Quote from Don Bright:
Very few simply "daytrade" any longer, opting to engage only in daytrading when being included in the new "sweeps" with the hybrid system. Focusing more on the lower risk, higher reward strategies.
FWIW,
Don
I don't understand why daytrading is not a lower risk, higher reward strategy. In the first month of the hybrid, the risk was absurd as no one knew how to put in orders and market participants could not act in their own best interests. However, as traders have become used to the hybrid market, much of the chaos has disappeared - I would even go as far as to say that the hybrid market is less risky than the specialist system. I notice now that extreme price movements between ticks are less frequent now than they were in the specialist system - that is to say, market sweeps to an LRP occur less frequently than the specialist spreading up or spreading down a stock to fill a large order. This is primarily because of the added liquidity from black boxes and from people trying to take advantage of the sweeps. Since the full implimentation of the hybrid market, my biggest loss has been 40 cents - and that was in a thin stock (I am an active scalper who makes between 30 and 90 trades per day). Whenever I take a loss of more than 10 cents, it is because I am trading a stock that is too thin in a risky situation.
Institutions entering orders tend not to like giving themselves the fuck print by triggering LRPs as the moves are faded with extremely high consistency. Even if a stock spreads down to you at an LRP, you can buy more if you're long or sell more if you're short and usually get out either break even or with a small loss. I've only once had to average down in this manner, and it works, because the move triggering the LRP is usually a cleanup print - it's an instutition saying "I'm done with this order, finish me off at whatever price."
I'm not saying scalping, or daytrading, is the best strategy at all. The old games of following size stepping down on the offer, leaning on bids, blowing up market shorties to squeeze people... clearly don't work the way they used to. There is a whole new world of strategies and trades - short term, low risk, high reward, scalp-based trades, which DO work, however.
People who say scalping is dead are traders stuck in their old ways who cannot adapt to the tremendous opportunity the hybrid market offers. People who claim that the risk is higher now than before are simply wrong; ask any daytrader who did not give up within the first 1-2 months of the hybrid who had experience trading with the specialists, they will tell you that extreme moves to LRPs occur less frequently than extreme specialist spread ups/spread downs. If the risk isn't any higher (which it isn't), the only problem with day-trading is that the older strategies don't work. The prints are still reliable indications of supply/demand intraday, even though they're noisier and more filled with random spurts of black-box induced panic. As long as institutions are working their orders with discernable patterns, there will be room for the adaptive daytrader.
