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Engagement tactics for fast / low liquidity markets
May 21, 2014
10:31 pm

Hi there,

I mainly like to day trade the first 45-60m of the day on the Hang Seng Futures. Lately I have had good biases to lean on but the market has been swift and lacking structure to enter. Even on very short time frame charts like a 15sec chart there has become a lack of obvious structure. I'm trying to engage with at least some confirmation so my risk can be defined. Here are some points about the recent behaviour:

- Minimal structure on low sub-minute timeframes
- No structure on 5m
- Large slippage risk if trying to enter with momentum
- Can look chaotic on small time frames sometimes

Attached are a few charts to illustrate my difficulty. I wonder how other folks adjust for this type of condition.

With kind regards,

May 21, 2014
10:58 pm

The attachments never seemed to attach. It seems 53kb exceeds the allowable attachment size. Uploaded to imgur, don't know how long they will stay there for….


May 25, 2014
10:03 pm

File size problem should now be resolved.

May 25, 2014
11:14 pm

Thanks – uploaded the images and they should be proper size now.


May 28, 2014
10:42 pm

So if one chooses to engage these thin and fast markets with some sort of confirmation here are some pros and cons I can think of when using this tactic for engagement.


    Clear risk
    Can be defined quite objectively
    Can be researched and studied on historical data


    Will quite likely get slippage if entering on a stop when its a momentum entry (ie. 123)
    Will possibly not get filled if entering with a stop limit when its a momentum entry (ie. 123)
    More size = more slippage
    As shown in the screens above, it is fairly common to not get clean confirming structures. That means it will be fairly frequent where one has the right idea but can't get on.
Jun 1, 2014
9:23 pm

What about the alternative of engaging thin and fast markets without confirmation. I think of this approach as entering against recent market movement. Here are some pros and cons with using this as an engagement tactic.


    Can possibly use limit orders to eliminate slippage at entry.
    Can possibly use quite large size due to entering against the immediate order flow.


    Risk may be more fuzzy due to lack of structure and possibly no current day structure to use.
    The absolute risk in ticks is likely to be higher and thus lowering your R:R

I have tried both of the techniques above quite a lot on the mini Hang Seng futures over the years and my general preference has been to use the tactic above due to its future scalability. The exact approach being used to decide when to enter may significantly adjust the risk profile and will certainly impact the overall effectiveness of this tactic. The exact entry reason/criteria is the main difficulty I have with this approach. My preference has been to scale-in and play for intraday swings, but I need to do more work on deciding when to scale-in – especially when their is no current day structure to lean against as a natural stop level.

How do any folks here deal with the problem of fast and thin markets? Don't be shy! :-)

With kind regards,

Aug 14, 2014
8:31 pm

I was hoping to stimulate some discussion on the low level details of how to execute trades in fast and thinner markets. Market orders with momentum? Stop entry orders on breakouts? Both of these will at times deal significant slippage. If instead one is deciding on limit orders and you want to get a fill, chances are it has to be done as price is moving against your trade idea or at some sort of minor pause.

No one trades fast markets? LC? Anyone?

Everyone loves confirmation so it 'feels' like entering with 123 breakouts on stop entry orders would be the way to go, but in practice you will get slippage on nearly every trade on the Hang Seng if you do this. Because everyone wants confirmation, maybe the opposite is the way to go…..it just feels a bit cowboy though.

I'd really value someones comment on this with their thoughts and experience.

With kind regards,

Aug 15, 2014
1:26 pm

The HSI by design is a market maker game. It is similar to the old days with Nasdaq stocks when it was mainly a dealer market. Hence they gap it hard whenever they get the chance to see if stops can be discovered. I am not talking about hard stops with orders placed. I am talking about natural stop where margin calls happen.

Thin markets => not good to engage => solution: use higher timeframes => can be swing level before you get stable mechanical results

1-2-3 entry is in fact better most of the time until higher timeframe price levels are challenged. At the critical price zones, FBO once or even twice is not a surprise. Willingness to do that can actually pay off. Some traders in Asian like to play FBOs only. Maybe you should take a look at the possibility.

The truth is – majority of people do not enter trade on confirmation, people pick tops and bottoms. Using confirmed entry is a rare practice among traders.

Aug 15, 2014
7:45 pm

So when you say 123 is better most of the time, you mean in terms of a technical signal or in terms of an execution trigger for a trade idea? Technically, I see it is quite good, but when I've used it for execution on HSI its either heavily slipped (with a market order) or not filled (with a stop limit). I'm talking about obvious 123s that you may see on a 1 min chart.

I do FBO's a lot, but not exclusively.

With kind regards,

Aug 17, 2014
12:40 pm

1-2-3 from an extended trend (something I should write about) within a single timeframe has mechanical advantage (an entry edge) which gives you the swing high from 2 swings back. From my extensive testing, it works across stocks, commodities, forex, etc.

This advantage can be used as a confirmation for entry by limit (i.e. picking potential higher low or lower high of your reference timeframe).
e.g. if 1-2-3 does not happen within certain time the limit entry is probably not as good as you think should be

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