Wednesday, February 24, 2010

Adding Emini S&P Scalping Back Into Arsenal...

... but this time, I'm doing it differently. With extreme discipline and I'm gunning for singles, not homeruns. Here's my trading plan:

Trading Plan for Emini Scalping
"Managing Risk and Hitting Singles"

As of February 23rd 2010, I am adding Emini scalping back into my arsenal of trading weapons. This is something I have used, on and off, throughout my trading career. I can honestly say that I have made a lot of money but have not been TRULY successful. On the other hand, I have lost a lot of money, thus, I have not been TRULY successful. So, how can I be successful while both making and losing money? I can avoid these pitfalls which I have not avoided in the past:

1. DISCIPLINE: I was not successful because I did not control my risk EVERY TIME I entered a trade by also entering a stop. Trades would occasionally get away from me and I would take the big loss wiping out all my scalping gains.
2. GREED: I was swinging for homeruns instead of consistently hitting singles. Small 1 and 2 point gains are statistically much easier to attain than 8 to 10 point gains.
3. METHODS: I was trading off of patterns only and not putting in the nightly work that it takes to identify significant price levels.

1. Control Risk AT ALL TIMES
2. Hit Consistent Singles, Not Homeruns
3. Do not trade when work takes precedence
4. 1st Month – Feb 23rd to March 23rd
a. $300 per week or 6 Emini points per week
5. 2nd Month – March 23rd to April 23rd
a. $400 per week or 8 Emini points per week
6. 3rd Month – To Be Decided – Based on performance of 1st and 2nd months

Each night, I will do the following:
1. Identify support and resistance levels on the Emini daily, 30 minute, and 5 minute charts.
a. Support/Resistance levels will be marked using the following:
i. Price/Volume Histograms
ii. “Eyeballing” obvious support levels on the charts
iii. Fibonacci retrace levels
b. On the daily SPX chart, I will use NYSE-TRIN, McClellan Oscillator, and the VIX to help determine overall market direction bias.
2. Check the economic calendar to be aware of timing of key data releases

Trade Setups
I will not take a trade unless price action meets my criteria for a “trade setup”. I will use the following criteria that define a “trade setup”:
1. I will initiate a trade when the market displays a temporary emotional high or low. An emotional high or low occurs when the NYSE-TICK is either above 800 or below 800.
2. I will initiate a trade at a support or resistance level which I plotted out during my “preparation” period.
3. I will frequently tie #1 and #2 together.
4. I will look for divergences between price data and tick data.
5. I will look for high volume and low volume bars on the 1 minute chart which can signify turning points in Emini contract demand.

Risk Control
1. Whenever an order is placed, my trading software is set to immediately enter a stop order 1.5 points from my entry point. Depending on the volatility of the day (or moment), I will have leeway to modify this stop up to 2 points from my entry point, BUT NEVER MORE THEN 2 POINTS. This is the most crucial part of my trading because the act of placing a stop EVERY TIME eliminates the risk of THE BIG LOSS.
2. After a 3 point loss in a given day, I will stop trading for the day.

Managing the Trade
1. I reserve the right to exit the trade before my stop is hit. Sometimes price action is so obvious that I know my stop will be hit. I would rather take a half point loss than a 1.5 point loss. I know this will result in occasionally missing out on positive trades which wouldn’t have hit my stop before I exited, but I am okay with this.
2. I will move my stop to breakeven when price action tells me it is safe to do so.

Closing the Trade
1. In 90% of my scalps, I am looking for a gain of 1 to 2 points. The trade will be exited after this goal is met.
2. Occasionally, if the market is strongly trending, I will move my stop to breakeven and attempt to attain a 2 to 4 point gain. I realize the probability of a 2 to 4 point gain is MUCH LESS than a 1 to 2 point gain; however, it will be up to my discretion to determine when I believe the market will allow me to take larger than normal gains.


  1. Wow. Great, that's exactly what I'm trying to do. Started it this week. Pretty good week for me so far. Today i made two bad moves. My plan was to stay out of the middle of the range and trade it back to the middle but I ended up breaking that rule twice and it cost me. Trying to get cute. Still not a bad week. I'm very encouraged actually. I can see a system that can work. I just need to stay disciplined. Going for homers has cost me. I look forward to seeing your results.

    Twitter: kkaech

  2. I like your methodology, very well detailed and it makes total sense.
    In my case, I also take the $EURO into consideration before making my trades.
    $TICK, $BANK and $EURO. Take a look at it and good luck


About Me/Disclaimer/Philosophy

Trading since 1996, it NEVER leaves my mind which is a curse and a blessing. I trade stocks, options, and futures.