BPA trading room Q&A: June 17, 2015
As a strict Always In trader, I got chewed up today, should I have assumed that the day was overall Always In Long and just stayed long with the stop below 16 or 22 until it clearly went Always In Short. How does a strict Always In trader trade today?
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Video transcript
Trade management: Always In trading
To me, if I were trading today, as an Always In day, I’d buy 16 – the 16 high. And maybe I’d get out below 39. But if I got out below 39, I have to get back in long or short. Maybe I’d short 42, but I definitely would buy 47. And then I’d get out here below 80, but that would be it. So, to me, the Always In Longs are 16 and 47, and possibly get out below 39.
And Always In Short – it never really became Always In Short. So for a trader that was trading Always In, I think he would wait; maybe sell the 2 close? But, to me, the first trade that I would consider would be the 10 high, the first one that I took for a swing was the 16 high, and I got out with two points.
However, if I held, I would have gotten out with more. I’d get out below 80. It never really went Always In Short. After 16, the bears never really did enough. So for a person who’s strictly Always In, I think they’re staying long; maybe they get out below 39. But if they want to try to stay Always In trading, they got to get back long above 46, maybe above 50, 55.
Follow up question on breakout scalps
On a day like today, would you ever place limit order brackets to catch breakouts? If so, can you describe your approach? If not, can you explain why not?
Yeah, like I said earlier, on a day like today, if you want to make 10 to 20 points, the only way you do it is just scalping – and one-point scalps all day long. You buy the 1 low, you buy more lower; possibly sell the 2 close, but if you sell the 2 close, I think you cannot get out above 1. You have to sell more higher. You sell above 6, you buy the 9 close. Maybe buy above 10. If you buy above 10, you got to scale in lower. If you buy above 16, you buy 19 close. You buy the breakout test on the close of 22; you buy the 24, 25, 26 close. Bad follow through, 27, 28. Either get flat or you look to sell above bars: above 31, above 28, above 39; top half of either a weak bull channel or a trading range day.
I think you sell the 41 close. You don’t get filled on your profit order; you buy the 47 close; you probably even buy below 44, 45 if you’re really aggressive. And bottom half of this trading range, I’m only looking to buy — you buy the 50 low; you buy the 54, close the 55, close the 58 high, the 61 close, probably the 64 low, although you could sell the high of the day, the 35 close. And then you buy below bars – maybe below 64, 66, 68. And would I buy above 71? Maybe. I think it’s probably better to sell above 64, sell above 70.
And I’m sure there are many other scalps in there as well. If I was 20 years younger, that’s probably what I would do. Probably would not have taken all of those, but that’s how I would have approached the day just looking for one-point scalps. Looking to sell above new highs, and buy below prior lows. Looking to buy strong bear bars near the bottom; sell strong bull bars near the top. Use three or four-point stops and scale in.
Al Brooks
Information on Al’s Online day trading room
Al, we have previously learned that entering on stops using a one point stop is a losing strategy. But what about LOs? Like BTC 2L, S the 4H, B the 9H, fading the BO above 26 on bar 35 etc… All of these would have netted two while risking one!
The reasons I ask are as follows; I need to keep my risk:reward ratio at 1:2 as I can’t win consistently 60%+ of the time. I’ve been having some success recently swinging for four points, risking two, entering only on stops, so thanks for that! But the problem then becomes boredom on a day like today; I get impatient and take bad trades. So I’m looking to bring in some LO entries so I can make some points on small days like the one above! 🙂
I am unable to scale in as my max risk is two points, max position size one contract. Can’t trade the SPY.
Appreciate your help as always!
I understand the thought about limit order entries. When traders are trying to become consistently profitable, I think stop orders and swing trading (reward 2x risk) is the best approach. However, when there is a strong breakout with good follow-through and good context, the breakout often can have a 60% chance of a measured move, and entering with a limit order on the 1st reversal attempt is the one type of limit order entry that is reasonable for a beginner. He has to use a swing stop, and he has to be reasonably confident that there is a strong BO with good follow-through and good context (for example, if the breakout stalls just below a lower high from 40 bars ago, that is bad context). Traders starting out should not be thinking of scaling into any trade, unless they can trade very small. Even then, I would wait until consistently profitable.
Let me further respond by pasting an email that I sent to someone earlier today about scalping.
“When I say that the minimums are 10 pips and 1 point, I am not saying that those are good targets. The minimum grade to graduate is a C or D. I would never be happy if my kids had that minimum as their goal. There is a minimum wage in the US, and no one should ever has it as their goal because they will live in poverty, although at least they will be able to live.
In fact, I have never met anyone who has made a living trading for 1 point in the Emini or 10 pips in a Forex market. There are many reasons for this, and you are right that overhead is one of them. This means that the combination of spread, commissions, slippage, and mistakes become proportionally so big that a trader needs to win 90% of trades consistently for years.
While I know traders who do win 90% of the time, they do not go only for minimum profits. There is one other important factor. There are 3 variables in the trader’s equation. I just talked about reward (profit target) and probability. The 3rd is risk. While it is often possible to use a 1 or 2 point stop, or a 10 or pip stop, sometimes the bars and swings are so big that a if a traders uses small stops, he needs to win 90% or more of his trades, which is not realistic. When the bars are bigger, especially when there are many reversals, a trader needs to use wide stops or win 90% of his trades. Otherwise he will lose. The bars are big often enough so that a trader going for minimum profits will be stuck wondering why he wins 60 – 70% of the time, yet is still only breakeven.
I hope this makes sense. I will talk more about this in the new edition of the course that I am working on.”