ES EminiMore on the Scalping Style of Trading

There are a variety of trading styles that traders employ, some with great success, others with less than satisfactory results.  My style of trading, scalping, is a direct reflection of my personality, experience and emotional disposition. ES Emini traders who scalp typically stay in trades for five minutes or less, or longer, if need be.

My views on the way the market functions precludes me from making long term committments to a given market direction.   Market prognostication is an inexact science, at best, and most economists and traders have a miserable track record of predicting the future direction of market movement.  So, I don't even try.  I suspect I would be as poor at predicting futures market direction as the experts.

As a adherent to portions of chaos theory, I believe there is a level of randomness to the market, which makes it less than predictable in the long term.  I do believe that certain means can be employed, and probabilities analyzed that will allow a trader to get an idea of what the market may do in the next ten minutes, though.  Chaos theory is about small patterns, called fractals, that exist in a far larger random pattern.  I take advantage of those smaller patterns and try to pull two or three points (on both the long or short side of a position), and then exit with my small prize.  Of course, if I find myself in a continuing trend, I may push my profit limits higher to take advantage of the trend.   By and large, though, I am looking for two or three points.

A casual glance at any intraday chart will show an undulating wave pattern that is the basis for scalping.  I try to identify the starting point of a wave and exit the trade when the little spurt of momentum stops.  Of course, there are days when the market trends in one direction, not often, and on those days I may take a position and hold until my comfort level erodes and I am ready to take a profit.

When you are in a winning trade, you never lose money by exiting the trade.  Sure, maybe the trade angled upwards another two points and you did not participate in that price action, but I am still content with my three points.

Never let a winning trade become a losing trade.  Take that to the bank because it is a common mistake by a legion of traders.

On the ES Emini contact I set my stops fairly tight, usually a 12 tick bracket and never adjust my stop lower to accommodate a lousy trade.  If I am wrong, I am wrong.  My goal is to find another trade that is profitable.

I don't hold trades overnight, and I don't set up trades and walk away.  The scalping style requires constant attention to the trade at hand, and this requirement makes it an unpopular choice for traders who don't care to spend a lot of time at the computer.  You will be spending time watching charts looking for trades, and once you are in a trade it is important to monitor the trade.

In baseball terms, scalpers are singles hitters.  Nothing more.   We may hit an occasional home run, but the is the exception, not the rule.  The goal of a scalper is to extra small chunks 5-8 times a day from the market.