Savvy investors must have an arsenal of tools and strategies available to employ as the market continually changes, adapts and corrects to news and events from around the world. I would like to share a powerful technique any trader can use to either hedge their position and/or trade in multiple time frames and multiple directions (long or short) at the same time.

Why would I want to trade long and short on the same instrument, in the same account at the same time? This is a great question and the key to this strategy. As you know, trading signals can show up on any timeframe and traders frequently find themselves deciding between holding a longer term position or trying to trade in and out in a shorter time frame. Why don’t we remove that decision and free ourselves up to trade in multiple time frames on the same instrument.

Let’s start with an example. In the chart below left, we are long 10 contracts on the Emini S&P 500 Futures ($ES_F). Let’s say we have been holding this position for several days and plan on continuing to hold until the weekly trend turns around. Now, what if we see a nice short setting up in our smaller time frame chart shown below right? We scalp against our long term position and manage each separately.

The NinjaTrader 7 platform has a special setting in place allowing us to separate our long from our short position on the same instrument. To set this up, we right click in the Chart Trader and change the property “ATM Strategy selection mode” to “Display selected ATM Strategy only”. Now we take our shorter term short “scalp” position and hope for a small pullback. If all goes well, we catch the pullback, however our longer term position stays in place and we can continue holding it for several days until the longer term trend ends.

In reality, when we enter our short, in this example of 3 contracts, the broker closes out 3 contracts from our first long position and we are only 7 long. NinjaTrader allows you to manage the “hypothetical short” as if it was a real position and as targets are filled, we get a better average fill price back on our long term position and visa versa if our stops get hit. NinjaTrader shows you both the position for your strategy and your account position.

With this advanced technique, you can now hold a longer term position while at the same time take advantage of moves on the smaller time frame. Traders who are able to successfully accomplish this technique and scalp additional profit from the minor moves in the market reduce risk in their longer term positions while at the same time can hold on for longer and more profitable runs.

This technique can take some time to master, so be sure to practice within your simulation account before trying it in the live market. If you need any assistance or additional examples, feel free to contact me. Happy trading!
 

 Raymond Stein, NinjaTrader, LLC