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Emini 4 Tick Scalp still valid?


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Emini 4 Tick Scalp still valid?

  #11 (permalink)
 SpeculatorSeth   is a Vendor
 
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A lot of the strategies that you are talking about (PATS in particular) are really based on having a larger stop than your target. Which can work, but is not really something I recommend. Taking on more risk by having a wider stop than your target can generate returns. However, it's hard to know if you're making money because of the signal itself, or if it's just working because of the wide stop. This makes it hard to know when the strategy isn't working anymore. Not to mention the drawdowns if you get a losing streak which happens more than you'd expect.

So to question I'd have to say that a 4 tick scalp is definitely not still valid in the current volatility regime. The chances of an 8 tick stop getting hit is just too high. This makes it really hard to hit the 80%+ winrate some of these strategies need to have a positive expectancy.

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  #12 (permalink)
 Trailer Guy 
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TWDsje View Post
A lot of the strategies that you are talking about (PATS in particular) are really based on having a larger stop than your target. Which can work, but is not really something I recommend. Taking on more risk by having a wider stop than your target can generate returns. However, it's hard to know if you're making money because of the signal itself, or if it's just working because of the wide stop. This makes it hard to know when the strategy isn't working anymore. Not to mention the drawdowns if you get a losing streak which happens more than you'd expect.

So to question I'd have to say that a 4 tick scalp is definitely not still valid in the current volatility regime. The chances of an 8 tick stop getting hit is just too high. This makes it really hard to hit the 80%+ winrate some of these strategies need to have a positive expectancy.

You are so right. "Mack" at PATS totally agrees with you and has made that clear. If you need larger stops you need to increase your profit stops as well. He was soap boxing again tonight that the stop goes above the swing high or low, not 2 points from the entry. I got through college by knowing that always and never are not the right answer, you absolutely have to take the state of the market into consideration instead of blindly doing the same thing over and over.

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  #13 (permalink)
ApolloEleven
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I asked Mack about it and wrote an email. He said he tried several ways, either put the additional ticks needed for your SL to your target or just put the stop where it goes and leave the 1st target at 4 ticks. Either way will influence your winning percentage either to the upside (large SL, but leave at 4ticks tp) or the downside (large SL and go for a 10 tick tp or else). There really is no clear answer to this as your odds change directly once you change your SL or TP. You can also put a limit order after your signal bar got triggered and wait for the market to pick up your order.

I continue to scalp for 4 ticks and let a runner go. If you study the market closely you can watch the 4 tick scalp is still valid. E.g. the market often times reverses after a 4 tick scalp failed and the scalpers got trapped, or after triggering a large signalbar the following small pullback goes exactly far enough to place a 8 tick stop and off it goes.

you can go either way as mack mentioned, just be aware your winning percentage changes with every change you about to make. a RR of 2:1 can be 8ticks/4ticks or 16ticks/8ticks, but that doesn't mean the winning percentage of both ways remain the same as the volatility also influences it. Higher or extreme volatility is more unusual than normal volatility and might keep traditional 4 tick scalpers out of the market or some simply can't afford a larger stop and wait for another chance when volatility goes down again.

However, after some research and chart study I found out there is no absolute answer to this. You have to figure it out yourself. It seems to be very individual.

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  #14 (permalink)
 
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 bobwest 
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TWDsje View Post
A lot of the strategies that you are talking about (PATS in particular) are really based on having a larger stop than your target. Which can work, but is not really something I recommend. Taking on more risk by having a wider stop than your target can generate returns. However, it's hard to know if you're making money because of the signal itself, or if it's just working because of the wide stop. This makes it hard to know when the strategy isn't working anymore. Not to mention the drawdowns if you get a losing streak which happens more than you'd expect.

So to question I'd have to say that a 4 tick scalp is definitely not still valid in the current volatility regime. The chances of an 8 tick stop getting hit is just too high. This makes it really hard to hit the 80%+ winrate some of these strategies need to have a positive expectancy.

I strongly agree with @TWDsje's entire way of looking at the question. Can you count on the very high percentage of wins that you need to offset the relatively large losses from the wider stop loss? Very few traders can. It is partly a matter of volatility, partly a matter of the market not always cooperating with you, and partly a matter of trader personal issues as losses pile up and the trader's emotions start to kick in.


Trailer Guy View Post
You are so right. "Mack" at PATS totally agrees with you and has made that clear. If you need larger stops you need to increase your profit stops as well. He was soap boxing again tonight that the stop goes above the swing high or low, not 2 points from the entry. I got through college by knowing that always and never are not the right answer, you absolutely have to take the state of the market into consideration instead of blindly doing the same thing over and over.

Setting a stop (and target) based on the chart more than on a constant set formula seems much wiser and far safer. If you always say it will be x points up or down, you are assuming that the market will always be the same. It is not even the same during the same day, much less with the current high volatility.


ApolloEleven View Post
I asked Mack about it and wrote an email. He said he tried several ways

...

after some research and chart study I found out there is no absolute answer to this. You have to figure it out yourself. It seems to be very individual.

Yes.

Bob.

When one door closes, another opens.
-- Cervantes, Don Quixote
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  #15 (permalink)
 jamrock 
tampa florida
 
Posts: 63 since Sep 2020

4 ticks is profit taking after an average not 1 to 1 get it?

i am unsure why new tradrs think 4 ticks means

buy es at 3001 sell at 3002! on a 1 lot no thats not scalping at all.

scalping in the professional world is taking an inventory and exiting that inventory rapidly at small profits.

scenarios

buy 3 total

3000
3000.50
2995
avg= 3998.5 plus 4 ticks = profit taker on all 3 @ 3999.5 get it now?

my math was off but you get the point

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  #16 (permalink)
ondafringe
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Tripken View Post
I talked to a trader a while ago that used a 3 tick PT then moved his stop to -3 so BE was worse case and supposedly his runners did much better

I've only recently become interested in this way of trading (scalp-with-a-runner), and, IMO, this is the only strategy that makes sense. Especially true since I am not comfortable trading with an upside-down R:R ratio. And the only way to get it right-side-up is to use a runner.

To my way of thinking, everything should be built around the runner(s). Then come up with a scalp you are comfortable with (8:4, 16:8, whatever)... and trade enough contracts so when/if your scalp comes in, that gain covers the Stop on the runner(s), plus round-turn commissions on all contracts. And the faster that scalp comes in, the faster you eliminate the risk for that trade (discounting any slippage on the Stop).

And I don't necessarily think an 8:4 scalp is invalid in today's market. Granted, you would have to be very careful with your entries and you shouldn't trade during periods of extreme volatility where price is jumping around 2+ points every few seconds, etc. but under *normal* market conditions, if you have developed a way to determine a momentum move with reasonably good accuracy, grabbing a point before losing two should be possible at least 50% of the time, if not more. And if 50% of the losers could be converted to BE, it seems that would move the needle significantly in favor of the trader.

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  #17 (permalink)
 
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 Tripken 
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Good Points. I am currently trading a 2:1 RR with a PT of 2 pts and SL of 4 points. The volatility was killing the 2pt. stops. I'm also currently trading 1 lot so all in all out, but runners will be part of the my system moving forward. Like you I believe it really changes the math and with a 2 pt. target I see less areas where the BE stop is getting hit vs a 1 pt. scalp. Now if we ever get back to 10 point days all this will change


ondafringe View Post
I've only recently become interested in this way of trading (scalp-with-a-runner), and, IMO, this is the only strategy that makes sense. Especially true since I am not comfortable trading with an upside-down R:R ratio. And the only way to get it right-side-up is to use a runner.

To my way of thinking, everything should be built around the runner(s). Then come up with a scalp you are comfortable with (8:4, 16:8, whatever)... and trade enough contracts so when/if your scalp comes in, that gain covers the Stop on the runner(s), plus round-turn commissions on all contracts. And the faster that scalp comes in, the faster you eliminate the risk for that trade (discounting any slippage on the Stop).

And I don't necessarily think an 8:4 scalp is invalid in today's market. Granted, you would have to be very careful with your entries and you shouldn't trade during periods of extreme volatility where price is jumping around 2+ points every few seconds, etc. but under *normal* market conditions, if you have developed a way to determine a momentum move with reasonably good accuracy, grabbing a point before losing two should be possible at least 50% of the time, if not more. And if 50% of the losers could be converted to BE, it seems that would move the needle significantly in favor of the trader.


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  #18 (permalink)
ondafringe
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Tripken View Post
I am currently trading a 2:1 RR with a PT of 2 pts and SL of 4 points. The volatility was killing the 2pt. stops.

From what I can tell, pertaining to Stops, there is a sweet spot for implementing a scalp-with-a-runner strategy. That sweet spot appears to be a 2 point Stop with a 1 point Target for the scalp portion of the trade, an 8:4 tick strategy.

BTW, I'm trading MES, but will move to ES once my metrics support that move. That's why I'm using MES-speak.

Trading MES, with one runner, you would need four contracts, three coming out after a one point gain. If you get stopped out after bringing in the scalp, you would BE.

The total risk for the trade would be 8 contract points plus 1 contract point to cover commissions on all contracts. So to maintain at least a 1:2 R:R ratio, the runner would need a target of 15 points.

Change 8:4 to 12:6 and you would still need to trade four contracts, three coming out after a 1.5 point gain, but the runner would now need a target of 21.5 points.

Change 8:4 to 16:8 and you would still need to trade four contracts, three coming out after a 2 point gain, but the runner would now need a target of 28 points.

So the more risk you take on, the more your runner has to bring in to maintain at least a 1:2 R:R ratio. Once you get past 15 points or so, it becomes increasingly difficult to bring the runner in on the same day as your entry, especially if you enter in the afternoon session. So you then have to be willing to hold your runner after hours and possibly overnight should that be required, which also requires a willingness to risk a good chunk of your open equity. And if you don't have the requisite margin, or you aren't with AMP, or you don't have an AMP-type broker, afterhours/overnight may not be an option for a lot of traders.

Assuming my math, above, is correct, a scalp-with-a-runner strategy doesn't look feasible to me unless you can make an 8:4 work.

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  #19 (permalink)
 
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 Tripken 
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ondafringe View Post
From what I can tell, pertaining to Stops, there is a sweet spot for implementing a scalp-with-a-runner strategy. That sweet spot appears to be a 2 point Stop with a 1 point Target for the scalp portion of the trade, an 8:4 tick strategy.

BTW, I'm trading MES, but will move to ES once my metrics support that move. That's why I'm using MES-speak.

Trading MES, with one runner, you would need four contracts, three coming out after a one point gain. If you get stopped out after bringing in the scalp, you would BE.

The total risk for the trade would be 8 contract points plus 1 contract point to cover commissions on all contracts. So to maintain at least a 1:2 R:R ratio, the runner would need a target of 15 points.

Change 8:4 to 12:6 and you would still need to trade four contracts, three coming out after a 1.5 point gain, but the runner would now need a target of 21.5 points.

Change 8:4 to 16:8 and you would still need to trade four contracts, three coming out after a 2 point gain, but the runner would now need a target of 28 points.

So the more risk you take on, the more your runner has to bring in to maintain at least a 1:2 R:R ratio. Once you get past 15 points or so, it becomes increasingly difficult to bring the runner in on the same day as your entry, especially if you enter in the afternoon session. So you then have to be willing to hold your runner after hours and possibly overnight should that be required, which also requires a willingness to risk a good chunk of your open equity. And if you don't have the requisite margin, or you aren't with AMP, or you don't have an AMP-type broker, afterhours/overnight may not be an option for a lot of traders.

Assuming my math, above, is correct, a scalp-with-a-runner strategy doesn't look feasible to me unless you can make an 8:4 work.

Also trading MES.

Yes it is tricky but I have so far been happy with the AIAO strategy for now. I'm using my own indi that gives me a fairly good win %. There are many times I watch the price take off and I've only made 2 pts. and wish I had a runner.

I guess it all comes down to your personal risk appetite, mine is low. I'd rather make 1 or 2 pts. and learn to scale up then get into longer hold times, just not in my DNA

I've been at this long enough to know that maybe someday I'll want to scale in/out, and other "advanced" strategies. But for me it's about finding 2-4 trades each day that are A+ setups and then scaling those up to 5-10 contracts, not there yet but when I get there I'll be pleased.

Good trading to you and enjoy the conversation!

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  #20 (permalink)
ondafringe
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@Tripken

I hear you. If you've got something that works and fits your comfort zone, ya gotta stick with it. Hopefully, your win rate continues and even increases!

Like you, I have coded some proprietary indicators and I've made some test trades on the scalp-with-a-runner strategy using the 8:4. Looks promising enough to stick with it for a while.

Enjoyed the back and forth, as well.

Later...

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