Scalping / Loss Mitigation

Since the broker liquidity and spreads have returned to a bit more normal lately
I've noticed something also returning to normal and that is the tendency for price(s) to react
at popular levels in a manner more like I've grown accustomed to observing before things got whacked out
like they did the last few weeks/months (like they've done so many times before).

To describe this, let me give a typical setup example:

You see price turning down, you want to sell the break, not pick the top.
You enter your order to follow the momentum, say the break of the big figure.
Naturally, who are you selling to ? Brokers, bucketeers and banks who have no intention of
buying something that's going to drop 10, 15, 20 pips. They're taking the other side
in order to realize 20 pips profit, not give the market 20 pips. No thinking needed here.
They want YOU to give THEM the 20 pips, not the other way around.

So, the price briefly breaks the figure, sellers get their orders filled and B,B&B run the price upto
the figure plus 20 or 27 or 25 or whatever. A scalper's stop has already been hit.
Retail is getting nervous by this time and starts buying back what they sold at the figure.
Of course, they're buying back from the folks they sold to in the first place so our B,B&B got their pips,
they may even be short now, and you take away nothing but your stoplosses,
as the market proceeds down to break the figure and onward to your original limit, which is moot now.

Okay, so I've painted the picture of what might happen on a typical day.
The screwy part was/is that when things got whacked out for a while, there was no telling
what was going to happen on given setups. So any attempt at loss mitigation while scalping
entailed more risk than usual because you didn't know what these guys were gonna pull.

Remember, I'm not talking about typical trades here (unless you typically scalp).
Not the kind where you pick your entry, set a reasonable stop beyond S/R and a limit
commensurate with the RR and sit back and watch the trade for a while as it develops.
I refer strictly to those hit and runs where you grab those few pips and close.

Alright so, the point is, things are revolving back to past behavour to a certain degree and
now when you sell the break to follow the momentum, risk your stop and get stopped out,
a stop and reverse strategy (piggyback on the anti-momentum) to mitigate some of those red pips
has been less of a whip-and-chop that it was getting to be. My observation only.

So, I'm selling a number, placing the stop, letting it get hit, reversing the trade to go along
with the market, wherever it's leading, paying spread, commission or whatever..again.
and taking back atleast some of those pips, sometimes more than B/E if I can ride a spike.
and then re-assessing the next setup, looking for a re-break of the big figure and
likely riding it back down with a stop equal to the original risk. When all is said and done,
there's usually some pips left over for all the trouble and nearly 3 times the work.

If you can picture all of this, and relate to any of it first hand, I think I've told you something.
If not, it's okay, no problem, because in that case, this is not for you and likely will not work if attempted.
Always use what works for you, never what someone else tells you works for them, unless you test it
and see whether or not it will match you and your trading so it can potentially work for you too.

Hi Toshi,

You made a few posts on fugly's thread which rang a few bells with me. Since then i've been stalking you . Great posts, though they seem cryptic to me at times. Guess your planting seeds so thanks for that!

I kinda get what your saying and loss mitigation is something i try to do myself. first trade win and out for the day. First trade loss second trade break even third trade go fishing... it goes on. Sometimes you can be at the screen for minutes sometime hours.

I'm not a hundred percent with you and i wish you could enlighten me more.
Any chance of a chart for a dumb ass?

I think one problem i have is my stop is not a place where i feel i can reverse my trade. Why? i guess i always like to get in on a retrace, even just to save my spread. Sometime of course you miss the move and a chance to profit. Do you think this thinking is a problem and i should have the balls to stop and reverse. Is there a grey price area of decision? Any comments welcomed.

Are you saying there are points in price, where price manipulation can be predicted and thus be profited from or are you saying that at theses price points follow the price and because of the extra broker injected volitity you will come out ok?

Does this price manipulation show on all of the brokers customers charts?

Is it possible to to run another price feed to identify manipulation and is there a way to profit from this. I'm thinking the manipulated feed may lead the real price. Then real price would turn to catch up. in this case they would be caught with their pants down. Would they pull the stunt again?

How long can these price manipluations last?

Should you trade your brokers price or trade what the broker is going to do to the people who trade their price?

I may even be doing what you descibe already but don't even know it....

So much i want to understand and i'm rambling..... tell me more, more, more!

Keep up the good work.

Well, that explains a couple things atleast.

I can't pee when someone's watching and the other day I just couldn't go.
Now I know why.

Also, I kept hearing this insescent giggling every time I let a fart rip.
I thought it was just neighborhood kids or something. It all makes sense now.
It was you laughing at my farts. My wife thought I was crazy.

Wow, you posed a bunch of good questions there. I'd be glad to try and answer some of this
with the express understanding that I don't hold myself out to be an expert of any kind.
If something works for me, it likely has no bearing on how well same such would work for another.
I wouldn't gain anything, nor would I feel very good about someone taking me too seriously or
misunderstanding something and potentially suffering some loss on account of it.
So if that's okay with you, here are some of my observations:

If you have a stop in an obvious place, why shouldn't it get taken out ?
It's not about having balls to trade or not to. More often, it's about having the self-control
not to click that mouse when you shouldn't. That saves more pips than the other condition loses.
Are there grey areas ? Well I have more confidence in the big round numbers and 50's & 60's
than I do say 20's/30s or 70's/80's, unless the number is significant in some other way (fib, pivot or something).

You ask about price manipulation. I'm not sure I know how to approach this subject
because what some call "manipulation" others view as the market, in it's overall existence,
just moving and breathing and doing what it always does: going up and down.

Some of the particular price action I was describing before is fairly common and so I wouldn't label it
as price manipulation, just brokers filling orders, because the market goes where the orders are.

Price manipulation on an isolated platform is another story as well and if you'll read
some of the fine print in the agreement signed when the account was opened,
you'll come to realise you agreed to such a fleecing long before you ever got started.

So unless it's blatent theft on the high seas type of manipulation, I'm reluctant to label
these price movements as manipulative. It's simply brokers getting orders filled.
Even if (especially if) it takes money out of your pocket.

For those trading retail, being aware of what a particular broker does or doesn't do
is rather important so as not to get caught or stuck like a mouse in a trap.

Erroneous price spikes are a favorite. Platform going offline is another.
20,30, even 50 pips spreads are yet another. I don't mean for real news releases.
The national enquire's leading index or something bogus. Whoa ! 30 pips spread on euro.

I know and I hope you know that every significant price point where decent volume trades
has it's own personality at the time it trades and the conditions prevailing at that time.
There's no one size fits all. If there was, someone would have figured it out by now.

Somedays, I'll watch the screen 3 or 4 hours before I'll snap at something, just to be sure that
the price action is friendly to the type of trade I'm attempting to execute.
Other times, it's as plain as the nose your face what the setup is and where the next candle
is most likely to gravitate towards (like the daily pivot is a good example).
So you jump in and set a stop, be patient and let it go there to that price.
The stop is so you wont lose 100 pips. The patience is so you can make some pips.

Although often very similar, no 2 trades are identical. Just like seashells.

I didn't mean to answer in general terms where specifics would have nailed something down to a point,
but I think that's exactly what I was trying to convey. You'll have to be flexible.

If you need to be rigid and mechanical about something, be so with money management, not the market.
We can control our money management, we can not control the market.

To retouch on the scalping/ loss mitigation aspect of what I previously mentioned:
If i'm selling into a red candle and it turns green, I probably don't want to be short anymore.
If this is a countertrend trade, then there's no probably about it. I get out.
Something like this is a likely candidate for a stop and reverse as well, since the trend may be reasserting itself.

I trust the 100's and 50's/60's more so than some of the other price points.
Sometimes some other number has more attention and it gets preferrence over some of the others.
After that number is overcome, with either enough buying or selling pressure, it may still hold significance
but not as much as it did before it was violated. Before it was a target. Once broken, it becomes a reference point.

I dunno, does any of this help you ? I hope so. Because it makes sense to me, I think it matters.
If it doesn't make sense to someone else, it may not matter quite the same. Such is trading and even life as well.

okay,

I didn't have a chart handy to show you so, I just created one - made one up.

Here's a fictional currency, the Scandanavian Ugatz on a 1 hour.

We'll take an often sought-out setup, a 3-bar reversal, at a big round number: "100"

In this first scene, we have some potential pips as price turns down.

Grab 'em & go.

Now, if a few minutes later, I see something like this:

I'm not happy being short anymore.

In a case like this, I'm looking to stop and reverse because:

1) I'm not willing to be short anymore so, therefore the stop.

2) price action is continuing up and past the figure maybe for another few pips
maybe more than a few. The next candle could very well be the reversal candle.
Maybe 2 or 3 candles more, I don't know. I just know that the second pic is not what I was
looking for when I entered the setup and so the reason to be in the trade has changed.
So I've abandoned the short, most likely got long at the same time, tried to take back a few pips,
attempting to mitigate the loss and then get ready for the next setup.

If it's a spike with some gap action on the ultra short-term chart (<1min),
I'll probably ride it back the other way for a few more pips and come out positive.


In any event, whether it's a stop and reverse, or just stop loss and let it go,
the important part is that the reason to be in the trade has changed.
The first few minutes of the trade provided 5 or 6 or, I dunno, 8 maybe or 10 pips.
If you let that slip away, oh well. A scratch is a scratch.

If greed kicked in and now the candle is green against the short, now it's not about
the few pips you let get away, or the scratch, or losing a spread and commission.
Now you've got negative pips and are likely on the wrong side. Get out.

Stop and reverse or just stop and get out. Just don't argue with the market.
The reverse trade might be a loser too, so the same rules of engagement apply.
After a second failed attempt at a candle, I usually will not try to challenge it again.
Just wait for the next one.

toshi

nice thread, wondering if you were going to post any charts - maybe a couple where you would have reversed and a couple where you would not have?

thanks

Wasn't planning to unless someone inquired with further interest.

The "scandanavian ugatz / 1 hour" fictional currency chart was for purpose of illustration.
The principle would apply to any "real" currency presently trading (are any of them real ?)

Your feedback is more than welcome and just so as not to mislead someone down the wrong path,
it bears repeating that the method discussed carries a style of risk distinctly different than
simple entry and exit with a stop and limit. Which pairs do you follow ? I'll try to find a chart.

I'm following USD/JPY, the 15 min. and hourly.



"You see price turning down, you want to sell the break, not pick the top.
You enter your order to follow the momentum, say the break of the big figure.
Naturally, who are you selling to ? Brokers, bucketeers and banks who have no intention of
buying something that's going to drop 10, 15, 20 pips. They're taking the other side
in order to realize 20 pips profit, not give the market 20 pips. No thinking needed here.
They want YOU to give THEM the 20 pips, not the other way around.

So, the price briefly breaks the figure, sellers get their orders filled and B,B&B run the price upto
the figure plus 20 or 27 or 25 or whatever. A scalper's stop has already been hit.
Retail is getting nervous by this time and starts buying back what they sold at the figure.
Of course, they're buying back from the folks they sold to in the first place so our B,B&B got their pips,
they may even be short now, and you take away nothing but your stoplosses,
as the market proceeds down to break the figure and onward to your original limit, which is moot now."

I'm trying to trade with momentum, in and out relatively quickly. This part of your post was very interesting...

Any charts you can post to illustrate would be appreciated

all the best!

my first account got blown due to this,selling at support,buying at resistance,so i observed this that at certain times support breaks and is reverted up (some say i got caught in an hanging man ie candle formation)and never comes back to that position again this is very common during the eur section some say that area got rejected before it follows a clear direction during the london section,often times some traders draw line on hourly support and resistance to see the kind of reaction there if possible scalp there,when there is a reaction there they try to find out in news why the support or resistance did not give up,well all these are all my observation so far i dont know the successrate of this but i can tell u it blew my account so inversly a good thing,well i am not saying that sell at support or buyingg at resistance is not some times profitable,i trade eur/usd i can really understand this well enough please show some light on this trading method

I miss toshi. He was like the perverted father I never had.

I miss him to buddy, we had some good put & call going but then he just left.. out of the blue...

Bankruptcy can be harsh...

Trading an unfinished candles near a major level is a no no.

You've got to let that candle complete and close out before making a trade decision.

One an Hourly or 4hour chart, bulls and bears fight often but you'll never see it until you visit the 1 minute/5 minutes charts. Longer time frames, that up/down movement should not be traded.

Which is why, we wait for the candle to close near the level and then make a decision. A closed candle will tell you all you need to know about the future price movement.

A Doji near a high pricing major level should indicate that the bulls have ran out of steam and that the market (bear/bull fight) is neutral. If you follow that dojo, 8 times out of 10 you'll see price reverse off that level. Theres a high probability of a reversal if a completed reversal candle presents itself near a major level.

You have to let the candles complete, and close then form a forecast analysis.