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How I Day Trade and Micro Scalp the NASDAQ Futures; with Recommendations
Damn thought I was the only one doing this batshit crazy strat but you really seem to have alot more time doing it and I just got a bare 1min chart. Your right about alot though especially needing capital. I tried to start with $3,000 using mnq only. Got to $6,000 then went to NQ. Got to $11,000 then got liquidated in one trade during one of powells speeches. Of course trade went in my favor right after. I only entered my initial entry once there was already a large sell off or run, was part of the edge, and slowly avg in. I just think if I was with a prop firm id prolly still be doing it, but I switched to just jumping on the trend with a smaller timeframe nowa days. The avg in buisness is stressfull since your holding loosing positions for minutes.
Can you help answer these questions from other members on NexusFi?
I found your method very interesting, and as a C# programmer myself (self-taught but could do a lot of damage ), I understand the system you're trying to convey in this thread. It's a very good approach in terms of utilizing the power of accuracy and computing power to achieve a system like that.
I have questions regarding how you handle a market direction change while you're in the middle of your mega-trade position. You mentioned before that you would drop about 50% of the position and re-enter later on when the trend eases off. This means that on a downward-trending day, when you're in a long position (referring to the mega-position), after reducing it by 50% and throughout the rest of the day, you would need to maintain the long position and counteract the trend by scalping micro-longs (only longs, given that the mega-position is long), correct? And of course, with 9-12 ticks, MNQ would surpass that target, and hopefully at the bottom of the trend, you could secure some profit and "land on your feet."
From my standpoint, I see that if the C# bot operator could grasp the bigger market picture and initiate the mega position in line with the market's direction, it would be a much easier game. However, days with two significant V-shapes could occur. How do you manage to transition your mega-position from long to short in a day like that?
Regarding the Trigger System, is it the signal for adding new positions, or do you simply adhere to a constant number of ticks from your initial entry?
If that indeed triggers the addition, I noticed you use Trade Flow Inventory Analysis and MACD. Could you delve a bit more into the entry signal for adding more micro-positions?
Thanks a lot.
PS: By the way, I also go by the "hyper" nickname.
hyperpro, you're asking some good questions here. Answering them in a
forum is not really possible, but let me outline the most important aspects
of the Analytics and the Execution of these Meta/Mega trades which involve
multiple defensive staggered positions, with profit taking; using a LIFO
accounting methodology for partial profit taking within the Meta-Trade...
Firstly, without knowing the Trend, no matter how "fancy" your Cost Basis
averaging and Partial Profit Taking is..... you will have difficulties. If you
are able to sustain a wide range of Price Adversity, even without knowledge
of the underlying Trend; it is often the case that such a "mechanical"
approach can result in WINs most of the time, or at least the ability to
gracefully Break Even despite having made absolutely the Wrong decision
at the outset. So this method of Execution of individual Positions within
a Meta-Trade position has a lot of merit.
However, you really need to know the Micro Trend or Mediium Term trend;
and you can't do this by watching Price alone. Our approach is to use the
Market Depth to determine Trend. To do this, firstly you must have a very
high quality and a very wide non-aggregated Market Depth feed, such as
can be provided by Rithmic, either paper trading or live. Providers such as
LeeLoo or Apex are able to deliver such Market Data via Rithmic, as people
may be aware...
Such a high quality data feed contains
information which can yield the short term micro trend, and perhaps even
the medium term trend. This is Day Trading, and this is Scalping; so when
I refer to a Micro Trend, it could be a minute or so; and a medium term trend
could be 3-5 minutes or so in duration.
In order to accomplish this, though, you must be in a position to process
hundreds to thousands of Market Depth updates per second; and in such
a way that you can determine where Market Maker is placing Size on Price
levels near the market and extending further out... This is the "secret sauce"
which requires high performance, ideally colocation of your system running
on a computer in Chicago if you are a U.S. futures trader. (I do only the Nasdaq futures) The algorithms optimum for doing this are very very difficult
to fine tune...
Back to the mechanical aspects of entering multiple Micro positions; you should
be entering positions ONLY when you have a positive Micro Trend signal; and
also in the context, if possible, of the short term trend. If each of your Entry
decisions is consistent with the current Micro Trend; then the aggregate of
your Meta Trade will benefit. You cannot simply throw Defensive entries
against a Trend which shows no signs of moving in your direction; hence the
need for Active Trend Detection...
Things explode in complexity from this point on; just how active trend
following can be done at the Micro Trend level. And, although the same
principles do occur across futures symbols; you really need to focus upon
one single instrument which, in my case is the NQ/MNQ pair.
Although Trade Flow Inventory Analysis can be done; and it yields interesting
"situational information"; it is not accurate enough in predicting Trend
changes with the precision you will need. That must come from Market Maker
activity on the Market Depth (aka "The Book") which you'll need to analyze
for clues as to future Micro Trend direction.
But success in trading, scalping, investment in general depends upon being
able to accurately predict the future Price, regardless of how well you think
you can compensate for errors through "fancy" Trade Management..... If you
can't predict the future of Price, then you risk adding to losing positions and
struggling very often just trying to manage the price adversity damage...
Calls for in person consultancy, which I've decided not to do, except in
rare cases... What I've written probably creates more questions than it
provides answers...
Oh whoa, thanks for your fast response with ton of great information.
Yeah I'm aware of Rithmic with their high quality non-aggregated order book. I use Sierra Chart and thinking of creating a C# bot to run in parallel with a Sierra Chart instance at the colo, another C# app at my desk to remote control the C# bot on the host. In your case, you use Remote Desktop, that works too. The worst case if Sierra Chart cannot afford the speed required for the task, I would go directly with R | Protocol API. Chicago Aurora DC is the place for futures. I read that you use a physical server at the colo for the task. That should be efficient right?
I created an WPF app with SciChart for crypto and also dealt with order book in full depth, so I understand the pain of it. It's a lot of computational power just for this.
You pointed out very clear answer to my question that is Market Depth and Trade Flow Inventory Analysis. That's great info. Also thank you for the micro trend and medium trend term. It really helps. I will definitely logging and dig deeply into the order book.
I read and took a lot of notes from your writing. It's all good info.
I would not switch from MNQ to NQ myself with capital of $11,000. I would increase the micro position of MNQ or may reduce the distance we to add/avg in. With $11,000 and doing MNQ we could stand for the move of 100-150 points (depend on how aggressive we want to avg) with soft landing.
I would not switch from MNQ to NQ myself with capital of $11,000. I would increase the micro position of MNQ or may reduce the distance we to add/avg in. With $11,000 and doing MNQ we could stand for the move of 100-150 points (depend on how aggressive we want to avg) with soft landing.
And I would like to loop hyperscalper’s idea here is the LIFO really helps to reduce the impact by mistakenly going agaisnt the trend
I'm happy to discuss various methods of "digging deeply" into the Market
Depth. Of course everything you do will want to be as efficient as possible,
since peak update rates for MNQ will be roughly 30% higher than those for
NQ and rates are 1000 updates PER SECOND are not uncommon, especially
in "bursts".
My coding is currently hosted within NinjaTrader using its OnMarketDepth
and OnMarketData callbacks. Essential that you "capture" critical data on
each callback, and Queue it; so another fairly high priority thread can push
it into your Analytics; and also in rare cases, discard a chunk of older data,
in case of rate limited overflow. I handle both NQ and MNQ simultaneously,
and don't experience overflow conditions. My data if from paper trading,
arrives typically 20-25 milliseconds after its timestamped creation date,
and then my queued data is processed <5 milliseconds or so after arrival
in the queue.
But how should DOM data be captured, and how might it be processed?
I say that Price Specific Analyzers should be in a Hashtable or Dictionary,
at EVERY possible Price which is anywhere near the active market. And
these individual processors which are price-specific, should capture the
Size data in a "pipeline" so that perhaps a few seconds of data is always
available for analysis. When you are ready to evaluate the DOM Size
relationships, then you'll decide where the BID price is, and the ASK price
and then fetch analyzers corresponding to those prices.
You'll want to be able to query the Analyzer for things like: "What's the minimum non-zero size captured in the last 250 milliseconds?" or "What's
the average of the largest 2 sizes in the past 150 msecs?" and such
queries. Implementing the capture buffers within the Analyzers as
"circular buffers" is an efficient capture mechanism, etc.....
Naturally you'll want your system clock to be run against a quality
atomic clock time source, such as Meinberg's software. You'll timestamp
all of your data so you can calculate time intervals, etc.... needless to say.
So, when you're ready to evaluate a "DOM Bias" you might find out the
Sum of the Maximum Sizes of each Analyzer within a BID-side range of
6 Price Relative Tiers, and the same Tier range on the ASK side. If you find that
MORE size is "pushing against the market" on the BID side, then you have
an indication that the market is likely preparing to move UP in Price; and
if you see it on the ASK side, then the market is likely preparing a DOWN
Price Micro Trend. So you're using Price-specific Capture; but Market
Price Relative evaluation in developing some Bid versus Ask side Bias.
You need a hypothesis behind these decisions. In this case, consider that
if Market Maker is going to push the Price UP then SHE will "push" more
Size on the BID side against the Market inside price; since the following
will be true. ANY Retail Player who wants to SELL, SHE wants to BUY
since SHE will be pushing the Price of anything She Buys, UP in Price,
and so will have no "micro Price Adversity" on the UP move in Price....
Think about that one for a while, but it's one thing you'd like to be able
reliably to measure; and having some hypothesis as to WHY you're
measuring such a Bias is a good way to keep yourself SANE during the
process of refining your algorithms for DOM-based Price Micro Trend
Prediction.
Noise reduction and simple smoothing are necessities; but don't
smooth "too much"... LOL
So, 'nuff said for now; but that's the kind of thing you'll want to be able
to do..... It's worth of lengthy discussion but all I can do is sketch out
some high level concepts and give y'all some ideas.
What you described look like detecting the pattern of absorption volume. Let's me just rephrase it with my understanding: if the MM wants the price to go up, she will stack more limit buy on the BID side to absorb all retail trader's selling. After the retail trader's selling completed, MM will push the price up. The other direction applied for ASK if the MM wants the price to go down. Am I correct?
How do you deal with iceberg order because even on the MBO DOM, one could catch with eyes some big orders or repeatedly same size but bursting continuously at the same price - that's for sure someone on the MM side is pushing against the retail trend. So do you track those and mark it as something special?
Another side of the book is the traded bid and ask volume, I'm thinking of tracking those matching of the big limit order/iceberg with those traded volume (identified as buy or sell side from retail traders) would also benefit the system.
And yeah, I got the idea of circular buffer system. This is the best for long run problem and high speed processing of data. Just love it.
Good comments. None of this is simple. However, what I do is to assume
that MM's behavior is "stealth" in nature, and that She does not place obvious
"big lots" and hold them in the same way that a large retail player might do.
So, one should consider that IF large "sticky" limit sizes are "holding" at the
inside, that it is NOT Market Maker. Rather, it is a Retail player, placing
large limits and holding them in an obvious way.
It is not altogether simple to say that in all cases a transaction at the BID
price is a Retail Seller who is selling to Market Maker, which would be the
naive interpretation. Market Maker has very much more sophisticated ways
of "distributing" quote volume near the market in more of a "statistical"
manner, so that MM's "true quote volume" will be a distribution of sizes
which come nearer to, or further from the Inside market; depending upon
MM's desire to "transact" with the Retail population...
So you can see that we may make some simplifying assumptions, but that
there may be cases which would "appear to be" Market Maker, which are,
in fact, just larger Retail players placing "block" or even "iceberg related"
sizes...
But what I assume, and would recommend you assume; is the opposite of
what most Traders assume. When traders say "Buyers are in control" so a
market is rising, they generally mean that Retail players are moving the
market up in a "supply and demand" sort of way.... My view is that this is
the Wrong Way to interpret the motivating forces behind Price movements.
Just assume that Market Maker moves Prices "at will" and that Retail players
are largely Followers of Price movement, rather than the motivating force
for Price movement. Market Maker moves prices; and the movement of
price "tempts" or "induces" Retail participation, primarily "chasing what
seems like the Price trend".
You can come up with lots of reasons to shoot holes in such a simplifying
assumption; but my experience is that Market Maker activity can be teased
out of a very complex situation in which "iceberg orders" or persistent
large block limit orders by Retail players, can be distinguished from Market
Maker's Accumulation and Distribution of size or volume in ongoing trading.
In fact, when I find large "sticky" limits at the inside market, which are
being "consumed" by Retail transactions; I attribute the volume to Retail,
rather than to Market Maker accumulation or distribution of contracts when
looking at Inventory Analysis.
As you know, Trading is "messy" and so one should not expect to find hard
and fast rules which are always the case; exceptions such as the whole
"iceberg" concept and large persistent blocks do need to be considered.
In my case, when I see Large blocks, say, at the BID, which are being
consumed.... I interpret that as Retail Buying near the BID. And when
such behavior is finished, then I expect Price to DROP against that Retail
Buyer, moved down deliberately by Market Maker, in order to get that
Retail Buyer (at the BID) to consider Stopping Out...
MM has the power, and to the extent that Her actions can be discovered;
you have strong predictive power. However, as I've said elsewhere; even
if you have an estimate of Market Maker's Accumulation and Distribution
situation, and even that She is "losing Money" on a timeframe, which
I call RISK, you cannot then assume Price trend will turn. Inventory
Analysis is what I call a 'situational awareness" tool; but precision in
the turning of a Micro Trend is to be determined by changing patterns
of placement on the Book, or Depth of Market; by Market Maker's
Much more Sophisticated patterns of quote placement.
And Market Maker always has "Best Price". This is because She is
already on the Price level with a quote; in general before any Retail
players will be there. So if you think you get Best Price by using a Limit
order at the BID to Buy, you would be wrong. Market Maker is always
slightly ahead of you; having already placed size at that Price when
that Price was distant from the market, in anticipation of when the
Inside Market would be moved to the Price level.
Think about that for a moment, and you'll see potentially how sophisticated
Market Maker algorithms are..... She is nearly always already present
on the execution queue for Matching at a given Price because She got
there Early, and held size there..... So She gets "first shot" at Best
Price execution; having held that Price's quote for some time, probably;
in Anticipation that the Price (initially distant) would later be at the
Inside Market (because MM moved the Market to Her price target)...
Food for thought anyway, I hope !!
I don't mind if you wish to poke holes in my assumptions; since I
don't claim to be right all the time, and I work only with the NQ/MNQ
futures symbol pairing. Even between those 2 symbols, the Analytics
are a bit different as well, just to complicate things further... LOL
), I understand the system you're trying to convey in this thread. It's a very good approach in terms of utilizing the power of accuracy and computing power to achieve a system like that.
