Quote from Scientist:
Baruch, that is a well-meant, yet silly comment. I really was joking about betting the farm. How much do you think I risk on a single trade? How much do YOU risk on a single trade? I would not risk more than 1%, or, at the worst, 2%. Yesterday's EUR short never even came anywhere remotely near that. I ususally exit before I lose that much. While scalping, the relative risk factor is of course drastically reduced, if I scalp the size I currently "swing" trade, I risk less than 0.5% on any single trade. I can scalp with several times the size I can swing trade, because lower time-risk and smaller stops. Now THAT is the advantage of scalping. Unfortunately, this only applies in very liquid markets, like the ES, where the liquidity is high enough to support that.
I disagree with a notion that holding on longer is what makes the big profits, as opposed to scalping. That totally depends on two factors: 1) The market you trade, 2) The money you have / size you trade.
I believe if you trade a market like the DAX, for example, you can make about 10X as much by scalping it. Same for ER2 etc. The EUR is also very nice to scalp. But it's all restricted in terms of liquidity.
I am sick of hearing the argument that there are no $100M-scalpers out there. Jesus, of course there aren't. What do you think how that'd work, scalp the ES with 10,000 contracts?
It's all solely a matter of money velocity. In finance, the smaller you are, the more money you can make, because of more money velocity (compare 1-man fighter versus dreadnought). As you become a multi-millionaire or manage lots of money, you get to find out that it isn't all so easy anymore making a few thousand % a year as it was when you had a $10K account. When you look at it this way, finance actually becomes one of the fairest games in the world. The larger you are, the harder it gets. On the total extreme, beginners can whizz in and out of the market with 1-lots all day long, it's so easy, every market looks abundantly liquid, you always get a fill, you can buy the bid and sell the offer, and on top of that are totally invisible, because nobody would ever even notice you.
Once the beginner gets over 1-lots, he will realize that it isn't so easy after all. DAX isn't that easy with 10-lots. Nor are the currency futures. If I want to enter a dozen plus contracts on the AUD, for example, I can't just put my limit in and wait. Chances are the market will move there to take the volume out and then run against me, or, never go there, because it's scared of the volume. So I have my execution platform strategies set to not send orders until price is a couple of ticks away. Admitted, you're late in the queue, but you see, that's why you can only do AUD well for swing-trading or pos trading. You gotta give up a tick or two. On the EUR, it's similar. You have to scale in preferably over several levels, so things are smooth and people don't see big orders matched or get scared by your size, or, as on AUD, see your order sitting there way in advance. Always keep low profile and camouflage yourself well. "They" are all watching you.
I was talking to a very good friend and prop trader (we're in chat during RTH everyday), who scalps MSFT etc with decent size. Most of the time, he will go for 1c gains or sometimes even less. He will get liqudity rebates etc, and if you do size, it all adds up. Now, I sim-traded some MSFT for fun and found it to be a potentially very very profitable market. I asked him if it's possible to scalp MSFT with 50K (shares). Well, he told me that it's pretty tough with 50K, they really see you coming, so you will have to split your orders etc. and perhaps get in over a couple of levels. He says anything over 10K can become problematic. You see, that's just the way it is with scalping.
Well, to sum it all up, I have come to a point where scalping can at times become a nuisance fill-wise, so I go for longer-term things. That has nothing to do with my "decreasing love for scalping". Scalping is the best style of all if you're really small. It's just the way it is that if you want to trade bigger, you need to give something up.
The trading style you employ should not so much be a choice of preference, but more a choice of the individual market and size you wish to trade.
and (B) I don't want to run the risk of anyone taking the same trade, but not being able to handle the potential drawdown before it kicks in. Perhaps it's a little arrogant to think that anyone would copy the trade, but my conscious is a strong little bastard...