How much $$ is required to be Scalp Day Trader ?

[nyc-hotshot]

Quote from Scientist:



What platform do you use? X-Trader? Button?

Happy Scalping,
~Scientist

I use the PRO software offered by Realfasttrader. I've been trading with them for a while and I have a decent flat rate (considering I generally trade 2k-3k shares at a time). I mostly use them for the software though. Their PRO software makes the DMI indicator real easy to use and that is the most important thing for me (as discussed in my DMI/ADX thread).

 

[Mr Subliminal]

Quote from Scientist:

You callin' me cobber? LMAO! Haven't heard that for ages man!

That's because I was gallivanting around Terra Australis long before you were born, cobber.

Anyway, you're wrong. It's not a common misconception. I scalp the ES everyday. You're just not paying attention.

I repeat : You quoted me:

And that's precisely right. Read again: 1T per side = 2T/RT.
Plus 2X $2.40 commish per car = $4.80 = $ 29.80

That's your initial minus-sum.

I showed you how to do a round trip (2 sides) for 1T. It appears you are overestimating your "initial minus-sum" - please give an example of how you get 2T.

 

[Scientist]

Quote from Mr Subliminal:

That's because I was gallivanting around Terra Australis long before you were born, cobber.

LOL. Yeah, we actually use that term jokingly sometimes. It's an hilarious thing that's particularly funny when tourists say it. The Aussies have an evil chuckle about writing into the tourist guides that that's a common address in Australia. It's such an ancient, funny oz term it just makes you laugh. So do the other oldies: "Mint", and "Grouse". It's sort of all become very "Beaudy moit" these days. LOL

I showed you how to do a round trip (2 sides) for 1T. It appears you are overestimating your "initial minus-sum" - please give an example of how you get 2T.

OK. I long at 990. Get filled at 990.25. 1 Tick.
Wait, let it run, hit my target at 991.25, get filled 991.00. -> Another tick. In & Out. All I'm left with is 3T, rather than 5.

Yes, you'll say, why not use a limit order? Yeah, you're right. I use chase limit, however, you still can't always get filled there, often you have to get out with a tick slippage before the wheel turns. We just have to assume that with any kind of trade, we're expecting 1T slippage for entry and 1T slippage for exit = 2 Ticks.

Right?

~Scientist


P.S: Hey - I just did 2 clean scalps of 15c each on MXIM! And that during the doldrums, what a bewdy! Equities are awesome!

 

[nononsense]

Quote from nyc-hotshot:

I think you can day trade (even scalp) with as little as $25k - $30k. That would give you over $100k intraday buy power.

nyc-hotshot,

You are right on buying power. You need to have this $25K+, otherwise they will not let you trade for $100K's worth if it is that what you want to do. I fully agree.

As I see it - it would be the same for stocks as for futures - the amount needed is rather what you should have to give you a reasonable probability for not going broke. This is what I alluded to when I wrote "Now many considerations enter into this."

Put simply:
If you like to handle $100K's worth of stuff, you should really have $25K + {value of drawdown}.

You would have to figure out the drawdown for your particular trading method. You must fix a interval over which you want to stay alive and assign a probability you wish to adhere to for staying alive.

Now mind you, this does not mean that you will necessarily go broke if you don't have this amount but the probability to stay in the business over the selected interval will be less than what you wished for. You could say that you became a somewhat reckless gambler.

My explanation above is rather too quick to do any good. If you are further interested in this you could look at:
"The Mathematics of Money Management: Risk Analysis Techniques for Traders" by Ralph Vince

In my humble opinion, if you can't figure this out one way of another, you don't know what you are doing.

 

[CalTrader]

Quote from hayman:

I've been trading for a year now, and I am a Scalp Day Trader, who likes to end each and every day in cash. I trade NYSE issues.

....

1) I started with $ 50K initially. I am currently working with $ 65K,
but think that this might be a little light.

2) For most of this first year, I've been trading 2,000 share
blocks. I'm thinking of doubling this on average from here on
in.

Would greatly appreciate any other opinions on the above.

A reasonable living can be extracted from a 50K+ trading account. However, unless you are trading high-leverage 50K will be a little light. .

I started out only trading NYSE only on a 50K low leverage account: more as a experiment to validate my ideas. It worked exceeedingly well and I put more capital to work and moved my ideas under the banner of a business. I branched out to trading nasdaq issues and futures. When I started out I was moving 500 - 1000 share blocks and gradually increased these to 1 - 2 K blocks. I did not trade 1M shares per month and found that trading less was more profitable than trading more. When I started out I traded only intraday. Now with larger amounts of capital I do multiday holds and larger position sizes in certain cirumstances.

I think there is a sweet spot on position size which varies with the issue. For some issues a 1-2K block size works well.

 

[Mr Subliminal]

Quote from Scientist:

OK. I long at 990. Get filled at 990.25. 1 Tick.
Wait, let it run, hit my target at 991.25, get filled 991.00. -> Another tick. In & Out. All I'm left with is 3T, rather than 5.

I see what you're saying and agree about using 2T in your case and for strategy testing. I was talking about "immediately" - no "wait, let it run" - in which case I can get 1T most of the time (assuming automated trading or bloody fast fingers).

Now explain to me what happened to Carlton this year. Where are the glory days of Alex Jesaulenko, Big John Nicholls and Wes Lofts?

 

[nononsense]

Quote from CalTrader:



[...]
However, unless you are trading high-leverage 50K will be a little light. .

Hi CalTrader,

Maybe, maybe not. It all depends on what you mean by "unless you are trading high-leverage". What if leverage is too low? This fellow will not be able to eat. From what point on does leverage become dangerous so that 50K will be a "little light"? All good questions but we need real figures for answers. We are talking about real money!

In fact all what you are warning about is that to answer the lead question of this thread correctly, you cannot escape the "danger" aspect. This question can only be dealt with in a probabilistic sense. I gave a short, simple explanation. Read something like Vince if you want to know more about this.

Don't go broke!

 

[Scientist]

Quote from CalTrader:
A reasonable living can be extracted from a 50K+ trading account. However, unless you are trading high-leverage 50K will be a little light...

This is pretty relative I'd say. It really depends on what kind of lifestyle you want to live.

If you're a free bachelor like me, with a supportive and understanding girlfriend from the finance field that has lots of money, drives her own sports car and insists to pay you back every cent even for a coffee, saying "It's not the money I want you for" (yes, these specimens do exist), then you can live dirt cheap and accumulate wealth exponentially in a very short timeframe. In this case, a 50K trading account is a blessing.

On the other hand, if you have to support 6 kids, a nagging shopping-addicted wife's credit card payments, a mortgage on your joneses' home, your own credit cards, your kids' college education, several doodads such as boats etc as well as different-colored leather seats and a new set of alloy wheels for your 6-month old Lamborghini Murcielago, then 50K are probably a little hairy to keep up with the bills, unless you're a good scalper.

Personally, as mentioned, I'm not a very good equities scalper at all - I come from the futures field. Today, I scalped only MXIM and I made a total of ~82.7c, which isn't sensational, but it's fine. If I dealt all of what you can get for $50K (~1150 shares of stock MXIM), then this would have netted you ~US$950. This isn't much, but enough to live off for a lot of people, and it can definitely be improved upon. As for me, I'm constantly improving - Why shouldn't you?

As mentioned on this thread, there are people here who scalp stocks half the price and look for almost the same cent amounts per trade - They're probably making 2X as much as me! esc_trader etc? How about you guys?

I have seen a scalper friend live, doing $3K+ a day on a $50K account, several days in a row, trading equities. I don't know how much leverage he used, but if he can pull it off it doesn't matter anyway. He lives a lot finer than I do, too. And that wasn't in 1999, where things moved $5 in 5 minutes, but middle of last year. It's so interesting to watch other people trade - If they let you.

Again, the question of how much money is required is hard to answer, because it depends on many factors: How much to live, how much to save, how much to have security, how much to pay for liabilities and bills, and, most importantly, how good you are as a scalper. If you're only just starting to learn, then forget the $25K thing, for sure. If you're top-notch, then $25K could be way enough to start, particularly with leverage. I know somebody who went to a prop shop with $5K, used their leverage and did very well for himself. There's these people, and there's those...


All the Best,
~Scientist

 

[Scientist]

Quote from nononsense:

Maybe, maybe not. It all depends on what you mean by "unless you are trading high-leverage". What if leverage is too low? This fellow will not be able to eat. From what point on does leverage become dangerous so that 50K will be a "little light"? All good questions but we need real figures for answers. We are talking about real money!

In fact all what you are warning about is that to answer the lead question of this thread correctly, you cannot escape the "danger" aspect. This question can only be dealt with in a probabilistic sense. I gave a short, simple explanation. Read something like Vince if you want to know more about this.

Don't go broke!

I don't understand you here. On one hand you're quoting Vince, on the other you're asking for the most basic figures for day trading money management?

To deal with the "danger" aspect you only need to apply basic MM principles. Leverage becomes "dangerous" at the very point where you risk too much equity on a single trade or series of trades with low probability of success.

If you want figures: Well, if you take the widely used "rule of thumb", being not to risk more than 2% of your capital on any given trade, then you could take your $25K, equal to $100K with 4:1 Leverage, then divide 2% off $100K by 4 or simply take 2% off the initial $25K, and you're at a maximum of 0.5% or $500 per trade of maximum risk. This is far enough for scalping. If you require more than 0.5% risk scalping, you're not scalping.

If you were trading i.e. MXIM like I did today, a loss of of 0.5% would equate to 21.5c per share. This is what I'd consider an absolute disaster loss, and rather unlikely in such a liquid issue. Generally, in this stock, I would hardly risk more than 10c per trade per share. That's it. You can even reduce that, but I like to cut the issue a bit of slack quite frequently - I sort of 'scale in runners' quite often. You don't have to do that.

With this loss margin, you can come up with $10K, use 8:1 leverage and still only risk a max of 2% of your initial per trade, given that you get out before a 10.75c loss per share per trade.
Well, given that you know what you're doing, that is. But people have done it. And it's a lot better to blow a $10K intitial than to blow a $50K initial, too. You can get "professional" leverage at www.greentreetrading.com - I think they give you 10:1 if you ask for it. Good Luck

~Scientist

 

[esc_trader]

Longer-term holding periods would be better than scalping, if there were not so many changes in direction.
It's all this whipping around in the (US STK and FUT) markets that makes scalping a better choice.

I think the optimal frequency of your trading would be based on the number of directional changes anticipated. Longer term holders sit through the noise, scalpers find additional opportunities there.