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jeremyjohnolson

The "Scalp" Strategy

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Here's another one I took on BA on the same day.  These are 1 min candles. It was reversing from a 5 min ORB break up and coming down.  I don't know if "trending" is correct or not since it was so short a time, but that's what I called it.

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Here's one on BABA.  It was called out in the room and it was already very extended.  So that's why I got in for just a small scalp at the top of the move not expecting it to go much more.  I would say this one was chasing and probably not a good trade even though it did work out for me this time.  If you look at the 1 min candle chart you can see I did at least get in on a small pull back.

 

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Here is a losing trade where I tried to get part of the move of a 5 min ORB (breakdown) but got stopped out.  Again, the reason I am calling this a scalp and not a 5 min ORB is because normally I would have taken a smaller position and my stop would have been closer to VWAP (the blue line).  Maybe this should just be classified as a 5 min ORB though.

 

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19 hours ago, jeremyjohnolson said:

Overall I haven't done as well with the 15 min ORB with a win rate of 49% and profit factor of only 0.93 over 37 positions.  But for the last 26 of those 37 I changed up the way I was looking at the 15 min ORB, I started giving it more room and taking a smaller position size, since then my profit factor has increased to 1.29 (still not great) and my win rate has been 58% over those 26 trades.

 

Ok so I might be a little clearer now I think. So if you're saying this is mainly a compensation for the low success rate of the 15 min ORB then I would question that as a strategy. 1 & 5 are part of my trade book but 15 min ORB's aren't, the way I trade and my interpretation of how Andrew/Brian etc trade is that by this point of the day we're looking for ABCD's for break of the high of the day on the 1 minute or other such strategies.

If we break that down:

- In the event we have a runner that has a tonne of momentum and is just climbing continually constantly breaking high of the day, mini pull back or consolidation then higher then it would look like a 15 min ORB is working and someone might trade it as a 15 minute ORB if they're getting in late but chances are it's risky because it's fairly extended by that point. If I'm in that from early (1 or 5 ORB for example) then I'm not necessarily partialling on a break of HOD because it's constantly breaking them and so unless it's at a resistance point I might just be letting it go as will a lot of other traders.

- In the event traders are looking at it as an ABCD on the 1 minute or 5 minute chart for a break of high of the day then as soon as it breaks we're all taking heavy partials because that was our main move that we were looking for, where as as soon as it breaks is effectively your entry. I suspect this initial pop through that was our main move and that we're heavily partialing on is what you're seeing as going in your direction briefly. Unless I think the stock is really strong then I'm probably getting down to <25% position on that initial pop through HOD that would be your entry. 

If this is the case then on many stocks that might have the criteria of 15 min ORB you're entering into a lot of exits, some have the strength to keep going but a lot that break HOD then end of fading back to VWAP etc.

If you think my assessment is correct then I'd suggest watching Andrew and listen to Brian trade that part of the day, it might change your perspective on why that's happening and while you don't necessarily need to trade it like them it's essential to know what other people are looking at to improve your own trade book.

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Thanks Martin.  I was humbled by the market today and reminded that I am glad I am still in sim.  I think I will just go back to the basics for now.  I am still doing well with the 1 & 5 min ORBs, I will just keep focusing on those for now and forget this "scalp" idea.  The more I think about it, if I am honest with myself, I think the "scalp" idea was more of a way to add something to my trade book that would give me permission to basically do whatever the heck I want lol and it didn't work out so well today!

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First, every trader is unique, so if this works for you then I say go for it. However, I think you are potentially opening yourself up to big potential losses. My guess is after several sample sets you will have more winners than losers, but your average win will be much smaller than your average loss. You will most likely take a lot of trades and not make a lot of money (at least not enough to justify the time invested). Hopefully I'm wrong, but that would be my guess based on my own trading experience. 

Second, I would recommend you take a good hard look at your playbook first. I think I understand where you are coming from though. I have often thought about a similar strategy to what you are describing, especially with my BHOD strategy. On slower up moves toward the HOD (not punching up) I still get the break, but they don't always move a lot higher, and if they do, they do slowly. Sometimes they break, move back down, then move higher. My plan is to take a 2r size at the break with my normal stop. Take half off the trade when the price stalls after the initial break and move my stop up to break even on the trade (no risk of loss and no gain if it falls) or my entry (to lock in profit). Then play it like my normal BHOD. I may still play with this in sim, but for now it's not my focus for one reason. My problem is in my playbook and/or execution of it. 

Once I started trading live most of my trades were around break even (+/- less than 1r). I was making a little money and my win rate was super high (80%+), but I was stopping out of most of my trades within 5 minutes. A lot of trades I stopped out in less than a minute. After listening to Peter talk about how he would make more money by letting his winners run, but it would drop his win rate I decided I needed to work on letting my trades play out. I lowered my risk and tried to do just that. And it worked. My win rate dropped, but my average win increased. This also brought up a bunch of other trade management issues I was unaware I had. I have been correcting those issues over the past few months. Now that I'm doing a better job managing my trades I have noticed something else. I'm getting a lot of 1 partial then stop at break even trades. I'm in the process of going through all my data again, but what I'm gathering is I need to work on my playbook. 

My setups are ok, but I think they are too broad. I like to take trades, so I tend to see setups even when they aren't the best. Or they have some, but not all of my criteria. I've eliminated quite a few plays from my playbook that just were not working for me for one reason or another. Now I have 5 plays in my playbook which is about half what I had before. If I only take those plays when they are good setups and I follow my trade management rules I make money.   

Sorry that was a long post and has more to do with my trading than your question, but I hope that helps you. I guess my main point is take a look at your playbook before you try a riskier strategy. Maybe there's something in your setups or management that is causing the results you are getting. If you do try this live be very careful with how much risk you take. Don't blow up your account trying to add a couple bucks to your trades. 

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9 hours ago, cjsimon07 said:

First, every trader is unique, so if this works for you then I say go for it. However, I think you are potentially opening yourself up to big potential losses. My guess is after several sample sets you will have more winners than losers, but your average win will be much smaller than your average loss. You will most likely take a lot of trades and not make a lot of money (at least not enough to justify the time invested). Hopefully I'm wrong, but that would be my guess based on my own trading experience. 

Second, I would recommend you take a good hard look at your playbook first. I think I understand where you are coming from though. I have often thought about a similar strategy to what you are describing, especially with my BHOD strategy. On slower up moves toward the HOD (not punching up) I still get the break, but they don't always move a lot higher, and if they do, they do slowly. Sometimes they break, move back down, then move higher. My plan is to take a 2r size at the break with my normal stop. Take half off the trade when the price stalls after the initial break and move my stop up to break even on the trade (no risk of loss and no gain if it falls) or my entry (to lock in profit). Then play it like my normal BHOD. I may still play with this in sim, but for now it's not my focus for one reason. My problem is in my playbook and/or execution of it. 

Once I started trading live most of my trades were around break even (+/- less than 1r). I was making a little money and my win rate was super high (80%+), but I was stopping out of most of my trades within 5 minutes. A lot of trades I stopped out in less than a minute. After listening to Peter talk about how he would make more money by letting his winners run, but it would drop his win rate I decided I needed to work on letting my trades play out. I lowered my risk and tried to do just that. And it worked. My win rate dropped, but my average win increased. This also brought up a bunch of other trade management issues I was unaware I had. I have been correcting those issues over the past few months. Now that I'm doing a better job managing my trades I have noticed something else. I'm getting a lot of 1 partial then stop at break even trades. I'm in the process of going through all my data again, but what I'm gathering is I need to work on my playbook. 

My setups are ok, but I think they are too broad. I like to take trades, so I tend to see setups even when they aren't the best. Or they have some, but not all of my criteria. I've eliminated quite a few plays from my playbook that just were not working for me for one reason or another. Now I have 5 plays in my playbook which is about half what I had before. If I only take those plays when they are good setups and I follow my trade management rules I make money.   

Sorry that was a long post and has more to do with my trading than your question, but I hope that helps you. I guess my main point is take a look at your playbook before you try a riskier strategy. Maybe there's something in your setups or management that is causing the results you are getting. If you do try this live be very careful with how much risk you take. Don't blow up your account trying to add a couple bucks to your trades. 

Thanks for the insight! May I ask what your avg R for winning trades and overall avg R are in the bolded part? What about after the adjustment was made? Thanks!

I agree that every trader is unique. Just look at our moderators, avg R for John or Norm is below 1 R and for the style to make money, one would need a bigger account size and take more risk per trade. I am sure Aiman and Thor will be over 1 and they must have use less capital to achieve the same goal. 

Edited by Jiheng Sang

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On 1/11/2021 at 7:19 AM, Jiheng Sang said:

Thanks for the insight! May I ask what your avg R for winning trades and overall avg R are in the bolded part? What about after the adjustment was made? Thanks!

I agree that every trader is unique. Just look at our moderators, avg R for John or Norm is below 1 R and for the style to make money, one would need a bigger account size and take more risk per trade. I am sure Aiman and Thor will be over 1 and they must have use less capital to achieve the same goal. 

I couldn't tell you exactly what my average R was because one of the problems I had was not using the same risk per trade. My risk was anywhere between $20-50 per trade, but most of my trades closed + or - $20 or less. I can tell you in June my average loss was around $68 and my average win was around $25. Working on things like never letting the price go past my stop and letting my trades play out helped bring those averages to about $29 average win and $25 average loss in August. 

I spent the fall working on my playbook and focused more on grading my trades like this:

GT= Good trade. Good setup and followed my trade management plan

B/E= trade was +/- less than 1r based on the risk on that trade

F/S= full 1r loss

B/M= bad management. I broke more than one of my trade management rules

B/D= bad decision. Impulsive entry, bad setup, over trading...

I grade each trade after I take it. This helps me manage myself during the trading day. My goal each week is to have less than 10% of my trades be B/D and less than 20% be B/M. Over time I'd like to get that even lower, but those goals are realistic based on my past few months of trading. Now I'm using fixed risk and my focus is on only taking my best setups and not chasing if I miss one or see it late. I'm taking fewer trades, but I think this will help me get better data on my playbook and help me to refine it further. 

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I think your strategy makes perfect sense from a technical/number crunching perspective. However, I think most traders that have been doing this for a while would agree with me when I say that trading is much more about psychology than analytics. If you traded this way live and you took a trade with heavy size that goes your way, there is going to be a very strong impulse to hold (because of the fear/greed of missing out on large profit) . If it goes against you, there is also going to be a very strong impulse to hold (because of the fear of realizing a heavy loss). I think a strategy like this may work for a computer trading algorithm, but the psychology required for this is well beyond a beginner / intermediate live trader. 

So to put it bluntly, I think this approach is an excellent way to blow up an account. 😛

-Chris 

 

 

 

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1 hour ago, Christopher said:

I think your strategy makes perfect sense from a technical/number crunching perspective. However, I think most traders that have been doing this for a while would agree with me when I say that trading is much more about psychology than analytics. If you traded this way live and you took a trade with heavy size that goes your way, there is going to be a very strong impulse to hold (because of the fear/greed of missing out on large profit) . If it goes against you, there is also going to be a very strong impulse to hold (because of the fear of realizing a heavy loss). I think a strategy like this may work for a computer trading algorithm, but the psychology required for this is well beyond a beginner / intermediate live trader. 

So to put it bluntly, I think this approach is an excellent way to blow up an account. 😛

-Chris 

 

 

 

I agree that the biggest challenge standing in the way of success in trading is my own psychology.  Like I have said previously, I still consider myself a novice, but even I have been doing this long enough to be able to say I know from personal experience that you are 100% correct in saying that trading is much more about psychology than analytics.

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