Scalping Strategy with Flow Data (Currently Testing)

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MasterSteve

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@BenTen and I have been working on different ways to incorporate unusual options flow into our trading. The majority of work I’ve done with flow so far is related to swing trading, but it can also work for scalping as well. Here’s how this strategy works: Ben and I keep a watchlist of mostly large cap tech stocks that we usually watch and trade. I scan this watchlist every day after hours for notable option flows and make a watchlist of any that are likely to move the next day and in what direction.

This is different from my other UOA work because I am only scanning tickers we are familiar with, not scanning the whole market. Meaning I may not see unusual flow, but I can see if one side has more interest than the other. The goal for this strategy is for scalp trading only. I expect to see a move the very next day, or I’m out of the trade. The data we’ve gathered has been interesting so far and we thought we’d share what we’re working on with the site. We’ve gotten a fairly good success rate on picking stocks that move, but we’re still working on picking the right direction. I think the next stage of this will be to confirm our direction with flows in the first 15 minutes of the day, but that’s hard to track and watch in real time.

I’ll try and post an update at the end of the day with a recap. We’re still in the early stages of this and paper trading, but plan on eventually using this data to trade real money.
 
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MasterSteve

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For example, our watchlist for Friday 11/8/2019 was
  • BABA down
  • MU up
  • QCOM up
  • ABBV up
  • INTC up
  • CVS up
  • WMT up
BABA



Above is a picture of the 5 minute chart for BABA with some recent support and resistance lines drawn in. Thursday November 7th is the day on the left, the shaded section is aftermarket/premarket, and Friday November 8th is the day on the right. From the last few days of flow, I thought BABA would go down on Friday. To make this simpler to track, I’m saying I’d enter all of these positions at open. I checked the flow in the first 15 minutes of market open, and there’s a lot of flow pointing to the downside. That confirms our earlier thesis and I would hold. I probably would have sold before the price hits the previous support line at about $185.5, but at that point is a great position to exit if you didn’t already.

MU



Above is a picture of the 5 minute chart for MU with some recent support and resistance lines drawn in. From the last few days of flow, I thought MU would go up on Friday. First thing we notice is about 5-10 minutes into market open, a lot of flow points to the downside. The next thing that went wrong is MU never broke a previous resistance line at about 6:50 PST. At this point I’d jump out for a small loss.

QCOM



Above is a picture of the 5 minute chart for QCOM with some recent support and resistance lines drawn in. From the last few days of flow, I thought QCOM would go up on Friday. First thing we notice is about 5 minutes into market open, a lot of flow points to the upside. That confirms our thesis that QCOM looks to go up. Second, we see that QCOM doesn’t drop below that lower support line. I’d probably exit at around 9 when we almost hit that resistance line. Better safe than sorry with these scalp profit plays.

ABBV



Above is a picture of the 5 minute chart for ABBV with some recent support and resistance lines drawn in. From the last few days of flow, I thought ABBV would go up on Friday. First thing we notice is ABBV pushes past previous resistance and it becomes support. Flow consistently comes up with a bullish thesis, keeping us in the play until we decide to exit and secure profit.

INTC



Above is a picture of the 5 minute chart for INTC with some recent support and resistance lines drawn in. From the last few days of flow, I thought INTC would go up on Friday. First thing we notice that INTC can't seem to break above that previous support line. INTC has lots of short term puts in the first 30 minutes of market open, and we'd probably want to get out at a loss after that first big drop at 7:00 PST. INTC doesn't move much the whole day.

We were right about CVS and wrong about WMT. The actions we would take on those are similar to those above.

Recap
Out of 7 on the watchlist, 6 made significant moves. We called 4 correctly beforehand, and the remaining 3 would be quickly corrected and exited at a small losses.
 
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BenTen

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Thanks, Steve, for posting the recaps. That was very useful to let the people know what we're working on. I hope to see some positive results as we continue to test this strategy.
 
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MasterSteve

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Watchlist for Monday 11/11/2019

BYND
TGT
NVDA
GS
HD
CVX
COST
PG

We'll typically have lower volume in the market on a holiday, so keep that in mind when trading tomorrow.
 
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cherif

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@MasterSteve and @BenTen , is this going to be a daily routine? if so, could we participate and be alerted whenever there is a scalp alert during tradeing day ? thx.
 
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MasterSteve

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@MasterSteve and @BenTen , is this going to be a daily routine? if so, could we participate and be alerted whenever there is a scalp alert during tradeing day ? thx.
Hi Cherif, yes we plan for this to be a daily routine. We're still working on finding good movers and picking the right direction. The next phase will be alerts. For now, we're just publishing a list of stocks that will likely move, so people can add them to their watchlist and make a potential play. From our watchlists to yours.
 
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MasterSteve

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Watchlist for Monday 11/11/2019

BYND
TGT
NVDA
GS
HD
CVX
COST
PG

We'll typically have lower volume in the market on a holiday, so keep that in mind when trading tomorrow.
Update on Monday's watchlist. We had 6/8 stocks on the list move significantly, but were only about 50% on calling the direction. We kept that part private because we want our accuracy to be better before we release that data beforehand.
 
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MasterSteve

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Watchlist for Tuesday 11/12/2019

QCOM
TSLA
NVDA
 
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MasterSteve

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Watchlist for Tuesday 11/12/2019

QCOM
TSLA
NVDA
Update for 11/12/2019 3/3 stocks on the list moved significantly. We're only looking for 20% in these low flow days leading up to the FED talk tomorrow, worked out.
 
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MasterSteve

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Watchlist for Wednesday 11/13/2019

MU
IWM
TWLO
X
NVDA
LOW

FED talk tomorrow, keep your eye on that for a change in direction. Market could remain relatively flat until then.
 
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skynetgen

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When do you typically run the scan? Does the price action influences your decision to include the stock on watchlist or flow only?
 
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MasterSteve

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When do you typically run the scan? Does the price action influences your decision to include the stock on watchlist or flow only?
I typically run the scan after market hours for the next day. My decision to include the stock on watchlist is directed mainly by flow. If there is significant flow to one side or another or both, there is an increased chance we'll see a decent move.
 
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MasterSteve

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Watchlist for Wednesday 11/13/2019

MU
IWM
TWLO
X
NVDA
LOW

FED talk tomorrow, keep your eye on that for a change in direction. Market could remain relatively flat until then.
Update for 11/13/2019 5/6 stocks on the list moved significantly.
 
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MasterSteve

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Watchlist for Thursday 11/14/2019

QCOM
TWTR
NVDA
V
LOW
 
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MasterSteve

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I'm not putting out a watchlist today because there is overnight news and futures are up significantly. There is an increased amount of volatility in the markets tomorrow. My recommendation is to pick 2-3 tickers that you're comfortable playing and watch them in relation to the market carefully. If you scalp, take profits earlier than you usually do.
 
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MasterSteve

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Watchlist for Tuesday 11/19/2019
MSFT
MU
SBUX
PEP
EA
ROKU
 
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big dawg

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I'm a newbie here but like what I see so far. Being a scalper I really like your pre-market scan for unusual options idea. How can we here gain access to your findings prior to the open?
 
BenTen

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@big dawg We put together a watchlist for the next trading day during the night before. There is no pre-market involvement currently.
 

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