I am reading about scalping and trying to get a better understanding of the strategy. I ran into 2 groups of people. Those that advocate for being picky about their trades and looking for 20, 30, 40 cents profit goals per trade, and another group that trades way more often and goes for 10, 15 cents.
Big scalp group emphasizes the importance of direct market access with fast order execution. They try to sell on ask but they often bail out on bid and they enter on ask as well.
But I have also encountered the small scalpers that use brokers that provide them with “no fee” trade execution (except regulatory fees). It seems to be that they care less about absolute speed because they also try to sell on the ask but they differ from the first group by trying to enter at bid.
I see successful (I assume they don’t all lie) traders with brokers that offer no commission trading but sell order flow to someone else. They don’t seem to be impacted by it but I don’t know what type of orders are they actually sending in.
Here is where I get confused about it:
Could this be achieved by using special order types like “buy stop-limit order” and “sell stop-limit order”? If I create such orders and send them in, does that increase the probability of me getting a fill when the market moves because my order is already there? Where is “there”?
Is there a separate internal que that the exchange keeps for these types of orders or are the orders not actually yet at the exchange and are at the market maker that received my order and did not yet send it to the exchange? Or could they actually still be at my broker, whish is even worse and will make execution slower?
Example:
Stock ABC trades at $9 and I want to buy it after it breaks $10.05. I send in a “buy stop-limit order” that triggers at $10.05 a buy limit order of $10.10.
Should this enable me to get in fast without the need of direct market access?
I guess this depends on where is my “buy stop-limit order” actually located after I create it.
Is it at my broker, is it at the market maker or was it already sent to the exchange and is there but invisible? I think the location of the order is critical to predict how fast it will execute.
After I am done with paper trading, I plan to try real trading with $2-10 priced shares with order size of 50. I think I should go with the no-fee trading at first because of how thin my profit margins will be.
Thanks for the help with figuring this out!
Big scalp group emphasizes the importance of direct market access with fast order execution. They try to sell on ask but they often bail out on bid and they enter on ask as well.
But I have also encountered the small scalpers that use brokers that provide them with “no fee” trade execution (except regulatory fees). It seems to be that they care less about absolute speed because they also try to sell on the ask but they differ from the first group by trying to enter at bid.
I see successful (I assume they don’t all lie) traders with brokers that offer no commission trading but sell order flow to someone else. They don’t seem to be impacted by it but I don’t know what type of orders are they actually sending in.
Here is where I get confused about it:
Could this be achieved by using special order types like “buy stop-limit order” and “sell stop-limit order”? If I create such orders and send them in, does that increase the probability of me getting a fill when the market moves because my order is already there? Where is “there”?
Is there a separate internal que that the exchange keeps for these types of orders or are the orders not actually yet at the exchange and are at the market maker that received my order and did not yet send it to the exchange? Or could they actually still be at my broker, whish is even worse and will make execution slower?
Example:
Stock ABC trades at $9 and I want to buy it after it breaks $10.05. I send in a “buy stop-limit order” that triggers at $10.05 a buy limit order of $10.10.
Should this enable me to get in fast without the need of direct market access?
I guess this depends on where is my “buy stop-limit order” actually located after I create it.
Is it at my broker, is it at the market maker or was it already sent to the exchange and is there but invisible? I think the location of the order is critical to predict how fast it will execute.
After I am done with paper trading, I plan to try real trading with $2-10 priced shares with order size of 50. I think I should go with the no-fee trading at first because of how thin my profit margins will be.
Thanks for the help with figuring this out!
