Hi guys, Just wanted to ask, for someone who wants to scalp day trade futures, what variables do you look at to observe the patterns and learn the skill of scalping? I mean aside from the psychology, capital requirement and money management part, what should we really be looking at? Do you look at some type of indicator? Volume? price pattern? Speed? Fractals? I mean if you are scalping 2-5 ticks, for most this is just noise but for those who make a fortune doing this they must be seeing a pattern right? What do these patterns consist of? In the end we can only see the ladder, volume, and time in relation to the price for trading. It would be nice if someone can provide an example of a scalp setup idea. Or maybe steps of finding a scalp pattern. Anyway, thanks for reading.
While I don't trade futures, I would venture to say (barring any futures specific variables) you need two primary and required components. 1) A trend (up or down), or a very wide channel. Trading in a tight channel can cost you a lot of money. 2) Momentum. I have referred to this for many years. Mass x velocity. What I mean is looking for a trading vehicle (contract or equity) that is moved by large sized trading blocks, and it's traded rapidly. Again I don't trade futures, and have no experience with them. However, I believe if you're in a fast trading vehicle that has size, moving rapidly and in a trend, you've vastly improved your odds. Try and keep it simple. Too many indicators on your charts will just look like "screen spaghetti" after a while. Unfortunately, it's very easy to get sucked into the over analytical vortex. Good luck!
Spread and size, almost everybody is a scalper when you get down to those last few ticks before fill. The only thing you have total and complete control over is your entry. So, enter at the best price possible. And as soon as you enter, start looking for a better price. Learn from a jewish grandmother, she knows price. Not some guy staring at a chart trying to predict future. Good price has nothing to do with future price. Good price is you bought it lower than others and you sold it higher than many. That's all. Doesn't work every time, always works over time. Cost goes without saying......just saying. Indicator? That's why they call it scalping. Operates below indicator level. As soon as you bite the trend/chop indicator apple you have given up any hope. Must be able to scalp everyday big day, small day, trend day, trend year, chop, chop, chop. Every day all the time. Always looking for a better price.
Traded them for a while (mostly e-mini, currencies, and grain). I started with 500$ but I know it is not enough. I took into acount taxes (round trip) - ex. for 2 ticks taxes are more expensive than earnings in micro euro). I used level 2 usually and made between 50 and 100 trades per day. I reach 1,100 then I lost all earnings. Appart that now I think I hadnt capital enough and issues probably I didnt understand how markets worked.
There are many variables when trading, which is why it is impossible to predict future price level. However, it is very possible to see when price is starting to speed up and slow down. Changes in the speed of price are caused by changes in the quantity of buy/sell orders. The quantity of buy/sell orders is different at different times of the day. Therefore, you must be aware of the best time of day to trade, especially if you want to scalp. Last, but not least, your results in one market will not be the same in another market. Thus is due to different market internals. If you try and scalp the ES for a few ticks, then you best be prepared to do some serious work and some serious trading, as those who place most of the buy/sell orders do so with OPM, and do not really care about short term results. For ES, I would allow 6 months to 1 year, and also allow around $10k to $15k in "learn from losses" money! After that, if you can not do it, then forget it!
Scalping, IMHO, is the very hardest form of trading on the planet. Although, most would disagree with me, this is the best way to learn, start trading longer term stocks when weekly charts, define trend for weeklies, cause what you will use for a trading system on weekly charting, most of it will end up trading one minute bars, when you making money trading weekly for 2-3 years, then go trade stocks on daily for 2-3 years profitably, then trade 30 minutes timeframes for 2-3 years and now you will be more ready to trade one minute bars. Reason I go inverse of 99.9% of those who day trade, there is outrageous amount of knowledge you have to memorize and know it like breathing, so you have study and back test all the steps to get to scalping in 6-9 years, and in meantime will have some cash put away to try to do successfully. For scalping, trend is the toughest to define, since most are trying to make 1-5 ticks, you are going to have to be doing 75-80% winning to breakeven as your first 100-150% returns are for retail fees, so best to plan on doing above 90% winning trades to make it worth while, and as one just starting out, you will not make money first 3 years, this in my opinion, if you don't know how to program, it will be zero percent of making money, you will spend years back testing and better have money for buying tick data, years of it as you want to be able to have 3,000 sample for any signal. The richest people on Earth made it in long term, kick in buying long income houses or rental units, Any kind of business where you making something each month, in long run pays off most of the time. I scalp much less than I use to and all of it is automated, scalping ES, I average $12 bucks a trade this past week net, not very much when I consider doing this decades, just way it is now as many markets are watered down. I am spending much more time trading Long term Commodities. Learn how to do Commodity Spread Trading, margins are low, can do good profits doing this.
Lots of videos on Youtube about scalping...real trades by traders giving examples along with some videos of scalping via a simulator. Good place to start to go along with anything you "read" about at a forum because you know as they say...pictures (videos) better than words. Yet, the best place to start is with any readings or videos that are specific to your trading instrument...whatever it is that you're trading.
Wanted to add. Being a noob I was afraid of pick too much money from markets (when you win several rows you think you can predict the future wich is clearly not). Do not afraid of anything. Your counterparty is probably hedge. Or have an hedge of the hedge. Or will unload uncomfortable sizes. Try your best and learn everything you can.