Futures Scalping
- Thread starter OkComp
- Start date
What John just said is the best advice you will ever get. I too am a full member of both the CBOT and the CME. Few people pay less in commisions than I do. Without the membership I would probably be a net loser every day in my trading.
I trade at OEC (and TradeStation but TS is worthless for active traders). The more you trade the lower your rate. OEC goes down to $0.25 a side even with their published rates.
Then get a CME Volume Incentive membership. This will cost you $2000 but you save $0.50 per side on ES (and other contracts) So you can trade the ES for commission + $0.64 per side. So if you can get $0.75 per side commission your total cost is only ($0.75 + $0.64 = $1.39 per side) or $2.78 per round turn. This is easy to do and OEC helped me get it all setup.
Then get a CME Volume Incentive membership. This will cost you $2000 but you save $0.50 per side on ES (and other contracts) So you can trade the ES for commission + $0.64 per side. So if you can get $0.75 per side commission your total cost is only ($0.75 + $0.64 = $1.39 per side) or $2.78 per round turn. This is easy to do and OEC helped me get it all setup.
To me scalping means sending 2000 orders a second, and holding for seconds to at most a few minutes (an eternity) on fill.
It is very difficult and expensive to do because it requires first rate real-time programming, fastest possible direct connect feed(s), razor thin comissions, and then after all that you need to have a scalping strategy that has positive expectancy. Computers do 99% of the work once the market opens.
I have seen it. It is amazing the consistancy of returns, and I mean eye-popping amazing. I am going to attempt it, but I need to learn a new set of (programming) skills I don't have, and then once I have them, I have to rewrite a bunch of my existing code framework.
All in all, a huge undertaking.
It is very difficult and expensive to do because it requires first rate real-time programming, fastest possible direct connect feed(s), razor thin comissions, and then after all that you need to have a scalping strategy that has positive expectancy. Computers do 99% of the work once the market opens.
I have seen it. It is amazing the consistancy of returns, and I mean eye-popping amazing. I am going to attempt it, but I need to learn a new set of (programming) skills I don't have, and then once I have them, I have to rewrite a bunch of my existing code framework.
All in all, a huge undertaking.
Much of what has been written in this thread - and others - is simply not factual. The worst part is that a great deal of misinformation is being thrown into the hopper by smart, experienced traders; guys who should know better.
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Scalping is not scalable--inaccurate.
What it is not is infinitely scalable (but what is?) or even scalable to truly large size. If a small trader takes ES one lot trades to two and then five and then 15 he has scaled without his size impacting his results; and, if he is successful, he has increased his capital while putting in profitable hours of screen time. Can anyone deny that having even one profitable strategy that allows a trader to be "in" and working every day -- while having profitable months -- is vaulting a big hurdle?
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No one makes money scalping--untrue.
The reality is that most profitable scalpers are paying reduced commissions and that to do it paying a retail rate of even $4 a RT is a VERY difficult proposition. If you are intent on scalping than you need to plan to be, at some near point, affiliated with an exchange in some manner or you will be pissing away most/all of your potential profit in commissions. It's one thing to test it in small size and at retail rates but if your plan is to stay with one, two or even five lots and "grind" out a living paying retail commissions best take a hard look at the numbers.
That said there are the rare traders who scalp at retail rates AND MAKE MONEY! It just makes little sense to have a plan that is that hard to make work when there are ways to cut the rate you pay.
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I could go on but I am sure everyone gets my drift. Boldly predicting and it turning out that you were wrong in that OPINION can be provocative and liven up a conversation... yet it is quite another thing to represent what is obviously inaccurate as FACT or REALITY.
Smart experienced traders should deal in both fact and opinion. But if you represent it as factual it should be just that ... not inaccurate information that suits your world view. Others, as shocking as this may sound, may actually have a different world view.
-----------------------
Scalping is not scalable--inaccurate.
What it is not is infinitely scalable (but what is?) or even scalable to truly large size. If a small trader takes ES one lot trades to two and then five and then 15 he has scaled without his size impacting his results; and, if he is successful, he has increased his capital while putting in profitable hours of screen time. Can anyone deny that having even one profitable strategy that allows a trader to be "in" and working every day -- while having profitable months -- is vaulting a big hurdle?
-------------------
No one makes money scalping--untrue.
The reality is that most profitable scalpers are paying reduced commissions and that to do it paying a retail rate of even $4 a RT is a VERY difficult proposition. If you are intent on scalping than you need to plan to be, at some near point, affiliated with an exchange in some manner or you will be pissing away most/all of your potential profit in commissions. It's one thing to test it in small size and at retail rates but if your plan is to stay with one, two or even five lots and "grind" out a living paying retail commissions best take a hard look at the numbers.
That said there are the rare traders who scalp at retail rates AND MAKE MONEY! It just makes little sense to have a plan that is that hard to make work when there are ways to cut the rate you pay.
------------------
I could go on but I am sure everyone gets my drift. Boldly predicting and it turning out that you were wrong in that OPINION can be provocative and liven up a conversation... yet it is quite another thing to represent what is obviously inaccurate as FACT or REALITY.
Smart experienced traders should deal in both fact and opinion. But if you represent it as factual it should be just that ... not inaccurate information that suits your world view. Others, as shocking as this may sound, may actually have a different world view.
For those who are interested in the potential for futures scalping, here are my stats from my futures scalping for 2009 so far, I've rounded down the numbers:
P&L: (up to Sep 17th 2009) $199k
Max drawdown: -$3,200
Average daily profit: $1,200
Losing days: 19
Winning days: 146
% winning days: 88%
Some people raise the issue of commissions. Here are my commissions stats (rounded up):
Total commissions for 2009 to date: $24,500
Commissions as a % of P&L: 12.3%
I won't disclose my commission per R/T as it may allow inference as to what markets I trade, and I don't wish to encourage competition. However, I am not paying rock-bottom commission rates as I don't do high volume. My commissions are available for any full-time trader doing moderate volume.
This refutes the claims that consistent profitable futures scalping is impossible or pointless, or that you will be eaten alive by commissions or algos. There are algos in the markets I trade, they compete for edge but do not eliminate profitable trading opportunities.
Bear in mind I position trade as well so I am not a full-time 100% dedicated scalper. 2009 has also been a relatively quiet year with declining volatility and so my scalping profits are quite a bit less than in 2008. A more dedicated full-time scalper of equal ability should outperform these results by a fair margin.
N.B. I will not make any response to questions about this post. I have presented true data from real life trading - draw such lessons as you wish.
P&L: (up to Sep 17th 2009) $199k
Max drawdown: -$3,200
Average daily profit: $1,200
Losing days: 19
Winning days: 146
% winning days: 88%
Some people raise the issue of commissions. Here are my commissions stats (rounded up):
Total commissions for 2009 to date: $24,500
Commissions as a % of P&L: 12.3%
I won't disclose my commission per R/T as it may allow inference as to what markets I trade, and I don't wish to encourage competition. However, I am not paying rock-bottom commission rates as I don't do high volume. My commissions are available for any full-time trader doing moderate volume.
This refutes the claims that consistent profitable futures scalping is impossible or pointless, or that you will be eaten alive by commissions or algos. There are algos in the markets I trade, they compete for edge but do not eliminate profitable trading opportunities.
Bear in mind I position trade as well so I am not a full-time 100% dedicated scalper. 2009 has also been a relatively quiet year with declining volatility and so my scalping profits are quite a bit less than in 2008. A more dedicated full-time scalper of equal ability should outperform these results by a fair margin.
N.B. I will not make any response to questions about this post. I have presented true data from real life trading - draw such lessons as you wish.