I don't consider myself a scalper per se, I consider myself a pattern trader, I trade a method that trades the same on a 2 range chart, as it does on a 200 range chart. The same patterns occur on every time frame, I just choose a time frame that gives me a satisfactory number of opportunities per day. I trade only one chart, all my trading decision information is available on that single chart.
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I don't really know what a scalper is. But If I had to guess from previous statements, It's someone who goes for 2-3 times more than they would pay in commissions. Maybe this works well for the ES. I think it's safe to assume that the time frame has little to do with the label, It just so happens that it's better to use smaller time frames for scalping(from what people say). I don't scalp, I failed miserably at it. It was a nice idea while it lasted, But It just didn't pan out safely day to day. The reason I'm saying this is that I do trade patterns on time frames down to the minute level with targets 14-30+ ticks away. I look at time frames for the same pattern ranging from 1m,5m,60m,1h,and daily. I've found that the middle ground is just easier and what works best for me. I could swing trade larger time frames with the same exact strategy, but I don't like the over night exposure.
Maybe I'm considered a scalper by some, I wouldn't know. The definition on investopedia is a little ambiguous. I do know with my system that going for an expectancy of anything lower than 1:1 risk reward doesn't work long term. That being said, I found that having a predetermined limit, a number in mind before the trade, will prevent me from hitting home runs. Maybe there's something I never figured out with reading the tape, or some pattern I never saw. As a retail trader I couldn't hack scalping manually without an algo(I don't trade with an algo). And this is something I've agonized, scrutinized, and obsessed over trying to figure out for months and months in the beginning and eventually Just gave it up for something that works better.
Thank you for your reply, it was greatly appreciated
I certainly hope no one trades for 2-3 times their commissions, maybe I have been using the wrong term for scalping, for me a scalp is minimal 12.50 times my commissions and on average trades can range from 12.50 times to 50 times.
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Good point as everyone would have a different definition.
Scalper < 20 ticks
Day trader / Small swing trader > 20 ticks < 100. The criteria I use is if the trade is likely to be completed within the instrument's Globex ATR or the following day.
Large swing > 100 ticks with probability to spread 3 days+
Holding overnight has not been too much of an issue for me as I've been swing trading equities for 25 years. After awhile you become quite good at taking losses. Not to say they don't hurt particularly when you wake up each day to a string of losses in a row.
The annoying ones are when you see you have been stopped out overnight by a tick and after that it rockets the other way to your original 150 tick target...
The big advantage of swinging futures over equities is you have continuity of the move which means you can better quantify the loss as you are stopped out during the night at your expected price.
With equities you are at the mercy of the gap which seems a bit of a crapshoot if your swing target is fairly small. You can wake up in the morning stopped out at a level way different to where you had your original stop. For this reason (leverage aside) I believe swing trading futures is far less risky than swing trading stocks. I'd much rather hold say GC futures overnight than say the dollar equivalent ETF of GLD. GLD could open up anywhere in the morning whereas hopefully in the GC trade I've at least got my first target secured overnight.
Last edited by djkiwi; October 19th, 2012 at 03:56 AM.
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Yes, please upload the spread sheet, because as I've said I find the premise, assumptions, and some of the calculations rather peculiar. Some of the things I find puzzling:
- Line 4. Contracts per Target Scalper is always 1, swinger is 4, 6, 8, 10, 12, 14, 16. Am I looking at that wrong?
- Line 8. Scalper has 41 trades per day
Where did 41 trades come from? You say that 90% of traders are scalpers, so you are telling me that 90% of average traders are taking 41 trades/day, really?
- Line 19. %Winners-Target 1
Why does this number change for each scalper trade and not for swinger? I don't understand this.
Now, let's come back to reality again. Since you chose the CL, and you showed your CL charts. Here's my scalping method on the CL, as it would be traded to the letter according to my non-discretionary scalping method using your 6 tick stop 12 tick target spreadsheet rules. Arrows are winners, arrows with circles are losers. (I apologize for the small candles, that is the only way I could fit all the trades in one screenshot)
The average trader may be a 1 contract trader, but since your spreadsheet swinger method risks $600 per trade (30 CL ticks * 2 contracts), we'll say that the scalper method should also risk the same amount on every trade. This means the scalper method with a 6 tick stop will trade 10 contracts (6 CL ticks * 10 contracts).
Some of you may say, the scalper wants less risk so would not risks $600 per trade. Ok, let's say the scalping method uses 2 contracts, the same number as the swinger is using in the spreadsheet. Ok let's even use 1 contract. Now count the trades on this real life chart, crunch the numbers with commissions etc. using whichever many amount of contracts you like, and let us know the result.
Now, to be fair, and since we are now talking about reality, feel free to post your 10 BetterRenko chart, or 30 minute profile chart, etc. for yesterday, showing how you would have traded the 2 contracts 60 tick stop, 30+60 tick target, according to whatever methodology you use. Not challenging any person, entity or method, and not saying any method is better or more profitable then any another. I just like to deal with reality. We are traders, charts are our reality. Spreadsheets, especially with questionable starting assumptions tend to skew reality, and often produce misleading results.
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Last edited by monpere; October 19th, 2012 at 10:54 AM.
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@djkiwi I will review spreadsheet more this weekend
I take 3 to 9 trades a day, I try to get 2 pts with 3 trades or less (1 contact $100-commissions =. if it goes against me I wont trade more than 3 bad trades. If im positive and feel like it I ll trade for more.
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.
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.
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Again a mirage. I have a strategy that works with 6 tick stop 12 tick target. Why do I want to go change the stop/target to optimize? If I want to make more money, I increase my size. I make more money, my broker makes more money. If I want to increase my stop or target, I go back to the drawing board and start my backtesting again from scratch, and spend the next 2 years fiddling with it, because it's a new strategy. You make the assumption that if I change my targets, I will take take half the number of trades. That is a total nonsense number pulled out of thin air. No guarantee as to the number of trades you will get, it depends on the specifics of your strategy. You may increase your target, take half the number of trades, and also turn your strategy into a losing one. This kind of logic looks good on spread sheets, but is basically worthless in reality.
I made 1 million dollars last year and paid $100k for commissions, you made 1 million dollars last year and paid $10 for commissions, which one of us made more money last year? Which one of our brokers made more money last year? What do I care which one of our brokers made more money last year? I made 1 million and you made 1 million, who cares what our brokers made? If my broker calls me up tomorrow and says he's lowering my commissions, great!, but I'm not gonna change the parameters of a profitable strategy, solely for the purpose of paying less money to my broker.
I suggest we all spend less time fiddling with spreadsheets and more time developing strategies that make money in the real world.
Last edited by monpere; October 20th, 2012 at 06:33 AM.
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I'd like to ask frequent traders (especially scalpers) how do they rate latency.
I mean, do you think latency makes a big difference in your returns?
Is it important to get a submission confirmation in 50ms rather than 250ms? And to receive quotes in 20ms rather than 100ms?
I think it should be taken into account when asking who makes more money, because if latency makes a difference for a scalper,(s)he could make more money than a slower trader having a low latency,but could end up doing worse than a slower trader if latency is high.
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