Scalping Methods interview

On July 18, 2010 | By | In Techniques

Kevin Ho, a member of the derivatives division of the Singapore Exchange and operator of S & P500, reveals his favorite techniques for scalping six. But first a brief introduction in order to offer their particular vision of trading. For Ho, trading is a Wishing Well, as stated by motivation guru, Tony Robbins, “those metaphors you use to describe your life affect the quality of your perceptions and, ultimately, your own life . The same applies to trading: some say it is a dangerous animal that lurks, ready to pounce on us, others speak of raging seas to be crossed. In my case, I like to think that trading is a wishing well full of coins where the water went over my knee: I shall be happy if I take coins here and there, but will avoid the temptation to take a lot of them for fear of falling and soak (or worse, drown in shallow water).

Turning now on, let’s see how it defines scalping Ho: on the nature of trading in the pits, the best definition of scalping is the very short term operations. This presupposes get small profits consistently of operations that do not last more than a few minutes. The methods presented here are just that: high-probability patterns with extremely small stops and predefined profit objectives. As they say in the pit traders of success, it comes to getting a million dollars with one million operations.

While entry techniques explained are easy to understand, the risk management rules must be followed without thinking. Since stops are relatively small, the trader must be very fast closing the position or place orders at market once the entry is executed. Being successful with the techniques explained here depends heavily on the implementation of stop: if not close the position at the right time and make higher than anticipated losses, profits will disappear gradually.

Scalping categories
We can classify scalping techniques into three main groups:

  • Time-based techniques, both those based on rupture or opening ranges using fixed moments of time to perform the operations (eg 10.00 and 15.00 pm EST)
  • Countertrend techniques, which exploit periods of the day where the market tends to be lateral.
  • Techniques continuation of the trend, by taking advantage of setbacks in the trend for others to join.

The market recommended to apply these techniques are the future of mini S & P500, for being one of the most liquid markets, assets, and easily accessible.


My bread and butter

1. Scalping in the range of 15-minute opening
This is one of my favorite methods: it is simple, requires only fast access to the platform of our broker and is very reliable. It differs from the classical strategies of rupture of classic opening range in which the benefits are quickly killed, so that the operation takes less than 1 minute.

  • Pattern: We just need to wait 15 minutes after market opening and record the maximum and minimum that occurred in that period.
  • Rules of Entry: We place a buy stop two ticks above the high sales and a stop two ticks below the minimum.
  • Objective: We close the position when we have a full point profit (4 ticks of the S & P 500)
  • Stop Loss: We will place the stop at a distance of one full point from the entry price. Also close the market if we remain in position longer than 1 minute.
  • Re-Entry: If we skip the stop loss, we will seek input on the opposite side of the range, doubling the position.

2. The shock of 10:00 (The 10 o’clock jiggle)
This strategy seeks to exploit the fact that about 10.00 h. EST (16:00 pm in Spain) often produce shifts in the trend set initially at the opening.

  • Pattern: We hope to spend the first 30 minutes since the opening. If at the end of that period, the price moves close to the intraday highs, look to enter short in the market if, on the contrary, the price moves close to the intraday minimum, try to operate on the long side.
  • Rules of Entry: If the price moves in the Maxima, sales will place a stop one tick below the low of the last bar of 15 minutes. On the contrary, if the price moves in the least, we will place a buy stop one tick above the high bar the last 15 minutes.
  • Objective: We close the position when the benefit is 1.5 points (ie, six ticks of the S & P 500).
  • Stop Loss: We will place the stop at a distance of one full point from the entry price. Also close the market if we remain in position longer than 1 minute.
  • In any case, we will cancel all orders of entry after 10.30 pm (16.30 hrs CET).

3. The shock of the 3:00 (The 3 o’clock jiggle)
Because the U.S. bond market closes on 15:00 PM EST (21:00 CET), also at this time are typically caused reversals.

  • Rules of Entry: We place a buy stop above the high of the last 15 minutes, if the price has moved down in the half hour before 15:00 h. PM EST, on the contrary, if the movement has been upward, we will place a stop loss sales below the previous minimum of 15 minutes.
  • Exit rules are the same as the previous employer, and must remove all entry orders at 15.30 h. PM (21.30 PM).

Scalping PATTERNS:

4. The mean (The Penny Pincher)
The idea here is to try to catch a few ticks building a strong market move.

  • Pattern: Figure of candles surround 10 minutes looking bullish and bearish (for which I do not know what is an envelope, we have an excellent manual Candlestick here.)
  • Rules of entry: open positions only if the pattern occurs in the first or last hour of trading. If there is an upward bound, we bought market if the bullish candle body exceeds the maximum of the previous bearish candle on the contrary, in the case of the bearish engulfing, we will sell to markets if the body of the sail beyond bearish the minimum of the previous bullish candle.
  • Objective: To close the position when we have a full point of profit.
  • Stop Loss: We will place the stop at a distance of one full point from the entry price. Also close the position if we remain in market for more than 30 seconds.

I like this kind of patterns as they enter the market when the trend is established.

5. Scalping in 5 minutes with the Standard Deviation (The 5-Minute Scalp Standard Deviation)
Okay, rant is a name to refer to an entry strategy in a pullback. The strategy is simple to understand, exploiting only significant setbacks.

  • Pattern: In a graph of five minutes, we introduce a Bollinger Band deviation of 10 periods and equal to 1.
  • Rules of Entry: In bullish trends, buy when the price breaks the lower band where the slope of the bands is bullish. Similarly, in downtrend, sell when the price breaks the upper band as long as the slope of the band is bassist.
  • Goal: to close the position when we have a profit of 2 integers or if the price touches the band set, whichever comes first.
  • Stop Loss: We will place the stop at a distance of 1.25 points from the entry price. Also close the position if the slope of the band changes direction.

PATTERNS countertrend:

6. The Anti
This technique is of Linda Bradford Raschke, the only woman featured in Jack Schwager’s book New Market Wizards. Let us see why this technique is called The Anti

  • Pattern: In a graph of five minutes, insert a parameterized stochastic% K and% D = 7 = 10.
  • Rules of Entry: We will purchased when the stochastics cross upward moving average at any time, as opposed to sales.
  • Goal: to close the position when we have a profit of two integers.
  • Stop Loss: We will place the stop at a distance of 1.5 points from the entry price. Also close the position if the market does not take a clear direction in the 3 minutes of our entrance.

We have just seen six high probability patterns with their tight stops. Remember to run the stop loss when appropriate and avoid the temptation to hold the position longer for more profits.

Someone may consider that these patterns are not exciting because it does not lead to big profits but offer little benefit consistent over time.

However, imagine that the six patterns used throughout the day, three of them really exist and the remaining three often appear very often. My experience shows a reliability of 75% (in some cases even more), which may involve a $ 200 daily average operating profit on a day with a contract from the mini S & P500. This amount, which may seem small, can make a substantial income if we increase the number of contracts we operate, provided that we know what we do. Just remember to cut the losses and that a million dollars is a million operations.

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