– Why doesn’t my tick chart look like your tick chart?
Tick charts are not static like time based charts, so no two tick charts will look exactly the same. This is not a problem though. As long as your patterns and total number of bars are very close or identical, then that is good enough. Yes, some signal bars may look better on my chart than your chart, but most likely, other set ups on your chart will have better signal bars than my chart, and in the end, it all works out in the wash. Learn more about tick charts and signal bars here.
– Why do you trade with tick charts, and can I trade this technique with time based charts?
We prefer to trade with tick charts because we think we can see many more details within the price action and price structure versus what we can see in a time based chart. Open up a five minute ES chart and a 2000 tick ES chart, and then compare the two. I think you will agree that you can see many more details on the tick chart than you can with the 5 minute time based chart.
If you don’t have tick charts, we believe that we will have a slight advantage over you, but the simple fact is that the price action strategies we teach will work on a time based chart, just like they do on a tick chart. If your charting service doesn’t offer tick charts, you might also consider volume charts, as they are very similar to tick charts and also preferable to time charts in our humble opinion.
– Does price action trading work in other markets besides the ES?
Price action works in any market and on any time frame. That includes futures, Forex, other indexes and even individual stocks. And yes, price action works in markets outside the USA as well. The only requirement that we suggest that you remain stringent with is the fact that your market of choice must have sufficient volume so that you do not encounter slippage. Thin or low volume markets are not a good choice when using any type of scalping technique, so keep this in mind. Outside of this volume requirement, you can trade any market and any time frame you choose, and price action will still remain valid. We like and prefer to trade the ES because of the volume and the predictability of it. You can easily trade up to 100 contracts in the ES during regular trading hours and it’s unlikely you will ever experience slippage. Not many markets can handle that type of volume without slippage and your trading actually affecting prices by moving the market with your own orders.
– What do you mean when you say you use a “scalp and run technique?”
Scalp and run is the name we give to our trade entry technique. While we are scalpers first and foremost, we also understand the importance of taking advantage of big moves when they happen. The problem with big moves is you never know when one is coming really, so we use an entry strategy that uses a combination of scalping and swing trading. As an example, we might enter a trade with 5 contracts, and we might scalp out of that trade at four ticks on 3 or 4 of our contracts, then move our stop to break even on 1 or 2 of the remaining contracts in the hopes that we might catch a bigger move. We call this our scalp and run strategy, and the beauty of this technique is that we have no more risk in our trades after only 5 ticks of movement in our favor. Of course, you can choose to be a pure scalper or a pure swing trader, using a combination of different ideas that are off shoots of our scalp and run strategy.
– Why do you scalp for four ticks? Why not scalp for two, five or some other number of ticks?
It actually takes a six tick move to enter on a stop order and then exit a scalp with 4 ticks, so that’s one important reason we choose to go for four ticks. If you study our work, you will find that it is uncanny how often a move will go just far enough to obtain a successful four tick scalp, but if a trader chooses to stay in the trade for even one more tick, it will often turn into a losing trade. Four ticks is a very common scalping target in the ES, so many other traders are seeing the same set ups, and the fact that they are exiting after six ticks (or with 4 ticks of profit) creates enough buying or selling orders at these location to create a self fulfilling strategy.
– Aren’t you concerned that if you share your techniques with too many people that they will no longer work?
We get this question quite often, but frankly, this is of absolutely NO concern at all. The markets are simply too large and too efficient for this to ever be a problem. In fact, if everyone started seeing things exactly like we do, it would only increase the number of traders doing what we do, thus making all of our trades winners. If you truly understand the markets though, you would understand the fallacy of the idea that we might reduce our trade results by sharing our trading strategies. The beauty of price action trading is that a chart actually speaks a language, much like any language, and if you can learn to understand that language, you can improve your trading results exponentially. Think about it like picking up a book that is written in braille. If you don’t know how to read braille, you will have a hard time understanding that book. However, if you are fluent in reading braille, then you will have very little problem at least reading the words on the pages. Reading a chart is very similar, in that you must learn the language of the charts. Once you can read the chart fluently, your trading results will change forever!
– What charting software do you use?
We use NinjaTrader software. We believe that NinjaTrader is quickly becoming the software of choice for serious day traders. This does not mean that other charting software is not a good or adequate choice, but we don’t have any experience with anything outside of NinjaTrader since that is what we have used for the last several years. If you need help or assistance with your charting software, unless your question is specific to something we teach, we are limited in what we can do for you. You will either need to check with your charting provider or broker, or if you have questions about NinjaTrader, you can go to the NT website. They have excellent support and some of the best training videos that will teach you almost anything you need to know about the use of the NT charting software. Follow this link to the NinjaTrader Support Training Videos.
– I have always read that your safety stop can not be larger than your profit target, or else money management will not work out and you will end up losing money as a trader. Why do you say differently?
There are a couple of reasons why we teach what we teach. First of all, we agree that if your win rate is less than about 65%, it is indeed true that you can not have bigger losers than you do winners. While a 65% win rate may seem impressive or even un-achievable, we can do much better than that when trading with our price action trading techniques. Most all of our day traders have a better than 80% win rate, with some being in the 90%+ win range.
Secondly and most importantly though, we do not actually teach that you should always take a full two point stop. Our two point stop rule is the maximum stop we can use in order to enter a trade, but that doesn’t mean we are saying that you always take a full two point stop. The idea is to keep your stop one or two ticks above or below the signal bar that sets up our trades. Hopefully you can get into most trades with less than a two point stop, so the two point stop rule is simply a maximum stop size we are willing to risk on any single trade we enter.
– How do you set up your Automated Strategies that you are using when I see your live trade examples on YouTube?
We have created an article and a video to go along with it that explains this process. You can find the information on our automated strategies here.
– How long does it take to learn how to trade with price action?
This is a difficult if not impossible question to answer, as everyone learns and processes information at a different level. I can tell you that learning to day trade profitably is not easy, or else everyone would be doing it. It takes a lot of hard work, continued study and as much screen time as you can get simply watching prices move up and down on a chart. What we recommend is that you practice on a simulator trying to put our price action strategies and rules into practice each day. Where you really learn is by studying your trades and chart at the end of each day after trading on the simulator.
You can not take a quick course or read a few books and truly expect to make money in this business. If anyone tells you it is possible to make a living trading by reading a book or taking their short course that lasts a few weeks, then you should move on to another trading idea quickly, because it is simply not possible! It takes a lot of hard work and study, along with a lot of experience before profits will begin to come consistently each day. Most importantly, you must be studying the right materials and the right strategies, because a thousand screen hours learning the wrong things will not make you profitable.