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Who makes more money. Scalpers or Point Traders
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Who makes more money. Scalpers or Point Traders

  #101 (permalink)
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djkiwi View Post
@monpere

To make it easier, let's forget the scalp/swing scenario. Let's just say you take 50 trades per day over 150 days in a year with your 12 tick target and 6 tick stop.

Now let's say you are looking to optimize and are looking to increase your target to 24 ticks and stop to 12. This may mean you will take half the number of trades i.e. 25 trades per day instead of the normal 50.

One material thing I noticed you are using 1/2 tick for slippage on each loser. I find this very low. In fact my average is 1.5- 2 ticks on oil. I've included 1.5 in the model. Note this number makes a significant difference in the profitability and shouldn't be taken lightly.

https://futures.io/psychology-money-management/17811-concerning-risk-per-trade-sizing-15.html#post199582

Spreadsheet

Attachment 92564

Note both scenarios have the same win/loss ratio in row 19.

I've added another row cell 48 which shows the difference between the two scenarios. We can see that Scalp 5 with the 40% win/loss ratio has a $15k loss as shown in cell 46. Look at the corresponding scalp 15 shows a profit of $37.5k which is gain of $52.5k over the scalp 5 scenario (cell 48).

Now, I would not dismiss Anagami's research out of hand. In fact the results are very close to my extensive testing on this issue. I believe it is challenging for many scalpers or any trader for that matter to achieve a 2/1 risk reward ratio and a 40% win ratio.

The $52.5k difference is a straight out annual donation to the market maker and broker as far as I'm concerned. You may think your 12 tick target and 6 tick stop is something special and maybe it is. I haven't found any material change in my percentage win rate by increasing the target/stop proportions. They stay fairly consistent which results in a direct reduction in my operating costs.

Here is the spreadsheet to play around. It is fairly simple. I will also include a more complete version in another thread on financial planning.

Note it is in a dinosaur version of excel.

Cheers
DJ

djkiwi

Please could modify spreadsheet for 6 target.

Thank you very much
Felix


Last edited by Felix trader; December 12th, 2012 at 07:31 AM.
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  #102 (permalink)
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trendisyourfriend View Post
You need to compare apples with apples. The point value for the NQ, ES, YM are different but overall the volatility is proportional. 1 tick on the ES is $12.50 and 1 tick on the NQ is $5.00. When the ES moves 1 point, the NQ will move 10 ticks on average. As a rule of thumb both instruments move proportionally that's why they are priced like they are in terms of commission. Unless you take that into consideration, your numbers are out of whack. In other words, no matter the symbols (ES, NQ) it's all the same.

I have seen so many traders go broke trying to and relying on stats and conclusions of equality like these, no offense, but real world results, at least in those former traders' cases trumps academic discussions and conclusions.

Some system vendors, in order to increase their win loss rate became hucksters, and room moderators and general console-ers, so that others would follow their trades and add an artificial cushion of volume, and volitility, or simply put, easy pickings, and one of the smallest transfers of wealth from those pockets to the moderators, hence their rooms no longer being in operation, as they used to be. Simply put, those traders imperical / live results were not what was advertised, nor were they logrithmic, as described (ES, NQ, YM, ER2/TF all being relative and the same, adjusted by volume for point moves)

If someone is expecting a 12tick gain, then one has to be using a 10tick/$100 moving vehicle. If someone is expecting a 12 tick gain from something as heavily traded as ES, then that's some pretty big hope (hopium traders call it).

Perhaps the expression, that those who do don't talk, achieve results that are enviable, and its rather difficult to openly discuss, because so many read and reverse engineer threads like these, just to reap a harvest of slower money / dumb money (as the professional shops call it).

Whats interesting is those professional shops have moved over enmasse to automated systems and begun to rid themselves of those expensive Ivy league Traders / Salesmen / Investment Banker types. Seems this scale issue knows no bounds....

hey, what's the bid on an Ivy MBA now a days?

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  #103 (permalink)
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monpere View Post
This is not a regular Renko chart, it is a customized Renko. I only trade reversal bars, on this size chart reversal bars are generally between 6 and 8 ticks. As you can see near the right edge of the chart, there were roughly 1000 bars produced for the entire session, that is around the perfect amount of bars I look for in any instrument. That number of bars is typical for the CL on that chart.

My trading is also semi automated. I can see a signal setting up generally 5 to 10 bars in advance, the beauty of renko bars is that once my indicator pattern starts forming, I know the very next up or down bar will be an entry signal. So I can put in my entry order 4 or 5 bars in advance, if the bar does not close in my direction then the entry is automatically adjusted to where the next bar in my intended direction will close, and so on, until the next bar closes in the right direction or the order canceled when the pattern ceases to exist.

Once I put in that order, that is the extent of my involvement in the trade, the rest takes care of itself. I've come to realize that my trading style is so different then typical traders that I tend to be an oddball. I only need to look at a chart for 5 seconds to determine if I have a trade or not, because I trade patterns, the same basic 2 patterns for years, and I can recognize them in a split second while they are forming.

The CL can print many fast bars at times, my coding takes care of that as well. You see near the chart right edge '29% fast', you may also see text sometimes that say '2Fast', or the bars are darker then the surrounding bars, that is my indicator saying this action is too fast to be traded, and so it will not allow me to enter any trades in that area. I know a lot of beginning traders read these posts, I would not advise inexperienced traders to trade the CL.

monpere


love your style and method--i havn't started trading yet but this is exactly how i imagine scalping should be done.

Ive got so much to learn

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  #104 (permalink)
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From another thread and more appropriately here:


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

You are unwilling to argue the point because you have no point; comparing weather on a 20 minute time frame to financial markets is one of the most ridiculous comparisons you could make. Do some research of your own, if weather is the best comparison you can make as to why scalping for ticks is more viable than swing/day/position trading.


timefreedom View Post
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.


First of all, I acknowledged this very point above:


josh View Post
only an honest trial of this approach will tell you if it's a worthwhile approach for you.
...
that's only my experience, and may differ from yours.

Second, I believe that I was using market profile before the owner of this fantastic trading forum was, for whatever that's worth, so if you are implying that I or anyone is somehow blindly following what others do, then you are not correct. I like Mike a lot, and I respect him a hell of a lot, but I have been an independent trader, learning from others but trading how I trade for a long time, so please understand that I am not a lemming, and that I make my own decisions. So, do not group me into the category of lemmings, just as I have not grouped you into the "scalpers are all the same" category just because you are a scalper.


timefreedom View Post
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.

Are you making the argument that scalping is the ONLY way to manage risk and "make it" for a retail day trader?


Silvester17 View Post
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

One hypothetical trade means nothing. Besides, a 5 tick stop and 5 tick target, or a 20 tick stop with a 20 tick target means there is no real edge present here for me, and is not a situation I would find myself in. I would have a 5-8 tick stop and a 20+ tick target before I ever had a 20/20.

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  #105 (permalink)
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josh View Post
One hypothetical trade means nothing. Besides, a 5 tick stop and 5 tick target, or a 20 tick stop with a 20 tick target means there is no real edge present here for me, and is not a situation I would find myself in. I would have a 5-8 tick stop and a 20+ tick target before I ever had a 20/20.

And the 20 tick trade is still the better choice because you are outside the random rotations of the market which are unpredictable, and you also have a much better efficiency with your trade vs costs (commissions, slippage).

Mike

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  #106 (permalink)
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Whatever makes you money consistently is your best system, just do it over and over.

"The worm eating bird does not sit on a tree waiting for a bigger worm to show up on the ground."

-Ancient proverb-

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  #107 (permalink)
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kronie View Post
Whats interesting is those professional shops have moved over enmasse to automated systems and begun to rid themselves of those expensive Ivy league Traders / Salesmen / Investment Banker types. Seems this scale issue knows no bounds....

hey, what's the bid on an Ivy MBA now a days?

I've posted this elsewhere, but looking at the top 20 performing managers, it doesn't seem like evidence agrees with this statement.

Narula Columbia Business School
Kuhn Harvard College
Hintze Harvard Business School
Chen Columbia University
Cooperman Columbia Business School
Odey Oxford University
Hanover University of Chicago
Tepper Carnegie Mellon
Loeb Berkeley/Columbia
Weingord SUNY
Dewan/Coleman Princeton/Williams College
Sandler Wisconsin
Rosenstein Wharton
Halvorsen Stanford
Feinberg Princeton
Griffiths Harvard College
Lippmann University of Pennsylvania
Yeary University of Chicago
Zimmerman Amherst College

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  #108 (permalink)
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josh View Post
From another thread and more appropriately here:



You are unwilling to argue the point because you have no point; comparing weather on a 20 minute time frame to financial markets is one of the most ridiculous comparisons you could make. Do some research of your own, if weather is the best comparison you can make as to why scalping for ticks is more viable than swing/day/position trading.




First of all, I acknowledged this very point above:



Second, I believe that I was using market profile before the owner of this fantastic trading forum was, for whatever that's worth, so if you are implying that I or anyone is somehow blindly following what others do, then you are not correct. I like Mike a lot, and I respect him a hell of a lot, but I have been an independent trader, learning from others but trading how I trade for a long time, so please understand that I am not a lemming, and that I make my own decisions. So, do not group me into the category of lemmings, just as I have not grouped you into the "scalpers are all the same" category just because you are a scalper.



Are you making the argument that scalping is the ONLY way to manage risk and "make it" for a retail day trader?



One hypothetical trade means nothing. Besides, a 5 tick stop and 5 tick target, or a 20 tick stop with a 20 tick target means there is no real edge present here for me, and is not a situation I would find myself in. I would have a 5-8 tick stop and a 20+ tick target before I ever had a 20/20.

@josh,
My points are clear and concise. If your current path is taking you where you want to go, stay on it. Otherwise, in a few years, come back and re-read. You might be surprised by what you learn.

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  #109 (permalink)
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timefreedom View Post
@josh,
My points are clear and concise. If your current path is taking you where you want to go, stay on it. Otherwise, in a few years, come back and re-read. You might be surprised by what you learn.

You have made very little in the way of actual points, as you have so far made no logical argument. Because of this, you prefer to make things about me, and what I might be surprised to learn in a few years, complete with a sarcastic smile that you include because of your discomfort in speaking your own mind with conviction in the face of disagreement. It's not about me, but your choice to make it so makes it very clear that you have nothing of value to say on the subject. So, enough has been said, and I have wasted enough time. I would be happy to discuss this if you can include some logical facts and clear details, and not make the discussion about you, me, Mike, or anyone else who you know next to nothing about, as a means to divert attention from the subject. Otherwise, our brief discussion is over.

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  #110 (permalink)
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The main question should be asked differently before arguing scalping vs position trading.

Here it is the real question:

Are you good enough to make a realistic 30-50 grands a month as a full time trader, regardless of the method? If so, would you be here arguing your trading superiority? The chances are: not. You would not have time for this.

It would be more helpful to aspiring traders if one of gurus would come here and say "Here is how I trade and here is my outstanding performance." But, then again, he would not have time for that, would he?

Cheers!

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