Scalping

[darkcider]

^ I do think some basic, fundamental form of market understanding is necessary to make it, though.

All these patterns that we analyze, it's just buyers and sellers interacting with each other. This is what I think anyone should build their model on. The model itself can be anything, but I do think it requires a way of capitalizing on this understanding to be valid. If it bears no relationship to how the market behaves, then it's useless.

How this comes about is unique to the trader, but I do think you'll find plenty of similarities between the successful methods.

Precisely! "Look at the way i trade, i'm better than you", is certainly a newbie attitude, or at least a small minded and stupid attitude.

I guarantee that no matter how people trade the results will all be random and different. Now what does that tell you about any style of trading, the people trading and the markets?

 

[The Leopard]

(Also posted before or in another thread, not sure, but I think is relevant to the to latest posts)

Yes, I think there is a big misconception about trading and setups in general. Traders rely very much on set ups to initiate a position. But in my humble view, set ups will not give a true reality of the market condition but the overall chart will. The pressure is either up, down or neutral. If it is pushing prices more one way than the other, without much resistance in sight, a trader simply sit tight until he spots a tradable setup that offers him a good entry to participate. The actual shape of the set up is quite irrelevant.

I think this is the stage where you actually have a chance to make a price action approach work. Good post.

 

[Mike Kshemaraja]

I think this is the stage where you actually have a chance to make a price action approach work. Good post.

Thanks mate, I also appreciate your "direct" posts. Looking forward for more of them.

 

[VielGeld]

Now, if only my unending wisdom would reflect itself in my bank account...

 

[Pnty]

This week I got burned a bit with EUR/CHF scalping algo. We could see some elevated volatility in this pair over the coming weeks. Be careful guys.

 

[Mike Kshemaraja]

I would like to look at 70 tick candle charts, do you know any brokers that supply such service or only a trading software platform will?

 

[arbus]

Back to the original question for a minute..
Why not use an automated system or at least semi-automated.

Reason is - if you are scalping you are almost always looking for a technical set up. It is not possible to stare at a screen for hours a day waiting, and why would you want to? Use the computer for something it is good at.

Also if you are scalping study the market conditions at particular times of the day and days of week. Look for predictable patterns.

also,also, keep an eye on the news.

Also,also,also, test it! Trade on a demo account for a specified period.

 

[DionysusToast]

For institutional trade I would completely agree.
Trouble is I think the trend for HFT taking over is unstoppable,
at best, legislation may be passed forcing them all to at least use the SIP quote.
That will depend purely on who shouts loudest and lobbies more effectively,
the pension funds and VWAP insti algo's on one side and the HFT NBBO front runners.
Not sure I'd want to bet on that one

Really though, that is an insti battle ground.
If your current method still works or you can identify a way to profit
from the above battle, thats all that matters.

I think your fears are overblown.

HFT cannot stand in the way of real buying/selling.
The HFT world will end up imploding at some point - too many people, too few opportunities, too high costs.

Should be fun to watch.

 

[DionysusToast]

I don't even know why I am "debating" this on a forum with a bunch of out to lunch "traders" who think their magical pictures reveal where the markets are going to go.

Why don't you go to the cme and pay up $650,000 for a seat and see how far you get using woodies cci....

Well - I'll miss you.

If you decide to bow out by posting a bunch of porn pics - can you please PM me the pics before you do - I always miss them when this happens.

Most people think the markets are a level playing field. The reality is that they aren't even playing the same game.

The fact is that there is money in the markets and that attracts a lot of people who think the markets can be played 'straight'. The $1000-$1,000,000 crew. Then there are people with a lot of money who not only play 'bent' but actually really need to be a bit bent just to build the positions of a size where they can make a decent return.

 

[DionysusToast]

^
All these patterns that we analyze, it's just buyers and sellers interacting with each other.

At one level I agree....

BUT - most people think buyers make the market go up and sellers make the markets go down. For every buyer, there's a seller.

In regulated markets (i.e. not forex), who's on the other side of the trade and why? It's not because they have a different opinion.

You can't just think about buyers & sellers interacting. You have to consider the liquidity providers AND the sharks in the market and how they make their money.

 

[Joules MM1]

Whichever way you look at it, the order flow changes will ALWAYS precede the changes in price. The chart will ALWAYS give you a later entry. The order flow lets you drill down to a level of activity that cannot be seen on the charts.

...is this the new international disclaimer required of anyone authoring a "how to read a chart" chapter ?

 

[Liquid validity]

I think your fears are overblown.

HFT cannot stand in the way of real buying/selling.
The HFT world will end up imploding at some point - too many people, too few opportunities, too high costs.

Should be fun to watch.

Agree to a certain extent.
I don't have any fears over this, I don't actually care.
It is the way it is.

Yeah HFT won't stand in the way of larger moves, it was never meant to.
I personally think the only thing that will cause it to implode will be the
point at which it becomes economically impossible - transaction tax or some other legislation to prevent front running.

Other than that I agree there are too many HFT outfits chasing the same nickel.
That doesn't equate to fewer opportunities though.
Consolidation is most likely, as smaller HFT's can no longer compete.

In a nutshell, I think legislation alone will be the nail in the coffin of HFT.
When or even if that legislation is introduced is anyones guess.

 

[DionysusToast]

Well I do hope not because that nail is going to get me too!

 

[Liquid validity]

Well I do hope not because that nail is going to get me too!

Yeah I can see where you're coming from regarding a transaction tax
Personally I'm not convinced they would implement an outright transaction tax,
lets face it, it would be ****ing stupid to say the least.
Scalpers wouldn't be the only ones affected either, it would probably kill day trading
altogether.

I'm thinking along the lines of the $25K PDT rule.
By that I mean a qualifying ruling as opposed to an outright rule.
Something along the lines of a volume weighted/daily frequency tax would do the job,
as long as it had sensible parameters.
That would curb HFT influence, whilst not killing it off altogether.

Even outlawing what is essentially front running would help.
So far the current U.S admin and the previous have shown no concrete signs of action.
Most likely due to heavy weight vested interests once again...
Eurex has shown that these types of problems can be dealt with,
so it does beg the question - why the inaction?

 

[DionysusToast]

Well - it's a hard road to kill HFTs and not Market Makers for sure...

 

[Liquid validity]

True, goes without saying market makers would have to be exempt.
I doubt the HFT's would want to use that loophole to carry on given the extra
burden.

 

[DionysusToast]

Well - HFTs often defend themselves by saying they provide liquidity...

Should be interesting...

 

[The Leopard]

I think the fuss about HFT firms is heavily overdone. I really can't see any serious negative impact that they have. In fact, I can't see that they've had much impact of any kind - a chart from today looks pretty similar to a chart from 50 years ago.

I could imagine their influence having a small (very small) positive impact from the point of view of the retail trader, but that's about it.

There definitely does seem to be a campaign against them though. Fund managers especially seem to hate them, it's said that they consume liquidity and create higher volatility. On occasion this may be true about liquidity, although for the majority of the time I would have thought the opposite.

The only people I can really see being affected are scalpers, but even there HFT hasn't made it impossible, just different. You just need to realise the game has changed slightly, and adapt accordingly.

 

[Liquid validity]

I think the fuss about HFT firms is heavily overdone. I really can't see any serious negative impact that they have. In fact, I can't see that they've had much impact of any kind - a chart from today looks pretty similar to a chart from 50 years ago.

I could imagine their influence having a small (very small) positive impact from the point of view of the retail trader, but that's about it.

There definitely does seem to be a campaign against them though. Fund managers especially seem to hate them, it's said that they consume liquidity and create higher volatility. On occasion this may be true about liquidity, although for the majority of the time I would have thought the opposite.

The only people I can really see being affected are scalpers, but even there HFT hasn't made it impossible, just different. You just need to realise the game has changed slightly, and adapt accordingly.

I'd say for retailers other than scalpers, its the higher volatility that is the greatest effect.

 

[Liquid validity]

Well - HFTs often defend themselves by saying they provide liquidity...

Should be interesting...

Should be interesting...why do I get the feeling I'm being baited
Only joking, fair question.
I'm pretty sure you already know the answer though

Whats the difference between the liquidity market makers and HFT's provide?
MM's will not pull that liquidity, its visible and available to all.
HFT's on the other hand provide liquidity purely for their own benefit.
HFT liquidity is not always visible, frequently fake and fleeting.
Daily volumes tell a different story, just providing a cumulative total.
Its the nature in which that liquidity is provided that is the difference.

When did you last see a market maker pull their liquidity (flash crashes and market suspensions aside).
HFT's do that all the time as that is their primary reason for providing liquidity,
not to provide an open market as MM's do.

I've posted this before somewhere else, here is an example of a short term liquidity reduction due to an HFT algo:
Nanex - HFT Killed the EMini

Liquidity illusion:
Nanex ~ The Liquidity Illusion ~ NBBO Flutter

Rise in HFT activity since 2007:
Nanex ~ The Rise of the HFT Machines

Backed up by CME volume Vs round trip time (and thats without additional effects of co-location):
http://www.cmegroup.com/globex/images/RTT.png

Quote stuffing:
Nanex - Quote Stuffing Banned!

Its fair to say that anyone working in the spread or taking a tick or two is most affected.
All of the above does increase volatility as well, which affects everyone.
Cop out answer is that its all down to the Euro and Greece.
As HFT activity has increased massively over the last few years,
I believe its more than Euro factors and general economic uncertainty...
For most people increased volatility is the most noticeable affect of HFT activity.