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Why I Just Changed My Scalping Strategy After 20 Years
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And I believe this will be helpful to
any new traders who want to trade
futures products. Um understand the
landscape of each futures product, how
each futures product behaves differently
and uh so they have some more context
when they go and place trades, whether
it's putting their stop losses in, take
profits or putting a wing in or
something like that. So studying daily
ranges will give you context. And so
that's the uh the goal for this market
measure today.
>> Uh we like it.
All righty. So let's do it. intraday
scalping zones. And and by the way,
we'll we'll we'll be your harshest
critic on this one, just so you know. Um
because because when it comes to inday
scalping zones, that's kind of like um
this is kind of like something that
we've been talking about for literally
for years. So um hang on one second. Let
me get There you go. All right. So
we used to do it as a measure of kind of
whatever the expected move was for the
day. So like let's just say 1/ half a
standard deviation to one and a half
standard deviations. Let's think about
that way. But we haven't really done a
lot of work on intraday scalping zones
for quite some time now. So I think this
is going to be really cool. Um
>> and it's also interesting Thomas as
you're doing this now when
we're seeing a lot of two-sided markets.
Um had a massive rally for the past 6
months. Now it's getting choppy and
there's a lot of whatever your take is
on the market or whatever, there are
some opportunities uh right now that I
think we haven't seen in a while.
>> And you're talking to somebody that I
don't know if you know this, but I grew
up in this business as a scalper. First
20 years of my career, I just stood in
the pit and scalped and like everybody
else did. So this is kind of my this
whole scalping thing. I want to cover it
more, but we haven't on the network.
Tony was a scalper, too. So let's do
this. Inday traders rely on speed,
intuition, and often guesswork. But how
far do prices really move on these days?
We analyzed intraday ranges to define
realistic scalping zones.
All right, let's go next slide, John.
Um, so scalping zones are based on
intraday price ranges from 8:30 to 3:00
p.m. It's central time. For each symbol,
we measured the 50th percentile, the
75th percentile, the 95th percentile,
and the daily range. Okay.
>> Yeah. These are the three things I
decided to use. The 50th percentile
being like a base case, the 75th
percentile being some sort of stretch,
then 95th percentile being some sort of
outlier or extreme move in the market. I
also made sure to add a formula at the
end that kind of shows how I uh
calculated the daily range as a
percentage of the open price. So today
we'd be way outside of this.
>> That is correct.
>> Okay, let's go. Next slide.
So we pulled one minute. OLC is open,
high, low, close data. We analyze the
ES, the NASDAQ, and the Russell. Use the
futures, but it doesn't make a
difference. Crude oil, gold, silver,
Bitcoin, and ETH, and the last 12 months.
months.
>> That is correct. Yeah. I used it doing I
used our Jupyter notebooks that we use
internally for our research for other
research projects. So I wanted to
include a snippet just to kind of show
the viewers kind of what we do in the
background and kind of how we pull data.
>> Good little glimpse into the
>> little glimpse of course. Yeah, I like
>> All right.
>> All right, go ahead. I'll let you take it.
it.
>> Sure. Yeah, this first plot I I made it
a little bit more complicated than it
probably should have been, but let's
talk about box plots. So what we're
looking at here that colored in zone is
an interquartile range. So it's between
the 75th percentile and the 25th
percentile range. So right now as you
can see that red line that is the 95th
percentile range. That is the outlier
moves. The orange being the 75th
percentile and the 50th being the
median. And so as you can see when we
look at the first three box plots those
are the indices they trade at a very
small the in the IQR the interquartile
quartile range is much is sh it's lower.
It's it's not as wide. So those are good
uh futures products I would recommend
for small and consistent scalps. And
then when we look at commodities, you
kind of get also that small range, but
not exactly with the CL, but they offer
some more movement with still a good
amount of liquidity and volume in those
in those products. And then we're
looking at Bitcoin and Ethereum at the
end, the last two where they see massive
moves. even their 50% I mean their 50th
percentile moves the base case is much
higher than ES's or the S&P 500 futures
uh 95th percentile move and so those
would be products I would definitely
want to position smaller in and uh
definitely don't have as much volume as
the the indices
>> yeah and the markets aren't nearly as tight
tight
>> they're not as
>> what I want to what I want to add here
is box plots have been around for a
while but what you see here is a good
intuitive ative explanation of what they
represent. So if you've been trading for
a while, of course ES and NASDAQ equity
indices a little less volatile than
something like Bitcoin or Ethereum.
Okay? And what Thomas has done is shown
much wider ranges, wider boxes for the
more volatile things. That's what a box
plot shows you. Well, literally
visually. Okay? So you can see here
obviously crude oil is more volatile
than gold. Bitcoin is more volatile than
crude oil etc etc
let's take a look at the next slide. Sure.
Sure.
>> So crypto has the widest intraday
swings. I don't think that would
surprise us. Commodities offer solid
movement and the equity indexes are more
stable which favors
scaling in and out with with precision.
I think an easier way to describe that
would be I would increase the size of my
positions if I'm scaling I'm scalping in
equity indexes compared to cryptocurrency.
cryptocurrency.
>> Okay. I that's that's an absolute
no-brainer. I think that that when it
comes to scalping, you got to realize
that 90
98% of all scalping is done in the ES. I
mean, some people will scout NASDAQ and
there are a few firms that will, you
know, they they'll make markets in
crypto, so they'll scalp it. There's
also some market makers that will scalp
like you know bonds and and some
customers scalp bonds and crude oil but
for the most part the equity index
indices specifically the ES sometimes
the NASDAQ but specifically the ES are
the primary vehicle
let's go next slide
so the NQ offers the richest daily range
which I don't think that would surprise
anybody um the E the ES is usually the
the ratio ES to NASDAQ is usually
depending on where we are, you can do it
3:2 or 2:1. The Russell is more like
5:2. So, if you're if you're just
thinking of what the what the ratios
are, um the Russell ranges are modest
but consistent. I think that's fair. The
ES remains steady near $70 per day. Um
it's 70 handles per day. And yeah, I
think it's a that's an average.
>> Scratch, but you you went back to the
beginning of the year for that average,
right? that has started. Yeah, the last
12 months,
>> right? Last 12 months because right now
it's a little less than that. Right now
we've been in the like 60 range. Um
So volatility peaks in April likely due
to earnings or macro catalysts. I mean
this year it was all the tariff stuff
but after spikes after spikes movements
tend to compress. Yes. and can use this
to adjust trade size and expectations
monthtomonth. Um, yeah, I mean,
sometimes April's a nothing month. This
year it happened to be crazy. Uh, but I
think that's all pretty fair. I mean,
that's exactly
>> just to confirm just to confirm some of
the data here. What you also saw was a
spike in the VIX right in April because
like you said with the DAFFs and all
that jazz and the point is market
movements and volatility implied
volatilities are very closely related.
They're not 100% correlated, but yeah,
you saw just like we saw a spike in the
VIX in April, we also saw a spike in the
scalping ranges
>> and that mean reversion also is shown
here as well with that compression after
that big spike in April. >> Yep.
>> Yep.
>> Let's go next slide.
>> So using scalping zones to structure
trades. So this I'm curious about. So
take us through this.
>> Sure. So let's talk about when the
markets are in a base CA. I mean that
particular day of trading is a normal
choppy day. It's a base case. What I
recommend or a use case for those days
would be to fade extreme movements,
scalp the scalp the reversals and make
your targets tighter.
Anything you want to add to that for
that first case?
>> So the the 50th percentile just means if
the expected move is let's say $60, your
your base case is a $30 handle move. And
yeah, it'd be 50% of the average
>> 50%. So fade extremes. Well, that's what
we are. We're contrarians scalp
reversals. I mean, that's the same
thing. It's the contrarian play and the
tighter targets. I I would totally agree
with that.
>> Great. All right. Then the next case
would be the 75th percentile. So let's
just say we're in a trending market
stretching. Um the use case in that
situation would be to lean into a trend,
use wider targets, and trail your stops.
When you say lean into a trend,
you mean what?
>> What I mean by leaning into a trend is to
to
>> Are you fading that trend or are you
buying that trend?
>> I'm buying the trend.
>> Okay. Cuz we would be we would still be
fading the trend.
>> So you'd be so leading into a trend it
you you in other words on a down day
today you'd be shorting this down move.
you would be because this is outside the
range today because today we're in the
extreme case. But right if we're inside
of we're inside of kind of a normal um
move for the day, we're usually on the
contrarian side. That's what we that's
what I think of when I say lean into a
trend. I agree with the wider targets
because if you're if you're moving more,
you want to wide the targets a little bit.
bit.
>> Um the trailing stops for us are mental.
They're not hard stops. They're not
they're not orders that are resting.
They're just mental stops. >> Sure.
>> Sure. >> Okay.
>> Okay.
>> And then yeah, for the 95th percentile
or the extreme market condition or
outlier breakouts, the use case would be
to widen your stops and avoid early exits.
exits.
>> Yeah. And that's where we that's where
we stop fading. So the difference for me
is when you get an extreme move like
today, I'm less likely to fade it
intraday. So for a scalp today, normally
if we were down, let's say 30 handles, I
would get long. If we're down 50
handles, I'd still get long. >> Okay.
>> Okay.
>> But if we're down 100 handles, I'd get
short. You know, that seems kind of
weird, but big moves outside of the
normal range have a very I feel like
they have a smaller chance of intraday
reversal. So, I feel like it's a better
play to be on the same side of the
market than to a reversal.
>> Yeah. Like another way to put it is
anything within the IQR, the
interquartile range. Yes.
>> Fade the scalp
>> or fade fade the reversal.
>> That That's what I would do.
>> Yeah. I don't know about you TV, but
that's my two cents.
Um, so next slide.
What do you got here?
>> All right. So, you have some
implications. I added like a bonus
graphic, a volatility radar. If you look
at the first three on the on the like
top from the beginning to the right or
the first subset of a of a graph, you
have the indices and you can see that
their range is very short. They're small
1.4, 1.8, and 2.2 respectively. Then you
go to the commodities you have some
inconsistencies but much greater range.
And then when you go to the
cryptocurrency the ETH and the BTC you
can see that those uh that 68 the
standard deviation of the daily range is
much greater. So what are some
implications from this? You can avoid
overtrading by anchoring trades to an
expected range. You can adjust sizing by
symbols. So do not treat the ES and the
BTC the same. And don't chase. Know when
you're in a typical day versus an
outlier day like today.
Well, I think one of the really good
takeaways of this is the don't chase
rule because what I've learned over the
years is if you miss it, you miss it.
Don't chase. >> Yeah.
>> Yeah.
>> Um and it's it's easier said than done
to know when you're in a when you're in
a typical day versus an outlier day
because you really don't know. I mean,
today they were they were kind enough
early on to give you an outlier day so
you didn't have to guess, but normally
it's much harder than that. But the
don't chase rule is really important.
>> So the the two things I' I' I'd say
about this, the nice thing about when
you're talking about adjusting size,
what you can do when you're doing this
at home is the size of the contract and
the buying power requirements sort of
even them out so you can see, okay, how
much does it cost? What's the capital
requirement to buy an ES versus buying
BTC, for example?
you factor in the capital requirements
and you factor in the volatility and
that starts to give you a solid number
of okay I'll buy you know
five worth of ES and only one worth of
Bitcoin for example whatever the capital
is so that's the sort of thing that the
the way I would do this is look at the
capital requirements and try to have
them balanced as far as don't chase one
of the things that I like to tell people
is money doesn't care. Your net lick,
your bank account doesn't really care
where what symbol it came from. If if
it's not if you if it's not working out
in ES or Bitcoin or whatever, don't
hesitate to look to another product. We
are product indifferent. Thomas looked
at seven symbols, awesome symbols, very
highly traded. But if they're not
working for you on a particular day,
either don't think about don't worry
about taking a day off or go look at
some other products.
So key takeaways, each future symbol has
its own personality. I completely agree
with that. ES titan tame BTC wild and
tame. Now just to be fair, nobody really
trades BTC futures. I I just want to be
really clear about this. they they
they're they're a massive contract. So,
um you know, BTC futures are let's see
right now they're they're they're
$500 and there's $600,000 a contract,
right? It's a lot, right? There's
$600,000 a contract in notional, but you
have to put up like over 40% of that.
So, you're talking about like $250,000
just to trade a Bitcoin future.
>> It's it's $232,000
to buy one of those futures versus
And and just so you know, only 7,000
have traded today. So we don't really
nobody scalps Bitcoin futures. You
wanted scalping products, you'd scalp
ES, you'd scalp ZN, you'd scalp NQ, you
could scalp CL, but those are the if
you're trading futures, MEES, MNQ, that
kind of stuff.
>> 23,000. Bitcoin futures are 10 times the
requirement of ES.
>> Yeah, that's the other problem. Yep. Um
percentiles help define risk adjust risk
adjusted trade expectations.
>> So you can't know if a 95th percentile
day is coming. That's accurate. But when
price is already there, you know the
odds of further extensions are low. I
agree. We're there today. We've already
seen that happen. Understanding the
intraday range uh understanding the
range of intraday moves can benefit
traders who are looking to scalp or fade
large moves. Like I said earlier, we're
we're we will fade half a standard
deviation, 3/4 of a standard deviation,
but once we get outside of a standard
deviation, and you're up till you're 95,
100%. We're done. We're not fading
anymore. We're not We can still trade
it, but we're not fading.
>> Yeah. And I just think that adding more
context for traders, especially new
traders, and adding more filtering when
you want to execute a trade, I think it
results in better trading and better
results. More filter. I think I think
this is a great presentation and what I
would suggest is go back to the you know
go back to Tasty Live website, go to
this market measure, load up the slides
and have those
box plots and that bar graph that Thomas
created. Just have that up and running.
If you're going to try and if if you
don't have the trading experience to
kind of intuitively understand NASDAQ
versus ES versus Russell versus Bitcoin,
have that data in front of you. It is
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