Friday, 17 December 2010

Level Playing Field or Is It?

When I was on the floor, we had a huge advantage over "the paper". Off floor traders, be they the big boys trading size or the retail traders, were at the mercy of the floor. We could front run the paper, hit tick and low tick, run stops, you name it and it happened.

Those days are gone! As electronic traders, we have all the advantages. We can use whatever technology we can think up and afford. We can see lots of markets at once and trade whatever has juice. Yes, some of the big boys can peak a little ahead of us, but on the whole there is a level playing field and if you have the technology edge or a brain edge then the playing field is tilted in your favour.

Not having the millions to throw at the latest technology, lots of traders work smarter. My Dad always told me to use more inspiration than perspiration and that is especially true of trading. Creating a methodology that gives an edge is the answer, and we have a lot bigger edge now off floor than when we were floor traders.

The picture below is a scalping system I use when I have limited time. We had an overnight and morning snow fall and I was doing some snow blowing on the farm, so didn't really follow the markets in the morning as I usually do. I sat down for a couple of hours to scalp the Euro using 3 tick range bars. The picture below is the result. Nice and profitable, but hard yakka (work) as they say in Oz. Same methodology, just faster bars.

Just remember that usually the last trade in the sequence is likely to be a loser. I'm particularly watchful after the 3rd trade, although in these really short term periodicities there can be many more than 3.


  1. Hi EL,

    It looks like Germany's going to implement a Financial Transactions Tax on every trade. Will that effect your trading? The DAX maybe?


  2. Before commencing the scalping strategy, do you still take a moment to envision?

    Specifically, do you only trade the scalp strategy at defined reference points in your MP/VP or do you rely on the trend occurring in your short time frame to qualify a picture you wish to trade?


  3. Anon 19:14, I can't imagine the Germans putting themselves to a competitive disadvantage by increasing trading costs on futures substantially. Let's see what happens.
    Vincent, I always envision as without having some context I feel lost but I am always ready to be wrong. It's less important if you're scalping for just a few ticks as its the momo you need to identify.

  4. Hello

    people like you sell dreams and it give us the
    proessions the opportunity to make living.
    keep succrssful blog.

  5. Hi EL,

    I'm sorry for my english but is not my language.

    I follow your blog (great blog!) from the beginning but is the first time that I post.

    I'm trying to follow your road map.
    At the moment I identify your setups and backtested and the 70% winrate is ok for some setups.

    I'm working on how improve the exits of second and third scaling out: I notice on your oldest posts (as you have written)that you don't exit from a losing trade with a stop loss but you cut the lose trade before.

    I understand also that is important that the second and third trade must be more profitable of the first: if I take a trade risking 27 ticks for example (9 ticks for contracts) and I scale out the first now i'm risking just 9 ticks (33% of beginning position) and this is good. But on losing trade that is all wrong I lose 27 ticks.

    On the sequence of trades in a day and in a week, I'm understanding these can influence the profitable.

    You have just written also something about dynamic risk managment and on sizing your position with the contexts.

    Could you post something more about it.
    I'm understanding that is the hardest point of the road map to restrict the DrawDown.