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How I Day Trade and Micro Scalp the NASDAQ Futures; with Recommendations

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  #11 (permalink)
 matthew28 
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hyperscalper View Post
[edit2] BUT, AS IF BY MAGIC; look at the next accounting where my Open Losses are
just about exactly compensated for, by my Intra Trade Profits. HEY, I'VE BROKEN EVEN !!!
And I can encourage you to imagine that Patience, and "working the trade" may not
make you an overwhelming Winner; but it can give you a "soft landing" when you make
a decision which is just Wrong... You have the power to improve the situation; and you
are NOT just giving up, and Stopping Out; you are "working the market" !! _

hyperscalper

So your solution to making "A STUPID DECISION"/"a decision which is just wrong" is not to stop out or admit you are wrong but just keep selling in and out as the market goes against you so refusing to take a loss?

Looking at an NQ chart price went up 100pts in the first hour but you spent the morning selling. Surely it would be better when you know you are wrong to get out and then find an opportunity to get long.

I remember looking at an MT4 forex indicators a long time a go which was sold as a "guaranteed no loss indicator." There would be lots of small closed profits and then a large negative open loss comprised of trades that had gone negative and were being held until they could be exited at a profit no matter how many days or weeks that might take (no rollover on spot forex). Ignoring the losses in the hope that closed profits can balance it out.

How does using LIFO compared to FIFO make any difference to the actual account balance. Surely there is the risk that people mentally discount the large loss that LIFO says they are holding, rather than those contracts actually having been closed out due to FIFO, and instead focus on small scalps counter to the current trend. So therefore you don't recognise the actual FIFO early losses, recognise you are wrong and find a long entry and recover losses that way, but instead carry on taking short trades as price continues going up.

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  #12 (permalink)
 hyperscalper 
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matthew28 View Post
So your solution to making "A STUPID DECISION"/"a decision which is just wrong" is not to stop out or admit you are wrong but just keep selling in and out as the market goes against you so refusing to take a loss?

Looking at an NQ chart price went up 100pts in the first hour but you spent the morning selling. Surely it would be better when you know you are wrong to get out and then find an opportunity to get long.

I remember looking at an MT4 forex indicators a long time a go which was sold as a "guaranteed no loss indicator." There would be lots of small closed profits and then a large negative open loss comprised of trades that had gone negative and were being held until they could be exited at a profit no matter how many days or weeks that might take (no rollover on spot forex). Ignoring the losses in the hope that closed profits can balance it out.

How does using LIFO compared to FIFO make any difference to the actual account balance. Surely there is the risk that people mentally discount the large loss that LIFO says they are holding, rather than those contracts actually having been closed out due to FIFO, and instead focus on small scalps counter to the current trend. So therefore you don't recognise the actual FIFO early losses, recognise you are wrong and find a long entry and recover losses that way, but instead carry on taking short trades as price continues going up.

YOU RAISE VERY GOOD QUESTIONS, so let me try to address them.

The example above is not my "real trading" but is just a scaled example to illustrate
the main points. Most traders are small traders; so I wanted to keep things small.

"Surely it would be better when you know you are wrong to get out and then find an opportunity to get long."
This is a very common reaction, which is to drop the entire trade; and try to chase the Price Trend.
This seems like a Simple Issue; and a "No Brainer" that what you suggest is the way a Trader should
behave. Maybe so, and maybe not.

On a Monotonically rising "Rally Day" my example shows (unproductive?) Selling into a Relentless Rally.
And all I was able to do was to Break Even; so you'd suggest my approach was a Fail. Yes, it was
perhaps a fail; unless you consider Breaking Even against taking a Loss, a "fail". I consider it a
qualified success; since Not Losing, is on the path toward Winning, and it illustrates my main point
that even (what turns out to be) a "mistake" can be "managed".

Concerning an "uncontrolled" continuous Defensive strategy; it can often push the Trader much further
than can be sustained; if it is only a "Blind Defense, hoping the Trend will Reverse" and there's no
Analytics evidence that the Trend might be turning...... So just using a modified Martingdale Strategy
does indeed work !!! But only if you have the Resources of Warren Buffett; and can tolerate ANY
Loss Level, while you're waiting for an opportunity to take Profits. Yes, there have to be limits
on just how much Price Adversity you are willing to Defend, and whether you believe that pullbacks
will be available to Break you Even.

The example, I think, is a good one; since it appears Hopeless. But making a "soft landing" by
Breaking Even; is better than taking the Loss, I'd suggest. BUT EVERY SITUATION IS DIFFERENT,
as you know, and there are Relentless Rallies, and Relentless Sell-Offs which will simply force
you out of an Adverse Position, no matter what you attempt in Mitigation.....

fortunately, Relentless Up and Down days are relatively Rare; and when the Market is not behaving
in this somewhat "anomalous" fashion; then the approach I suggest produces quite good results.
When there are Pullbacks, you can benefit; but when there are None; you can be Screwed, and
be forced to Reduce your commitment, or Stop Out entirely; and do as you suggest, hope to jump
on the Trend Train, desperately hoping to make up your Losses... That's Trading !!! lol

"How does using LIFO compared to FIFO make any difference to the actual account balance."
At the end of the day these are two "accounting methods" to help you keep track of your progress.
It doesn't affect the end account equity; but I'm just saying that the LIFO view helps you to see
better how you're doing, Intra-Meta-Trade, and see the Progress you're making.....

So, you're discussion of how FIFO is somehow "helpful" in shaking a Trader out of the Trade; which
assumes that the Trader "should be" shaken out of the Trade, rather than to use a Defensive,
partial profit-taking, distributed position pricing, incremental approach that I'm advocating.
I'D SAY simply that FIFO misleads in most circumstances and, in my view, your Worst Enemy
is being Willing (without a fight) to just Stop Out, and find another Entry.

On the "pathological" days, such as today where there's a Relentless Recovery Rally; your argument
makes some sense (as it turns out). But "anomalous days" are in the minority; and our ability to
"manage Price Adversity" instead of just Chasing Price Trend; is an approach which is
under-utilized by Traders.

You may be right: "Stop Out Now, Cut your Losses" and switch to the Apparent Price Trend. But I'd say
that "Price is the Great Liar" in many cases, and Traders who watch [and who Chase]
only Price will be Deceived into
making poor decisions.

No reflection on the validity and the intelligence behind your remarks. You are representing the more
conventional point of view; with which most Traders would readily agree !! i guess my suggestion is
somewhat "bucking the trend" of the way of thinking about Trading. Maybe you're the one who's
Correct; and I'm the one who's Wrong; but that is a Situational call; but it's worth thinking carefully,
and THANKS FOR YOUR COMMENTS.

hyperscalper

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 matthew28 
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hyperscalper View Post
No reflection on the validity and the intelligence behind your remarks. You are representing the more
conventional point of view; with which most Traders would readily agree !! i guess my suggestion is
somewhat "bucking the trend" of the way of thinking about Trading. Maybe you're the one who's
Correct; and I'm the one who's Wrong; but that is a Situational call; but it's worth thinking carefully,
and THANKS FOR YOUR COMMENTS.

Thank you for your comprehensive answer.
And of course it is easy in hindsight for me to say "you didn't want to do that.. you should have gone long"
And also the fact that most trader's would probably agree with my cut losses quickly argument isn't necessarily a good thing as broker's would say most trader's lose.

Although I think LIFO over FIFO sounds a little like a semantic mental accounting exercise I do think a similar thing, a"theoretical average" trade position indicator that FT71/Morad Askar has spoken about is useful for the same reasons you mention. It allows closed profits to adjust the breakeven point of an open trade so helping with a more relaxed mental state while scaling in and out towards a larger target (for example on a positive long trade some scale outs of the position move the theoretical average price of the trade down below the entry so if price does pullback it is easier to hold, or add back in looking for the trend to continue, and not get shaken out of the trade). The Jigsaw DOM I use has the same trade profit scale which can include closed partial profits to reflect the open trade's breakeven price. I like that feature and as it serves a similar purpose as LIFO, who am I to argue.

What you are doing obviously works well for you overall so...trade well.

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 bobwest 
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Hi @hyperscalper, good thread. I'm enjoying the discussion of ideas.

I finally had to change the thread title to get rid of the ALL CAPS, which is similar to shouting and which was driving me crazy every time I read it.

Sorry, this may just be a stylistic issue, but too much emphasis actually makes something no longer stand out any more. It is better to keep the use of caps to just what you really need to emphasize, and in any case, not to use all caps in the thread title.

Thanks.

Bob.

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 hyperscalper 
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bobwest View Post
Hi @hyperscalper, good thread. I'm enjoying the discussion of ideas.

I finally had to change the thread title to get rid of the ALL CAPS, which is similar to shouting and which was driving me crazy every time I read it.

Sorry, this may just be a stylistic issue, but too much emphasis actually makes something no longer stand out any more. It is better to keep the use of caps to just what you really need to emphasize, and in any case, not to use all caps in the thread title.

Thanks.

Bob.

THANK YOU !!. That was my error ! I had not intended all caps in the Title !
It was because I had moved a header line which was
all caps, and pasted it into the title field.

hyperscalper

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 hyperscalper 
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LET'S REVIEW THE MAJOR POINTS SO FAR...

Firstly, you need to have financial Strength; so that you are not trading from Fear
and Weakness, but from Confidence and Relative Strength...

Fear is your worst enemy; and Markets will Defeat you by exploiting your Fear
of Loss. You know that; so let's face it.

The Nasdaq Market will "Push Traders" with violent and extended "runs" which
will "scare the pants off" a trader who is Overly Committed; and will force
a high proportion of Traders to Stop Out.

So, let's move to the second Key Point, which is that you should NOT use the
eMini contract NQ, but instead, use the MNQ "micro" contract. Why? Because
you are going to Dramatically Improve the RANGE of Price Adversity which you
will be able to tolerate.

When the "big Ego" traders are Stopping Out... you are Adding to your Collection
of Micro Positions, which form the aggregate "Meta Trade".

By using LIFO accounting support (which we currently don't have) whenever an
Entry Position reaches a "reasonable" Profit, then you will Take that Profit.

Why? Because this is Money in your Pocket, which offsets your Open Loss position
and encourages you that you are making Progress, as you Relax, and experience
Price Adversity.

In an odd and seemingly perverse way, "Losing is an essential element on the
way to Winning". This means that tolerating Price Adversity must be something
which simply doesn't bother you much. In fact, you are generally NOT planning
to Stop Out at all... (sure, there are Extreme situations). Wouldn't that be
an improvement over your trading experiences in the past? I think so.

(If we can come up with a LIFO accounting "tool" to help with this; then that will
really help you to see the benefit. However, I've admitted that, although I have such
a facility, such a thing is not generally available to help you "keep track" of
Open Losses versus Closed Profits as you "work the trade")

I can't give you my system; but, if I could, I'd be happy to do so. The general
trader needs a facility which will support LIFO accounting and will assist in decision
making as to when a position taken, and should be profit-taken. It would also provide
you with your Open Positions VWAP Cost Basis, etc.

I can confidently assure you that if there were a solid LIFO accounting system, that
many smaller traders would be using it constantly. But it's NOT generally available,
and so THINKING about these concepts, and the advantages which they confer,
is not really a practical thing.

You must have a system, or a strategy; which Anticipates Price Adversity, and which
allows you to tolerate it; WITHOUT STOPPING OUT, except in Extreme situations.
Trade without Fear, because you are managing your commitment levels, your
cost basis, and you are taking profits when the Market will give them...

How many "positions" might you take? Let's say you want to expose yourself to
3 eMini NQ's; well, obviously, that gives you up to 30 micro MNQ contracts with which
to VERY WIDELY SPACE the entries so that you are able to tolerate 30-40 points
of Price Adversity (just for example) and not experience a high level of Fear.

If you can do that; then YOU can WIN. Trust me.

The Human Brain just can't keep up with the situation, when you are talking about
30 "positions" which should Individually be Accounted for; using a LIFO defensive
strategy, such as the one I'm proposing. [edit] and don't forget you're not only
profit-taking, but you are also planning to re-enter the market further along...
This is all part of "modulating" your level of exposure; and the cost basis
of your open Meta Trade (offset by your cumulative profits) which is the
"outer Trading Frame" meaning Flat to eventually... Flat again.

Yes, I can do it, effortlessly; but I have software to support me in making those
calculations. Criticize me for proposing something, which has limited to
non-existent support in standard trading platforms, if you wish... But the lack
of a LIFO Accounting Support system is, I believe, a major issue which I'd
fix if I could...

ONCE you have experienced considerable Price Adversity with "distributed price positions"
and have "worked the Meta Trade" for a while; and realized how well it works, then
I believe you'd completely change your prospects for Survival in a market such
as the Nasdaq, or any similar market. Trading would be lots more "fun" and
much less "disappointment" and "pain".

hyperscalper

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ondafringe
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If a trader is really good at locating areas of support using multiple time frames, and wants to try scalping, I can see how scale trading might be of interest, assuming the risk is acceptable. I didn’t mention areas of resistance because I think scale trading on the long side carries less risk than scale trading on the short side, but either direction is possible.

Scale trading is about intervals and range, where the number of scaling intervals determines the scaling range or vice versa. You make your money as price churns up and down within the range. For this strategy, chop is actually your friend.

The major risk is price falls below the bottom of the range and doesn’t recover, either immediately after the first entry or at some point later. The minor risk is price remains within the range and never allows you to completely scale out of all your positions. However, on days where the market isn’t fully cooperating, what you call a “soft landing” can be achieved if price remains in the range long enough for the churn to offset some or all of the risk.

From my perspective, the safest way to pull this off is to first make certain what you’re trading is in an uptrend based on whatever time frame you are using to determine trend. Then determine when things have settled down enough to begin scaling in because you certainly don’t want to begin while the market is on a tear in one direction or the other. Then determine whether there is adequate support – within a reasonable distance below the current price – at which to establish the bottom of your scaling range. Then divide that range into a number of equidistant scaling intervals based on commissions, account balance, risk tolerance, etc.

So if you had a 10 point range with 1 point intervals (bigger ranges may or may not require bigger intervals), and you are scaling one contract per interval, your major point risk is (10/2)(10+1). So if price falls straight down and remains at or below the bottom of the range, you are down at least 55 points.

For MES, that equates to $275, plus commissions and fees of approximately $1 round-turn per contract, or around $10 (just to keep it near realistic, but simple), so at least a $285 loss if you are forced to liquidate at or below the bottom of the range before you ever get a chance to start scaling out.

In order to offset all of the major point risk, price needs to churn within the range until you have scaled out at least 55 times. In order to offset all of the major dollar risk, you would need to scale out at least an additional 16 times (71 * $4 [net per contract, per point] = $284). Once you have that, you’re as home free as you can get with this strategy. If you are forced to liquidate within the range, if you scaled out enough times, you might even realize a gain.

With MES, you could conceivably scale out that many times within 30 minutes. So, again, if you are good at determining areas of support... and you are good at determining when/where to make your first entry... and your account balance can support the strategy... and you are comfortable with the risk... then...

I’ll let someone else check my math. lol

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 hyperscalper 
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ondafringe View Post
If a trader is really good at locating areas of support using multiple time frames, and wants to try scalping, I can see how scale trading might be of interest, assuming the risk is acceptable. I didn’t mention areas of resistance because I think scale trading on the long side carries less risk than scale trading on the short side, but either direction is possible.

Scale trading is about intervals and range, where the number of scaling intervals determines the scaling range or vice versa. You make your money as price churns up and down within the range. For this strategy, chop is actually your friend.

The major risk is price falls below the bottom of the range and doesn’t recover, either immediately after the first entry or at some point later. The minor risk is price remains within the range and never allows you to completely scale out of all your positions. However, on days where the market isn’t fully cooperating, what you call a “soft landing” can be achieved if price remains in the range long enough for the churn to offset some or all of the risk.

From my perspective, the safest way to pull this off is to first make certain what you’re trading is in an uptrend based on whatever time frame you are using to determine trend. Then determine when things have settled down enough to begin scaling in because you certainly don’t want to begin while the market is on a tear in one direction or the other. Then determine whether there is adequate support – within a reasonable distance below the current price – at which to establish the bottom of your scaling range. Then divide that range into a number of equidistant scaling intervals based on commissions, account balance, risk tolerance, etc.

So if you had a 10 point range with 1 point intervals (bigger ranges may or may not require bigger intervals), and you are scaling one contract per interval, your major point risk is (10/2)(10+1). So if price falls straight down and remains at or below the bottom of the range, you are down at least 55 points.

For MES, that equates to $275, plus commissions and fees of approximately $1 round-turn per contract, or around $10 (just to keep it near realistic, but simple), so at least a $285 loss if you are forced to liquidate at or below the bottom of the range before you ever get a chance to start scaling out.

In order to offset all of the major point risk, price needs to churn within the range until you have scaled out at least 55 times. In order to offset all of the major dollar risk, you would need to scale out at least an additional 16 times (71 * $4 [net per contract, per point] = $284). Once you have that, you’re as home free as you can get with this strategy. If you are forced to liquidate within the range, if you scaled out enough times, you might even realize a gain.

With MES, you could conceivably scale out that many times within 30 minutes. So, again, if you are good at determining areas of support... and you are good at determining when/where to make your first entry... and your account balance can support the strategy... and you are comfortable with the risk... then...

I’ll let someone else check my math. lol

"Scale trading is about intervals and range, where the number of scaling intervals determines the scaling range or vice versa. You make your money as price churns up and down within the range. For this strategy, chop is actually your friend."

Well, I'd argue that Markets do spend a lot of time in ranges, although handling "chop" may require a
more precise order handling mechanism which uses Limit Entries and Limit Exit from each position. This is
especially true, since the percentage cost of MNQ is more (on a per tick basis) than the percentage cost of
the NQ contract. That's a bit unfair, but so long as you keep your costs below 10% or so, then I think the
benefits far outweight the higher costs. THE PROBLEM IS, as always, keeping track of desired Entry and
Exit points, and precisely placing the required orders. That's why my system tightly links Triggering and
Profit Taking with the semi-automated (but interactive, trader control) Order Entry.

This is going to be a Big Challenge if I or someone smarter, decides to provide a LIFO tracking system which
is in some way capable of interacting with Order Entry. Now that would be a PRODUCT TO SELL !!! $$$$
...just kidding... we're all philanthropists here

"So if price falls straight down and remains at or below the bottom of the range, you are down at least 55 points."
I said we don't intend to stop out, but in a clear break of support, your best course of action is to do
a conceptual FIFO closure of the positions down to a level you're comfortable carrying; with a view to
re-entering. In other words, you usually Never Stop Out Fully, but you "modulate" your position holdings,
and their Distribution. You have 10x the ability to use these mechanisms with the MNQ, than with the NQ
contract.

"The minor risk is price remains within the range and never allows you to completely scale out of all your positions."
Let me be clear that you DO NOT need to take profit on EACH of the constituent positions. Some may never
be profitable; but that,s OK, part of the plan. WHAT MATTERS, is the Aggregate Meta Trade's cumulative
return. Please think about that.

Everybody wants to point out that when "catastrophe" strikes; well, it can be a CATASTROPHE. But that really
means nothing, since you are far better protected against such a violation of your Cost Basis with this
Meta Trade method; than if you used the eMini contract and had NO possibility of moving Cost Basis
in your favor in the first place.... So... just sayin' LOL

Additionally, if you're talking ES, then you have a very limited Price Range; relative to what is possible with
the Nasdaq. So your calculations on using MES are, most likely not as effective; since we WANT to have
larger Price Ranging, but we should always be looking at Incremental Scaling, and treating an entire trade
from Flat to Flat as an Aggregate Meta Trade; and not thinking much at all about individual contracts within
that process, except to have a goal to "nibble" profits as must as possible.

hyperscalper

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 hyperscalper 
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MICRO SCALPING USING MULTI-POSITION META-TRADES

Attached is an image of how I trade the Nasdaq when it
is in the Phase I like to call "Death by Wiggle" and the
screenshot is a Friday, with low volume near the close.

The point is to show that it is possible (with the right
algorithms) to Micro Scalp the Nasdaq, using MNQ as
the Instrument; with 9 ticks on every gross profit;
using Limit Orders Entry and Limit Exits, and
make money...

This works well, staggering defensive orders every 5 ticks
or so, etc... but it can Fail when the market begins to
persistently trend; since defensive orders cannot be maintained
indefinitely due to drawdown and inability to profit from
incremental profit-takes along the way. So works well when
markets are "chopping" and not trending.

Many small traders tell me that if they could average
only $200 / day that they could happily give up their
Day Jobs.

I call this "Micro Nibbling" and it does require very special
Order Entry facilities to extract profits in such a situation,
consistently, every day.

In the Trade sequence shown, some profits were given
up, on the False Rally slope; with one full stop out; but
then persistence allows for recouping those profits
again, always "modulating risk" and taking what the
Market will yield; e.g. perhaps 9-10 Price ticks; but
perhaps not 11+ Price ticks; which makes it extremely
important to use "wholesale" Entry and Exit mechanisms
with precisely placed Limit Orders.

When micro scalping in this way; I always take fixed targets,
since any attempts to "trail profits" will result in imprecision,
and ultimately losses; so I always take "what the market will
give me" and that results in many mini-profit-takes, which
offset any open losses, etc... This is only one possible way of
trading, but it can yield consistent results for a smaller trader
on a daily basis; never taking huge amounts of risk.

Essential here is to be "predatory" always forcing the market
to come to a deflection in your direction before entering; so
that there is a probability of retracement yielding your coveted
mini-profit-takes with such a technique. A semi-automated
method of placing targets and calculating "stagger" offsets
is really required to do this consistently.

[edit] the second pic shows the conditions in which best results
are obtained; where there are no persistent trends...

hyperscalper

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  #20 (permalink)
 loantelligence 
Syracuse, NY
 
Experience: Intermediate
Platform: Ninja Trader
Broker: Mirus Futures/Zen-Fire
Trading: NQ
 
Posts: 176 since Jan 2011
Thanks: 26 given, 141 received


i trade the MNQ on the opposite side....your charts show you are always looking for the turn....counter trend trading....I am always Trend trading lookin for the breakout or breakdown....almost doing the same thing....in the opposite direction.... will have to try your technique....not sure it will work for me...yes there is always chop with the MNQ...but there is also a trend....the key is knowing when its going to turn....there in is the problem for both of us......here is the first 15 mins of trading Friday. $174.50..

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