E-Mini Trading: Why Is Scalp Trading So Effective When Other Systems Fail?

From the onset let me disclose that I am a dyed in the wool e-mini scalper. Further, I never trade the ES because there so many other contracts that have more predictable and better price movement than the ES. And finally, that I am not trying wring every tick out of every move; I am happy with 50% of a market move, just so the trade is a high probability trade.

When I was a professional trader dedicated to swing trading, I viewed scalpers with scorn. After retiring from institutional trading, I happily joined the legions of scalpers and enjoy scalping immensely. After watching institutional charts for 20+ years, adjusting to scalping was fairly easy.

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True scalpers are consumed with what is transpiring in the market now. As an e-mini scalper I am not particularly interested in the trend line on a daily chart; but I am a devotee of hourly charts and trade with Renko Bars @ 4 ticks and sometimes switch to range bars if the price action is particularly choppy. In short, my investment horizon is much shorter than swing traders, hedge trading, or the buy-and-hold cabal. My average trade is less than fifteen minutes long and nets about 14 ticks/contract. (with losers included in the figures)

I like to trade with trends, but my trend would qualify as a market move (rather than a trend) in most traders’ eyes. As a scalper, my money is in cash every night as I don’t hold trades overnight. My trading day can begin anywhere from 3 am EST to 6 AM EST and ends at 11:30 AM each day. I prefer to trade the pre-session as many significant moves often arise and are relatively easy to trade.

If you have the desire to be a scalper, you would be well advised to brush up on your technical trading. The e-mini markets have a very strong bias toward technical trading. Support/Resistance levels are dynamic and transitory, with the market probing for breakout or breakdown moves. All moves are potential money makers, but some carry a much higher probability than others; your job, as a scalper, is to identify those short term momentum spurts and trade them.

How do you identify potential short term moves in e-mini trading?

First and foremost, you won’t be a great scalper if you rely upon lagging indicators, a category in which most popular indicators fall. I am interested in order flow, volume ladders, and volume; the way the real scalpers trade. I realize that there are legions of traders who swear by lagging indicators, and in a protracted move in one direction they can be effective. That being said, the market is often range bound (far more than trending markets) and lagging indicators absolutely lose money.

On the other hand, the tape doesn’t lie and having the order flow on your screen can give you insights into the market you had not realized. Additionally, volume is far more important in e-mini trading than given credit. I employ volume in various phases of the trading process, which I seldom see others emulate.

Scalping requires a different mentality than other forms of trading. I want to get into the trade at the correct moment and I want to earn as much as I can in a very short period of time. I am not so much picking trades but riding short bursts of momentum. I am interested only in the short term trend, just so it doesn’t run headlong into known support/resistance or is against a strong trend.

In summary, I have pointed out that the ES contract is not the only, or even the best, contract for e-mini trading. I have tried to stress that scalpers have a different mindset than longer investment type traders, we utilize a good deal of technical trading. Finally, I urge you to utilize some real time (or as close to real-time as you can afford) indicators to make better trading decisions.

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