[walterw]

Hello everyone, want to make a little comment here on some scalping money management that has a great impact on the technical trading as on the traders psichology...

First of all let me make clear that this considerations are ONLY for scalpers.. it will clearly not apply for a daytrader by no means...

As you all know I am a scalper myself... I love scalping ¡¡¡ I enjoy making little money everyday, its a life style... and when you master a method its so exciting to sit down on your trading room an say, I know what I am technically looking for, I know how much money I want... I have understanding of what this is all about... I trade, get to my target and STOP trading live, from there on I do research...

So from this point of view, a scalper MUST have a daily target... so lets say for example this : trading ER a daily target of 60 dollars per contract its a very tangible and worth seeking target... some of you may say its too little, well not necesary... if you trade up to 30 contracts it can give you a steady monthly income of 36k... wich I dont regret....

60 dollars its equivalent to 6 net ticks after comisions, depending what comissions your broker is charging you, you will need 1 or two ticks more to cover costs...

If you look at ER range, 6 ticks is a stupid amount of money to make.... BUT sometimes its not that way... if you got stopped lets say two times on -5 ticks each... now you have to work 160 dollars to your target...

So you see, making 60 dollars per day contract some days may be a joke others will make you swet some... I call this easy or hard days...

Now, if your method has a good RRR embeded on its apraoch should you do fine...

On the other hand, having such low expectations for the day makes you much more selective on your trading... you will only take the best setups that most probably with one or two trades will make your day...

As day makes target and other day so does, week makes it month too, trader gets confident on his system and he is not greedy to take more than his daily target... here comes self-restriction not to trade.... In this types of ocations the trader is tempted to make more... going behind that temptation is something that will hurt the most valuable asset he can have : NO GREED... greed destroys... it does in all aspects of life, so in trading...

Most downward equities at some point where ok, you got so enthusiastic about that you thought you could trade everything that came in front of you... well no, it wasnt the case...

Scalping bussiness is more a conservation than creation of capital bussinness, and selfrestriccion does the job...

You want more than 36k month...? no problem, trade more contracts or consider trading ES or forex (hi liquidity)... but keep your daily target very low...

As any system , recomendation or experience, some things work for some traders as for others dont...

The Scalper Daily Target is a lifestyle.... cheers Walter.

[Jakew]

Walter, I just wonder why a daily target rather than a target per one trade? ( I am not a scalper). I mean if a setup occurs the trader takes it and exits at the target if the latter is reached. As a result there are days with no setups and therefore no money won or lost, and there are days with above average number of trades. So, what precisely is the role of a daily target in one's trading - how does it help? Cheers

[Dogpile]

working backwards yields a similar figure.

RUS is trading near 850. forget leverage for a minute. a 1% return per month is 8.5 pts (would equal 12.7%/year). Assume 20 trading days and you need to avg 4.3 ticks per day to get there -- 5-6 ticks with trading costs.

So I agree that 6 ticks per day for RUS is a good goal if you can do that with 'surgical strikes' -- not being in the market very much and can do it with reasonable stop-losses. Compounding 6 ticks per day is powerful on its own if you can do it with low variance. Then just add contract size and you can leverage returns while maintaining the same low variance.

But this doesn't necessarily mean the profit target for a trade is always 6 ticks. You might have a 1 pt target for a set-up. Or a 1.2 pt target. Linda Rashke says their modeling shows that you should be targeting 0.5 to 1.0 ATR to optimize your results. Depending on the timeframe you trade, this probably isn't all that much. Another way to do this is to make sure to take 1/3 or 1/2 your position off for a small scalp (0.5 - 1.0 ATR) and then play the other 1/2 to 2/3 for normal profit goal. This might yield the 6 tick target and your risk in dollars drops exponentially if you can get a small profit at very high % on 1/2 your position.

You need to also occassionally have big wins to offset those dead fat profile days when the market trades narrow range. But I agree that if you wait for a really choice set-up, they aren't going to come around much more than once per day -- per market you watch. Sometimes twice. Very rarely three times.

Wait patiently. Get in with your surgical strike and get out. It might not achieve your trade target (which is likely higher than your daily goal) on the first entry -- but if it does, strongly consider calling it a day. Trading one time per day, per market is a beautiful thing.

[walterw]

I think that Dogpile got the clear idea... now Jake there is something interesting here and we call it "momentum"... when he declares himself at the momentum areas... you want to leave a runner working... this will normally exceed your daily expectations, wich you can use it as a cushion on future stops... now calling a day in this case is a smart thing to do specially when you know that for a scalper the next 2 hours may have such a diferent climate that you have more chances of getting stoped than making any profits...

Fixed profits for a trade itself would keep you of taking this momentum situations... maybe you can take a fixed profit for the first 1/3 of position as many do here... the rest if you see momentum should you hold until you get a technical exit signal.... cheers Walter.

[Nick1984]

Assuming that your going in for a small surgical strike as you put it, how many different markets do you watch to make sure that one of your setups appears at least once or twice a day?

I've been daytrading only recently and have been playing with 233t charts and 5 min charts of the "main" market im trading and I trade the longer term intraday movements with a 55t chart to time entries with a daily target of between 10-20 points (YM points) or equivalent.

Taking 5-7 points at a time scalping with a daily target of 10+ points over 2-3 trades is somewhere I want to end up in the future once I build my account up slowly.

Walter, did you start out scalping or did you ease your way into it? Reason being is that if I went for my daily target atm by scalping my way there, then the commissions paid on 3-4 in/out trades per day would eat away a lot of my account.

[walterw]

Originally Posted by Nick1984 »

Assuming that your going in for a small surgical strike as you put it, how many different markets do you watch to make sure that one of your setups appears at least once or twice a day?

I've been daytrading only recently and have been playing with 233t charts and 5 min charts of the "main" market im trading and I trade the longer term intraday movements with a 55t chart to time entries with a daily target of between 10-20 points (YM points) or equivalent.

Taking 5-7 points at a time scalping with a daily target of 10+ points over 2-3 trades is somewhere I want to end up in the future once I build my account up slowly.

Walter, did you start out scalping or did you ease your way into it? Reason being is that if I went for my daily target atm by scalping my way there, then the commissions paid on 3-4 in/out trades per day would eat away a lot of my account.

Hi Nick, it took me some kind of process to get eficient in scalping... I originally was a swing trader (in Buenos Aires ), evolved to day trader and then became scalper...

The concepts behind swing and day trading where the same, just switched to a smaller time universe... got confortable with it and finded my place in the market...

I still believe I can have more better performance if my "timing" methods could be optimized... I am working now in a very cool tool that Raul ( feb2865) has introduced here and I know it will make a revolution on my timing methods as I still know they can be much more optimized...

About comisions in futures you should not pay more than 3.5 Round trip... in that case for example 1 point YM (minimal fluctuation) still is profitable...

It can be done... takes time, optimism and perseverence... and specially greed control...

I am only following YM... plenty of oportunities +15 oportunities per day... just take the best ones and make my day 50-60 bucks per contract.. makes a midle class living here in my country, for the millons I am working on a Forex project together with Don... cheers Walter.

[james_gsx]

I realized I'm a scalper, and changed my trading plan to adapt and I'm doing much better.

Now I do have a question, what about days like today? Normally I would take 20 YM pts and be done, but today I'm up nearly 40 YM. Setups keep coming up and I keep taking them, I felt a bit of greed when I noticed I wanted more so I left the desk for 30 minutes. But if the market is willing to give me 40, why not take it? I understand that that gives me the opportunity to lose more, but I still think there are only a few days a month where you can make good money and you should take full advantage of those days.

I'm just curious as to what your feedback on that is.

[walterw]

Originally Posted by james_gsx »

I still think there are only a few days a month where you can make good money and you should take full advantage of those days.

Hi James... the above statement is where a scalper probably is diferentiated from a day trader... scalper make money every day... day traders need big super days to curve their acct. balance...

You can not base your trading future on magnific days like today because unfortunately the market has very few partys like today... you must be prepared and programmed to trade succesfully on the very slow and normal days... thats where scalpers have an edge on daytraders... we dont care if today is a super day or not... we walk out everyday with our daily normal profit...

obviously when you detect momentum conditions you may want to take a little more gains, but unfortunately it is the exception... normally this bussiness is more boring than exciting... the target its not the excitment, the target is the money... cheers Walter.