Use of Terms
To be successful in our Trading Chat rooms, please read Use of Terms. It is important to understand key aspects of our chat rooms and Head Trader's communication and style. This is what sets Leading Edge Trading apart from other sites.
Entry
It has been our experience that the more specific, brief and direct that we can make our postings, the more succinctly traders can understand and then use the information on a trade by trade basis. It is in your best interest therefore to not only become very familiar with the abbreviations we use, but also how they should be applied. All traders know that on whichever side a trade is initiated, that trade must be exited via the opposite side. For example, if entering the market on buy side, to exit the market one must initiate a sell for the same lot size as the initial entry in order to return to "flat" or no position. However, in an active trading environment this may become confusing if we post a buy as an entry and a sell as an exit. It would require further clarification then if we only wanted to sell some and hold some of this initial buy and even more clarification if we now mean to sell short. Therefore, our posts for a buy or a sell will be for the entry phase only and would denote the trade, the entry area/level and the direction. A buy would obviously be for entering the market on buy side for an expected move higher and a sell is for entering the market on sell side (short) for an expected move lower. The exit phase for any given trade would merely be denoted as the profit taking target (PTT). It is our view that this keeps it simpler and in essence less confusing while we can safely assume that competent traders can understand the taking profit phase will be doing the opposite of the entry in order to exit the initial trade (see Exits). Please note: we will NEVER post a buy above where the market is currently trading and will NEVER post a sale lower than where the market is trading at the time of such post. If this is confusing, you need to watch a while longer.
Normal vs Aggressive
We have traders of all experience levels and capabilities reading these posts and following our guidance. That does not mean that each and every post for each and every trade is necessarily appropriate for every trader, especially if a trader is new or trading a smaller account (also see Varying Size). Aggressive trades are just that, more aggressive than normal entries. Traders with more experience in handling higher risk trades or traders capable of starting the day trading larger size can attempt these aggressive entries with smaller size due to the aggressive nature of such an entry. Why do we post aggressive trades? Occasionally it is the only available entry, especially in a market that has or develops momentum from such a level or in a reversing market. Normal entries are always a safer place to enter the market. However, that does not mean that those entry targets will be hit if preceded by an aggressive entry, hence the need to post the aggressive entry. Simply put, sometimes the aggressive entry is the only entry that is filled for a subsequent market move. Naturally, any entry labeled as "very aggressive" should be traded with even smaller size but should not be attempted by newer traders under any circumstances. If a trade is missed, it is missed. Do not chase the market. There will be additional opportunities to follow with safer risk parameters than chasing the market or panicking in or out.
Back to TopExits
As to exits, conservative exits are for newer traders or traders trading smaller size and it is still a good idea for all traders to exit at least a portion of any size traded (preferably 2/3rds) at the conservative exit or 2 or 3 ticks in front of the first profit taking target given. Why? Because it is the sure thing. The remainder of any size traded maybe carried to any expected further target in that same direction with a break even stop (b/e) from the initial point of entry. Exit targets or levels are described as "take some profit" (TSP) for an interim target or "take profit" (TP) for a final target. If no conservative exit is given then the first TSP target should be used to pare out 2/3rds of any size traded with the balance held with a break even stop for any potential, subsequent target. Whenever a target (price level) is given either for entry or exit, it is not necessary to enter or exit more than two or three ticks away from such a level. For example, if there was a hypothetical posting for an 1110.00 BUY for an 1120.00 target, the highest price entered for such a buy should be 1110.75 and an exit should be planned at 1119.25 or 1119.50. Any price target may be achieved (hit exactly) or even traded through, but we do not attempt to "get the last tick" out of any trade. It is more important to be filled on both ends of the trade, especially when trading larger size. Due to the accuracy of our postings and in the interest of risk management, it is not necessary to "dog pile" or panic in or out of the market any further than .75 or .50 from any target posted. Conversely, waiting for a target to be achieved "to the tick" or working any entry or exit too deeply in order to "get that last tick" may often result in such an order not being filled. Far more will be made capturing nearly every swing available throughout the day when confidently trading larger size with manageable risk than can ever be achieved by attempting to "get that last tick" regardless of size traded and trading in the manner described herein will be the safest way to ramp up your size over a reasonable amount of time.
Back to TopNHT/NLT
If we post that a certain trade scenario is valid so long as "no higher than" or "no lower than" (NHT/NLT) then that means that particular price level referred to cannot be traded through. This means that the market cannot trade any higher than an NHT level or cannot trade any lower than an NLT price level. Otherwise the market has broken that previously posted scenario causing it to be invalidated. Alternatively, a level which "has to hold"(HTH) may otherwise be listed as a "b/o" (breakout to the upside) or a "b/d" (breakdown) with the same effect. There are reasons why it may be posted as an NHT/HTH or b/o which may be revealed in the future. But for now especially when new to the room, they should be treated the same. In other words, if the market trades at a price higher than what "has to hold" or higher than a b/o level, for beginner traders it means the same thing. This is not to say we are automatically buying the break out level, but it would change the previously posted resistance or range bound scenario and a new trade or pull back entry level and its target will be posted. Traders should not place stops to exit the current trade or to enter a new trade after any such break. Rather, we will seek to exit the trade entered prior to such a violation on our own at or better than the break price (for a buy, a "better" buy is lower or for a sale, a "better" sale is higher). Please note: the break is not the entry. It is the market clueing us in on the next trade scenario. Postings after any such violation will denote future trades or action which should be taken thereafter. Please do not ask! We will post it.
Back to TopStops
Once a trade has moved in our favor by 3 to 5 points minimum, placing a b/e stop is acceptable and even desirable. However, focusing on stops to a greater extent than that is counterproductive and may even be considered a losing strategy. Any stops placed closer than 2 points from entry (an entry level we have posted) will more than likely cause traders to be stopped out at a loss needlessly. If a trader feels it necessary to place a physical stop loss on a given trade prior to that trade moving at least 3 to 5 points in our favor, that stop should be no closer than 3 points from the point of entry and preferably no closer than 5 points. Once again, we must stress that traders who focus on stops are frequently stopped out of many trades needlessly. We look at the market from an if/then perspective which is to say that if a certain level holds, then the target for such a given scenario should be achieved. If the level which had to hold does not (is traded through), then that will typically invalidate the achievement of the target posted for that trade and HT will post whatever new scenario may now be relevant. Due to the nature of how we look at the market and the levels we post, any break should offer ample opportunity for any proactive trader to exit without chasing or panicking out with minimal loss, provided the entry price was near the break price or what was posted as "has to hold". Consequently, one of the biggest factors in minimizing losses is to first establish risk (distance from the break price) prior to even entering a trade and then by making a good entry. In no instance, however, should any trader take a loss greater than 1 – 2 points maximum.
Back to TopTiming
Please pay particular attention to the time of any/every post. Frequent reference is made to the timing for a given trade scenario and how much time may be required for a particular trade or level to either hold for a certain amount of time or be violated within or by a certain time in order to achieve the target for that particular trade. The time parameters for a specific scenario to be fulfilled may be referred to in an earlier post and may be listed as a certain number of minutes from that post. For example, a post at 9:36 AM may say to give it another 3 or 4 minutes. Consequently, that post is informing traders to wait until at least after 9:39 AM or 9:40 AM before taking any new action, due to the timing of the initial post.
Back to TopVarying Size
Events which occur throughout the world on a 24 hour basis create pressure within certain stocks to move in anticipation of expected value changes for those stocks due to such events. While some stocks (not all) may trade in pre and post market, they cannot trade anywhere near the volume necessary to equalize this pressure and allow the stock to trade at its newly valued price based on how such worldwide economic conditions may revalue the stock price. Since we trade an Index made up of these stocks and these stock prices must be revalued at the start of each trading day, the best time for trading the S&P market is the first hour to hour and a half of the regular NYSE and NASDAQ sessions. Big money is moving, adding to, adjusting or unwinding their positions in these underlying stocks and the index must reflect the value changes of these stocks. Consequently, the first 60 to 90 minutes of a regular trading session is the best time with the most momentum and money driving these changes. Therefore, we advocate trading the largest size traded throughout the day during this first hour to hour and a half time period. The next most advantageous time to trade would be the last hour to hour and a half of any trading day as positions put on earlier on in the day must likewise be adjusted, added to or unwound and there is similar pressure or need for these stock prices to move, thereby moving the S&P Index. During the middle of the day (from 11:00 AM to 1:30 PM), is on most days the time during which traders should either refrain from trading altogether or trade the smallest size of the day, depending on how much size they started with as well as how much "cushion" was achieved during the first hour or so (see Cushion). As a generic example, a trader starting the day trading 30 lots during first hour may only trade 10 lots last hour and only 2 to 5 lots during midday. Doing this will result in retaining more profit made during first hour while greatly reducing the chances of turning morning "green" into afternoon "red". Brand new traders should only trade first hour. Traders trading small accounts cannot trade the same lot size throughout the day. Non-adherence to paring down size in this manner (especially midday) is extremely risky and will most likely inhibit your trading growth to the next level. You have been warned! Likewise trading 10 lots one day, 30 lots the next day, and 5 lots the following day as a result of whatever profit or loss was realized from the previous session, denotes an extreme lack of discipline and will most likely cause a trader to lose or to be inconsistent. A good rule would be to start with the same size each day (unless we post that the market is "choppy" or "mixed") for two weeks for the first hour of each day of trading.
| Summarized Recommendation of Varying Size during Trading Day | |||
| Trading Times | Rating | Size | Example Lot Sizes |
| 9:30 AM – 11:00 AM | Best Time | Largest | 30 10 3 |
| 11:00 AM – 1:30 PM | Choppy/Small Volume | Smallest | 2-5 1-2 0 |
| 1:30 PM – 4:15 PM | Second Best Time | Second Largest | 10 3-5 1 |
Be consistent with the size you trade each day unless we post that the market is "choppy", "mixed" or is a small range day!!!
Back to TopCushion
We do not trade from our P&L on our execution platform. Focusing on your P&L is as bad as or worse than focusing on Stops. However, we must be aware of how our day is going after the first hour of regular session trading to limit further trading activity for the balance of the day in order to prevent turning more profit into afternoon loss. For example, if a trader trading 30 lots made $5,000 during first hour, his risk parameters would be entirely different for the remainder of the trading day than if that same trader on a different day, again starting with 30 lots but on this day made only $500 during the first hour. In the first example, he may risk $500 for the rest of the day and if he were to lose would still go home with $4,500. However, in the second example the market is either "choppy" or illogical or the trader is out of sync for the day. In that second scenario, what would be the harm in simply stopping for the day? It would be difficult or impossible to turn a thin first hour into a profitable day and much easier to turn it into a losing day. When things have not gone as well as they normally do during the first hour, it is wiser to stop and come back the next day starting over with a clean sheet of paper. Ego or the need to "get it back" will be any trader's downfall. If a trader cannot trade in this calm and confident manner, then that trader is either trading too much size for a given account size or comfort level or he/she lacks the discipline to trade for a living. This is not a casino or the lottery. We are making sound, logical business decisions and this structured format should be part of your decision making process beforehand…not after the fact.
Back to TopScalping
We are not "scalpers", we are not "trend traders" nor are we trading to achieve a fixed number of points on any given trade or on the day as an overall goal. We trade the market the way it is and not the way we would like to be. Our goal as proactive traders is to capture as much as we can of every swing which becomes available throughout the day on a trade by trade basis. It has been our experience that scalpers get creamed on a trending day or at the very least leave more points on the table than they capture on such a day. Similarly, trend traders get crushed on choppy or range bound days. The reason is because they stubbornly focus on one methodology or type of trade and do not understand or adapt to what the market is currently doing until well after the fact. This usually is a result of lack of education/market understanding or of using lagging indicators, having little confidence in their trades or giving the market too much room to hurt them before abandoning a trade. This is not at all what we do (refer to Entry and Exits) but occasionally there are trades posted in the room as "Scalps". For us, a scalp is a smaller trade of 3 to 5 points (not a few ticks) in the opposite direction of the main trend at the time and is for experienced traders only.
Back to TopToday's Number
Throughout the day we stress writing down all levels or targets posted in the room on a full size pad of paper (see Training Pad). These levels often become valid later in the day regardless of when they are posted. Hence the need to begin taking good notes from the start of each trading day (8:15 AM). Should you log in after the trading day has started, please scroll back and write down all of the levels/targets which have been posted or discussed prior to your arrival as these will be useful for the balance of the day. Each morning HT will post a price level referred to as "Today's Number" and everyone should write that number across the top of their pad of paper. It is not a "pivot" number per se, but for beginning traders or people new to the room, you may think of it that way and its' use becomes quite apparent within the first few days of being in the room.
Back to TopAbbreviations
agr aggressive
b buy / bot
bbo back by the open
b/e break even (stop)
b/d break down (out of a range to down side)
b/o break out (out of a range to up side)
bigs S&P full (pit traded) contact
bot bought
brb be right back
cause because
cons consolidate / consolidating
conserv conservative
EOD end of day
ES emini S&P
f flat (no position on)
gm good morning
gn good night
HOD high of the day
HTH has to hold (cannot be traded thru)
k ok
LOD low of the day
mkt market
mo momentum
MOC market on close (up or down)
n no (when used in response to a question)
n north of (when used in reference to a price level) meaning higher than that price
NAZ NASDAQ futures contract
NHT no higher than (that price)
NLT no lower than
np no problem
ob or better (that price or a better entry or exit)
pb pull back (little down move in up trend)
pjac probably just a coincidence
pos possible / possibly
prob probable / probably
Q question
rev reverse / reversing
res resistance
s sell / sold (short)
s south of (when used in reference to a price level) meaning lower than that price
sup support
tp take profit (exit your trade)
tsp take some (2/3rds or more) profit, hold some
trgt target (enter / exit within .50 on safe side)
ua up against (lean on that price)
v very
y yes (when used in response to a question)
YM Dow futures contract
Back to Top
