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NYSEGOP

How Do You Scalp?

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Second trade of the day: long.

 

I missed at least another good set up (I was not around), but hey, they are all easy in hindsight.

 

The trend was up and pulled back formed a two higher lows (1 and 2), I saw a bit of a battle going on and two dojis printed just below the signal line (yellow) and got in as soon as prices printed 1 pips above the high. I did not like those two pull back bearish candle just prior to my entry bar, I would had prefer a bit more pressure instead as dojis candle before the break.

 

Prices then pulled back below the signal line but still producing a higher low (3) and a test of that low (4). Clearly the bulls were still in control.

 

She then went nicely higher but not reaching my target, then a huge pullback but still forming another higher low.

 

The time she formed another double top and I got out. She did eventually reach my target, but hey I am not here to be right, I here to play my odds.

 

Made 5.1 pips on 2% risk (7 pips)

 

Total 9 pips for today (two trades), just over 2.5%.

5aa710d7b9cbd_83-2.thumb.png.66e72c2eb9efdcf40cc79048826000b3.png

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Incidentally, if it's not too difficult to talk about, I'd be really interested to hear about your experiences with writing options.

 

sure - it's quite straight forward. i was a dumb ass.

 

i was selling straddles when i was on the floor like there was no tomorrow. this i thought was sure and easy money given everyone knew the market would be low vol for the next few months due to fundamentals.

 

2 years of profit wiped out in 20 minutes in one economic release. i had only been trading professionally for 2 years at that point. that was over 10 years ago now.

 

i never stopped to think why the paper/upstairs kept buying. why would i? i was young and a genius. ho hum. you live and learn.

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sure - it's quite straight forward. i was a dumb ass.

 

i was selling straddles when i was on the floor like there was no tomorrow. this i thought was sure and easy money given everyone knew the market would be low vol for the next few months due to fundamentals.

 

2 years of profit wiped out in 20 minutes in one economic release. i had only been trading professionally for 2 years at that point. that was over 10 years ago now.

 

i never stopped to think why the paper/upstairs kept buying. why would i? i was young and a genius. ho hum. you live and learn.

 

I don't really understand options well enough to know why those who write them can't cover themselves when the market begins to move against them - obviously it's not straighforward or everyone would be doing it. Part of your experience was obviously unlucky timing - I think many people go years doing what you were doing before it catches up with them, and in that time they pressumably have a great lifestyle.

 

Just out of curiosity, what happens if you default on an uncovered option - or do margin requirements make that impossible?

 

Anyway, I think it's great that you're still around and trading ten years later.

 

Bluehorseshoe

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it wasnt really unlucky timing, it was just stupidity! also, i was hedging the position - delta neutral mostly. straddles tend to be farirly delta neutral by their structure, but i had 1000's of them so you do get some delta you need to hedge from the inherent gamma - its been a long time since i traded options.

 

even if youre perfectly hedged in any asset, the very nature of an extreme event causes all products to behave irrationally as some would say. it dont do you much good when you cant get out and the other leg/hedge is badly mispriced also.

 

as for your q, the clearing house will cover any loss to your counterparty, the clearing house will take the money from your fcm, and your fcm will file a law suit against you to get their money back if you cant pay. i did have the money - but not much left afterwards.

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I don't really understand options well enough to know why those who write them can't cover themselves when the market begins to move against them -

 

Put yourself in the shoes of someone who has been buying the options........

 

If markets move slowly and liquidity remains in the options there is usually not a problem, however the issues arise when a big sudden move occurs ....

1....volatility massively increases, so the move against you hurts due to the underlying move

2.....and the volatility element of the option also increases

3.... the liquidity dries up as everyone is rushing for the liferafts

4....the guys who own the options are not going to take their profits quickly.....they have been buying options for this type of move and they are not suddenly going to say "well gee you guys who have been collecting premium all these months now want to just buy it back - from who.....oh me,.....sorry its going to cost.

 

Remember when you sell an option - the most money you will make is on the day you sell it, and every day you might collect a small bit of premium, but it only takes one big day to watch those options increase in price (against you ) ten fold with the often repeated black swan events.

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Put yourself in the shoes of someone who has been buying the options........

 

If markets move slowly and liquidity remains in the options there is usually not a problem, however the issues arise when a big sudden move occurs ....

1....volatility massively increases, so the move against you hurts due to the underlying move

2.....and the volatility element of the option also increases

3.... the liquidity dries up as everyone is rushing for the liferafts

4....the guys who own the options are not going to take their profits quickly.....they have been buying options for this type of move and they are not suddenly going to say "well gee you guys who have been collecting premium all these months now want to just buy it back - from who.....oh me,.....sorry its going to cost.

 

Remember when you sell an option - the most money you will make is on the day you sell it, and every day you might collect a small bit of premium, but it only takes one big day to watch those options increase in price (against you ) ten fold with the often repeated black swan events.

 

Hi SIUYA,

 

Thanks for your helpful (and patient) reply. I see what you're saying above - but surely there might be possibilities to hedge in other derivatives? Something like the ES remains reasonably liquid even through a 'black swan' event, so you'd get a sell stop executed, even though perhaps with considerable slippage that's better than remaining un-hedged.

 

I fully appreciate that my suggestion above is obviously nonsense - I'm just asking a stupid question to try and elicit an answer, not because I'm arguing the point in any serious way.

 

Cheers,

 

Bluehorseshoe

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it would be more informative for readers if you would share your idea and show the real deal...

 

 

not impossible but still depends on your broker imo

Its been said previously buying on the bid, selling on the offer. Or inside, if possible.

 

MA crossovers, swing pivots or take out previous high/low or whatever that chart is showing is not the exact process. Micro or very short term trading but not scalping.

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Buying a break above H[1] and holding for a 4 tick scalp is a common ES scalp. It is so common that there is even a counter trend scalp called a 5 tick failure when ES reverses before moving the 6 ticks it takes to fill the 4 tick bots.

 

Its been said previously buying on the bid, selling on the offer. Or inside, if possible.

 

MA crossovers, swing pivots or take out previous high/low or whatever that chart is showing is not the exact process. Micro or very short term trading but not scalping.

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Buying a break above H[1] and holding for a 4 tick scalp is a common ES scalp. It is so common that there is even a counter trend scalp called a 5 tick failure when ES reverses before moving the 6 ticks it takes to fill the 4 tick bots.

Define it whatever way you want but I prefer:

 

"Scalpers attempt to act like traditional market makers or specialists. To make the spread means to buy at the Bid price and sell at the Ask price, in order to gain the bid/ask difference. This procedure allows for profit even when the bid and ask don't move at all, as long as there are traders who are willing to take market prices. It normally involves establishing and liquidating a position quickly, usually within minutes or even seconds.

 

The role of a scalper is actually the role of market makers or specialists who are to maintain the liquidity and order flow of a product of a market"

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Scalping is very much possible for the retail trader. In my view the only way.

 

Why do most traders fail in doing it? Because they gain the wrong education.

 

Patterns, set ups, technical analysis do work but in the contest of the overall market in the direction of the least resistance, they all need to be backed by strong underlying conditions.

 

The above needs to be used as a mean to get on a trade in technical fashion, and not because that little pattern is convincing us on the matter of market condition.

 

A trader should not be convinced on ant kind of matter, not by fancy indicator, not by other people, and not even by himself. All the informations necessary is already displayed through the price bars in the chart. Why look for more or question what is there? The pressure is either up, down or neutral. If is pushing price more one way than the other, without much resistance in sight, a trader simply sits tight until he spots a tradable setup that offers him a good entry to participate. The actual shape of the setup is quite irrelevant.

 

jk

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Buying a break above H[1] and holding for a 4 tick scalp is a common ES scalp. It is so common that there is even a counter trend scalp called a 5 tick failure when ES reverses before moving the 6 ticks it takes to fill the 4 tick bots.

 

Simply selling at H[1] and buying at L[1] on a stop and reverse principle would be immensly profitable if only it were possible to guarantee a fill at limit in every instance. Even though this obviously isn't workable as a trading strategy due to the fact that these limits are unfilled often enough to produce a negative performance, I still regard this as strong evidence for the inherently mean reverting nature of the ES.

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Buying a break above H[1] and holding for a 4 tick scalp is a common ES scalp. It is so common .........
So just how common is this then?

 

Eyeballing a one minute chart with an ATR set to 1 shows 10% or less bars with a 4 ticks available. Nevermind 6 ticks opportunities.

 

I guess you also have a generous definition of "scalping" and are looking beyond seconds or a minute or two?

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surely there might be possibilities to hedge in other derivatives? Something like the ES remains reasonably liquid even through a 'black swan' event, so you'd get a sell stop executed, even though perhaps with considerable slippage that's better than remaining un-hedged.

 

I fully appreciate that my suggestion above is obviously nonsense - I'm just asking a stupid question to try and elicit an answer, not because I'm arguing the point in any serious way.

 

Cheers,

 

Bluehorseshoe

 

yes.....maybe.

that would be your choice of hedge, no market maker is going to put on a texas hedge to help you out of your stop :)

and ultimately that is a lot of what bigger funds/prop desks do - they hedge one large position with others a lot of the time, or they diversify, whereas a single individual position in one instrument as a day/retail trader is very different.

Or people do spread trades in the same underlying with different options strikes or series (different months) to minimize risk.

One issue will obviously be that often you may end up having two positions on with double the risk, or the opportunity window to quickly hedge something else when a gap occurs is very small.

If you like start another options question thread....

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Hi

 

Simply observing the DOM , get a feel for the market or nsync.

Watch what the market wants (path of least resistance)

Selling or buying pressure (wich is dominant)

Watch important levels and how price moves there and how it reacts( ydh,ydc,ydl,s/r,swl,swh,high vol areas low vol areas , recent heavy activity)

Get in , if market reacts in the favour of my position let it run till momentum dries up

Else get out dont be exposed to the market for to long , either take loss or BE

 

Watch out for games played ! Only trade the obvious !

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yes.....maybe.

that would be your choice of hedge, no market maker is going to put on a texas hedge to help you out of your stop :)

and ultimately that is a lot of what bigger funds/prop desks do - they hedge one large position with others a lot of the time, or they diversify, whereas a single individual position in one instrument as a day/retail trader is very different.

Or people do spread trades in the same underlying with different options strikes or series (different months) to minimize risk.

One issue will obviously be that often you may end up having two positions on with double the risk, or the opportunity window to quickly hedge something else when a gap occurs is very small.

If you like start another options question thread....

 

Thanks for your reply - I won't start a new thread as I'm only casually interested to be honest - it just seems ignorant of me not to have a better idea of how options work. In fact, I'll buy a book, I think . . . Cheers, and apologies for the diversion.

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Hi

 

Simply observing the DOM , get a feel for the market or nsync.

Watch what the market wants (path of least resistance)

Selling or buying pressure (wich is dominant)

Watch important levels and how price moves there and how it reacts( ydh,ydc,ydl,s/r,swl,swh,high vol areas low vol areas , recent heavy activity)

Get in , if market reacts in the favour of my position let it run till momentum dries up

Else get out dont be exposed to the market for to long , either take loss or BE

 

Watch out for games played ! Only trade the obvious !

 

This make sense to me, I pure scalper.

 

I would have a TP though, just because target can be reached and react.

 

On a 10 pip TP with and average loss of 7 pips, a 50 % winning trades, the account can grow quite considerably.

 

jk

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Is scalping all computer generated? Is there a way to do it on mac? What are the pros and cons of scalping?

 

I think that the main problem in scalping is that it pulls you into gambeling instead of real trading. Therefore, I always advice to trade on the daily chart- it might be more boring but at least it will give to ability to make decisions calmly. By the way, not every broker welcomes scalpers so you need to have ECN brokers that do not have problems with such trading.

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