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Average ticks per hour using the DOM?
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Average ticks per hour using the DOM?

  #1 (permalink)
Brisbane, Australia
 
 
Posts: 95 since Mar 2018
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Average ticks per hour using the DOM?

A question for those profitable traders who scalp, on average how many ticks can you get on your side in an hour? do you wait for opportunity or make opportunity? do you find a relative level of consistency each day or are different days all over the place? do you find some markets more consistent than others? etc

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  #2 (permalink)
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  #3 (permalink)
North Carolina
 
Trading Experience: Beginner
Platform: NinjaTrader, Tradestation
Favorite Futures: es
 
Posts: 644 since Nov 2011


Ticks per hour makes no sense. Profit/loss is primarily determined by volatility, predictability, and trading costs. The problem you will run into scalping is that markets are very efficient. It is very difficult to overcome the costs of stop losses. Most scalpers will employee either of 2 methods: they will take a high tail risk (large risk to reward) in order to decrease the costs of the stop outs or they will trade with a larger size and smaller risk. You cannot make opportunity. I think you cannot just scalp in a mechanical way. If you scalp you have to be able to see and trade the big trades in the market too. If you scalp with the higher tail risk method then you will need a very large account to do this in futures. If you take higher tail risk, your returns will be more robust and you will be able to profit most days but some days you risk having significant losses. If you are using stops, you will have more large losing days but they will be contained in size. The one good aspect is you may be able to trade with even less risk then you thought you'd need because you are not likely to be able to recover. It means if you stop early enough, when trading with the stop losses, you can might be able to make even more with less. I think you have to be able to trade whatever the market is giving you though.

One metric that might be worth tracking is your trading costs in relation to your gross profits. You obviously want to keep that below something reasonable like 30%-40% even though it might go as high as 50% but generally you will not be able to keep net profits when it gets above 50%. But, I'd emphasize you have to actually be able to trade.


Last edited by tpredictor; April 17th, 2018 at 11:57 AM.
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  #4 (permalink)
Denver
 
Trading Experience: Intermediate
Platform: Bookmap and Jigsaw DOM
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tpredictor View Post
1) The problem you will run into scalping is that markets are very efficient. It is very difficult to overcome the costs of stop losses. Most scalpers will employee either of 2 methods: they will take a high tail risk (large risk to reward) in order to decrease the costs of the stop outs or they will trade with a larger size and smaller risk.

2) I think you cannot just scalp in a mechanical way. If you scalp you have to be able to see and trade the big trades in the market too.

3) If you scalp with the higher tail risk method then you will need a very large account to do this in futures. If you take higher tail risk, your returns will be more robust and you will be able to profit most days but some days you risk having significant losses. If you are using stops, you will have more large losing days but they will be contained in size.

4) The one good aspect is you may be able to trade with even less risk then you thought you'd need because you are not likely to be able to recover. It means if you stop early enough, when trading with the stop losses, you can might be able to make even more with less. I think you have to be able to trade whatever the market is giving you though.

1) I'm not sure why you say it's difficult to overcome the cost of stop losses. Taking a loss is part of trading, part of the business, part of the game. What do you mean by "the markets are efficient"? Surely you don't mean that there are no opportunities because the market is priced perfectly...

2) I absolutely agree with this. Scalps and trades have to be taken within the context of the market and the context of the moment. Just clicking because X<Y && Z==Q is a recipe for disaster.

3) What do you mean by higher tail risk? Does this "higher tail risk" idea revolve around not using a stop in the market?

4) Again, I have no idea what you're getting at with this. Making more with less? Trading with less risk because you can't recover? I haven't heard either of these ideas before.

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  #5 (permalink)
North Carolina
 
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Platform: NinjaTrader, Tradestation
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1. Yes that's exactly what I mean. Most traders are "cheating" to obtain good results. What is cheating? It means they are trading infrequently or with larger stops then targets or even with a larger target then stop (big win). Trade with equal stop and target, constant size trade, and place a statistically valid number of trades per day and you will see how efficient the market is. It is possible for good traders to trade perfectly for a while but difficult to maintain. So, yes realistically it is easier and probably required to "cheat".

2. See, here's the problem as you try to reduce your risk-- you will increase your trading costs. Right, in generally stop losses will cut the profits a method can make by 30% to 60% if expertly utilized else 100%+. Even if you can predict your stop losses with near perfection, they still incur a cost. Imagine you near have perfect knowledge that if the market moves against 6 ticks that it will move to 12 ticks. This is never the actual case. But even if you had that perfect knowledge, you will place stop at 6 ticks. You risk slipping a tick on the stop but on the re-entry you also risk giving up a tick.

3. Right, if you don't take a stop loss you can usually hit a near target esp if you are usually leaning on the right side of market and don't get greedy. Think of it as a variance, you allow the stop to vary significantly because you put a tighter constraint on the target. There has to be a stop loss or else it is just gambling but you could risk some significant portion of your account and still have a low probability of taking a catastrophic loss.

4. Right, if you use stop losses then you have to be ultra-precise. You have to be right at bat. It means you will rarely take any heat on your trades anyway. So, you do not need to take hardly any risk.So if you can trade with a tight stop loss then usually there is no reason to risk-- let's say you think you need $1,000 of risk -- you probably can do just as well with 60% or 70% of that because if you are trading well your trades will be perfect anyway. Once you go beyond a certain point, for me it is around 70% of my loss limit then it was not possible for me to recover on the same day. If you have closed losses, that is. The only exception is with an open trade. One way to think or try to understand this you break some hypothetical risk limit down into portions-- let's imagine you will normally take 6 trades per day and have a 55% win ratio. On any given day, your probability of hitting 4 losses in a row would be ~9%. Relatively low, so it could be just as likely that you aren't reading the market well and/or that something is abnormal. The risk with the tight stop is fragility. Think about it, a 4 modest losses of let's say $225 adds up fast, that's $900 in loss. If the market doesn't move directional at least or more then that then you could have just used a larger stop and did better, at least saving commissions. Another way to think about it: the risk isn't primarily for your wins, it is more about cutting the size of your losses. Of course, you can always make more with more risk but because of the way the market works, the loss limit will jump so we are speaking within a fixed limit.

There is one other way only I know to produce the significant returns which is to trade both long/short at the same time. This is essentially going to flat at times. However, normally if you try to trade the high tail risk style -- you run the risk of having major blow outs. If you trade both sides of market, if the market doesn't nose dive (which it does often) then if you can scalp out closed profits faster then the market moves against your core then it generates a lot of possibilities for winning. However, you will normally have to carry a high risk per day which can be hard psychologically.


lax99 View Post
1) I'm not sure why you say it's difficult to overcome the cost of stop losses. Taking a loss is part of trading, part of the business, part of the game. What do you mean by "the markets are efficient"? Surely you don't mean that there are no opportunities because the market is priced perfectly...

2) I absolutely agree with this. Scalps and trades have to be taken within the context of the market and the context of the moment. Just clicking because X<Y && Z==Q is a recipe for disaster.

3) What do you mean by higher tail risk? Does this "higher tail risk" idea revolve around not using a stop in the market?

4) Again, I have no idea what you're getting at with this. Making more with less? Trading with less risk because you can't recover? I haven't heard either of these ideas before.



Last edited by tpredictor; April 17th, 2018 at 03:28 PM.
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  #6 (permalink)
Denver
 
Trading Experience: Intermediate
Platform: Bookmap and Jigsaw DOM
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1) I don't think it's cheating to trade infrequently. Each trader's job is to make money and manage risk. If you do that by trading once a day when it's slow and twenty times in a day on a NFP report, it doesn't mean that you're cheating.

Why should a trader feel forced to take crap trades every single day just to pump up their trade sample to "a statistically significant size"?


2) Reducing your risk doesn't mean that you increase your trading costs. Reducing your risk can be something like leaning on a zone with a solid setup. Sometimes I have trades that don't go against me at all because I picked the right price at which to do business. And stop losses save my ass more than they hurt me. Maybe that's just me though.

3) I'm still not following this line of reasoning.

4) When I'm trading well my trades are not perfect. I'd like for them to be, but it just isn't possible. When I trade well is when I'm seeing the market well and making the right calls time after time.
______________________________________________________________________________________________

Revan, to answer your original question, the number of ticks I can make depends on the opportunities available. Sometimes there are great trades starting right at the open. Sometimes I'll sit there for an hour and a half (like this morning) and not see a single actionable opportunity. Scalpers have to be simultaneously patient and responsive; you have to know what you want to see, wait for that certain thing to develop, and execute as soon as it does. Then you should have an idea of what ought to happen afterwards, and you need to be able to react well in the moment.

Your only metric of consistency should be your performance. You can't measure this in ticks when you start, but rather how well you took advantage of opportunities as they presented themselves. It's great to shoot for $1k per day--we all did when we started out--but the reality is that you should be asking yourself a different question.

If you had thirty opportunities today, did you take advantage of all of them? Were they good or bad reads?
If you had zero opportunities today, did you stand on the sidelines? If you didn't, then why did you even try to risk your money if you didn't have the read?

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  #7 (permalink)
North Carolina
 
Trading Experience: Beginner
Platform: NinjaTrader, Tradestation
Favorite Futures: es
 
Posts: 644 since Nov 2011

Why should a trader feel forced to take crap trades every single day just to pump up their trade sample to "a statistically significant size"?

Right, I agree that you shouldn't try to force opportunities. My point was that unless your method grants you a statistically valid number of trades per day then you do not have enough evidence to state the market is not efficient. This cannot be understood from the perspective of the trader. But, let's imagine it from the perspective of someone funding a trader or trying to decide to whether or not to trade a system, a great method would generate a statistically valid number of trades per day with a high enough profit factor to provide a 95%-99% confidence of making money. Most methods cannot do that so they are not really good evidence against efficient markets. Right, if you cannot increase the trades while keeping the win ratio and profit factor up then it doesn't provide any additional confidence, either. By "cheating", I do not mean that it is not the correct action to take, I simply mean that it is not providing good evidence against efficient markets. For example, if a trader takes a large tail risk then that it becomes more difficult to know whether or not they have an edge. In same way, if you have some relatively large wins, that might be the correct action as to what the market provided, but it wouldn't be as useful for someone trying to know whether or not you really have an edge.

2) Reducing your risk doesn't mean that you increase your trading costs. Reducing your risk can be something like leaning on a zone with a solid setup. Sometimes I have trades that don't go against me at all because I picked the right price at which to do business. And stop losses save my ass more than they hurt me. Maybe that's just me though.

I disagree on this. If you reduce your risk and you don't increase your trading costs, you will be increasing shortfall risk in the form of trying to catch higher R trades. If you are catching bigger trades, you are most-likely compounding the risk of your open profits. Example, if you catch a $1,000 gain with $200 risk then it is incomplete to state you risked $200 to make $1,000. You risked all your open profits which means at +$1,000 you were truly risking $1200 if you didn't trail your stop. Trailing stops rarely works. There is no free lunch in trading.

This is a critical relationship to understand for any scalper. As you reduce your risk per trade, your trading costs will become a bigger percentage of your gross profits. That's why the exchange makes special deals for higher frequency traders or else they wouldn't be able to make any profit because their profits are below the cost threshold. Again, this is a super critical relationship to understand esp for the scalper but also important for system developers. Generally speaking, if you have a profitable method then the more trades you take the more mediocre the trade will will be, the lower the profit factor, and the greater the gross profit.


Last edited by tpredictor; April 17th, 2018 at 04:15 PM.
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  #8 (permalink)
Denver
 
Trading Experience: Intermediate
Platform: Bookmap and Jigsaw DOM
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Posts: 433 since Jun 2015
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I'm sorry, but I have to disagree with most of this. In my experience, market efficiency is the last thing I worry about. I don't care about whether or not the NOB or FYT spread is in line with somebody's expectations. I care that some big player just waded into ZN, sold 1600, took it offered, threw another 2500 on the offer, started hitting the bid again, and now we're a tick above new lows for the day. What's probably going to happen in this scenario? Damn the market efficiency--longs are going to puke, shorts are going to slam it, and unless a large buyer shows up under the lows to absorb and take it back into range, then you need to be short.

The R on my trades is typically 1.5 to 2. I risk a couple of ticks to see another tick or two on top of the initial risk. I see you're talking about evolving R, which I agree with. If your target is at +10 and the trade is +8, there's no reason to risk it back to +4 just to see those last two ticks. It's the same idea as moving a stop to breakeven.

I think we may be confusing expectancy and risk in this last bit. If your expectancy is +$1 per trade, then you're going to pay quite a bit in commissions to trade enough to make $100,000. If your expectancy is +$1,000 per trade, then you have to trade significantly less to hit that same threshold. Reducing your R multiple from 100 to 1 doesn't necessarily mean that you're throwing more into costs and commissions.

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  #9 (permalink)
Brisbane, Australia
 
 
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tpredictor View Post
Most scalpers will employee either of 2 methods: they will take a high tail risk (large risk to reward) in order to decrease the costs of the stop outs or they will trade with a larger size and smaller risk. You cannot make opportunity. I think you cannot just scalp in a mechanical way. If you scalp you have to be able to see and trade the big trades in the market too.


tpredictor View Post
larger stops then targets or even with a larger target then stop

Right guys, and from my research if you set big stop/small profit or a big profit/small stop and place an order based on nothing but pure chance, it ends up reversing a 50/50 formula and returning the same results, basically like trading via a coin toss, which to me aligns with that ending point, "if you scalp you have to be able to see and trade" - sl's and tp's are all a side tool, the main fundamental thing you must posses is ability to predict the market, no stop loss/take profit ratio will work unless you have this fundamental skill.


lax99 View Post
Reducing your risk doesn't mean that you increase your trading costs. Reducing your risk can be something like leaning on a zone with a solid setup. Sometimes I have trades that don't go against me at all because I picked the right price at which to do business.

I agree with this, as I said from my limited experience stops and profits are nothing without fundamental skills of reading the order flow, amazing that you can adjust and manage your risk simply by being a skilled speculator, put it this way, you trading to save the world at this point in time is a lot less risky than myself doing it.


lax99 View Post
Revan, to answer your original question, the number of ticks I can make depends on the opportunities available. Sometimes there are great trades starting right at the open. Sometimes I'll sit there for an hour and a half (like this morning) and not see a single actionable opportunity. Scalpers have to be simultaneously patient and responsive; you have to know what you want to see, wait for that certain thing to develop, and execute as soon as it does. Then you should have an idea of what ought to happen afterwards, and you need to be able to react well in the moment.

Your only metric of consistency should be your performance. You can't measure this in ticks when you start, but rather how well you took advantage of opportunities as they presented themselves. It's great to shoot for $1k per day--we all did when we started out--but the reality is that you should be asking yourself a different question.

If you had thirty opportunities today, did you take advantage of all of them? Were they good or bad reads?
If you had zero opportunities today, did you stand on the sidelines? If you didn't, then why did you even try to risk your money if you didn't have the read?

Cheers, I will take note of that.

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