyone can tell you what the weather will be like with 99% accuracy 20 minutes from now. But reality shows that most traders cannot predict where the market will be 20 minutes from now with much better than 50% accuracy; and, in that equation there is volatility to consider, so just predicting it will be 10 ticks higher in 20 minutes is not enough--we must predict that it will not go down 30 ticks and back up 40 ticks to achieve that +10, for example.

Actually, weather is quite similar to financial markets. However, I am unwilling to argue the point. I make my living scalping. Do some research and you'll find... well... I'll just leave it at this: just because the owner of this fantastic trading forum decides to day trade using market profile, that in no way means that it's the best / only (or even a viable) approach. If you are a hedge fund, or placing trades with institutional backed financing, then you'll have to live with day/position trades. If you are a retail trader, you better learn to manage your risk carefully via scalping - unless you're willing to trade in sim and pretend that someday after you retire from your "real" job you'll somehow morph into a successful trader.

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  #28 (permalink)
 
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 Silvester17 
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josh View Post
we must predict that it will not go down 30 ticks and back up 40 ticks to achieve that +10, for example.

good example showing that you would be better off with a 5 tick target / 5 tick stop, than a 20 tick target / 20 tick stop. both losing trades, but only losing 5 ticks


timefreedom View Post
Actually, weather is quite similar to financial markets. However, I am unwilling to argue the point. I make my living scalping. Do some research and you'll find... well... I'll just leave it at this: just because the owner of this fantastic trading forum decides to day trade using market profile, that in no way means that it's the best / only (or even a viable) approach. If you are a hedge fund, or placing trades with institutional backed financing, then you'll have to live with day/position trades. If you are a retail trader, you better learn to manage your risk carefully via scalping - unless you're willing to trade in sim and pretend that someday after you retire from your "real" job you'll somehow morph into a successful trader.

yes, this is a very important point. especially difficult if holding overnight when market is closed for an hour.

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  #29 (permalink)
 
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A more appropriate thread to debate on scalping vs day trading is here:



Mike

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  #30 (permalink)
 
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Posted here instead:

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Last Updated on May 13, 2013


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