Learning to trade by scalping?

Biomech

I think watching stocks for a while using scalping type psychology will be good for you because it will teach you to have faster reactions when faced with sudden reversals. Beginning traders usually make the mistake of selling too quickly because they are thrilled to finally be ahead by .10 leaving 1.60 on the table. On a loosing trade they will sit there and watch a stock go against them by 2.00 or 3.00 and do nothing. Avoiding or reversing this is a must. Making LOTS of real trades not just paper trades is a necessary part of the first steps in trading and cutting your losses quickly right from the start will keep you alive long enough to learn the trading style that suits you best. It cost me a few grand before it sunk in that the faster I could admit I was wrong the less it would cost me. I now use scalping when quick exit seems like only chance of profitable trade and swing trading and options for long term plays. (long term for me is 3 to 10 days). Some stocks trade so un predictable that you need to watch them every second (finger on trigger at all times), others you can let run loose for a while and still sleep at night. I still consider my self a short term day trader because about 80% of my trades last less than 10 min. Even stocks that I am holding I will sometimes trade in and out of several times a day to lower my share cost. My trading style is to make money now! Best of luck to you, "We are always learning" :)
 
Biomech: Want to include 30 minute charts,candlecharts in your plan? Its easier [not easy] for me to profit from 30 minute than 1 minute chart................................................... Interesting Hitman , [LUV is the greatest strength] said something like he found out in his scalping a 30 minute chart showed him about 1/2 his trades he shouldnt have been in :cool: [2] rtharp mentioned 1 trader trading 1 stock;real helpful to watch 1-7 stocks an extreme amount of time ![NASD,NYSE]
 
I agree with the posts about scalping being the most difficult type of trading...I have been trading futures, options for past several years and have only met one or two successful pure futures scalpers who do this stuff off the floor...The one guy who I know does extremely well has 30 years of trading experience, on and off the floor, has a seven figure net worth and trades very small size relative to his account size...Not to mention he has many years of experience, knows the "tricks" of the trade and will add to losing positions, at times, because he knows he can trust himself to avoid real disaster...

These strategies and tactics could NEVER be mastered by someone with less than a few years of real trading experience...This past week was a losing week for him in the ND futures and he rarely has losing days...So, I would agree you are entering the markets at one of the most difficult times I have ever seen in my 5 years in the markets...

Swing trading(short term) say intra-day position trading is probably the best of all scenarios, but I have no idea which markets you are trading and many counter trend spikes occur in these bear markets that can destroy even the best laid plans...

Best bet is to trade very small and to only take the trades which set up the best...Put the odds 100% in your favor and avoid the urge to try and trigger trade with 100 trades per day...It tends to make the game very emotional and tiring...

But then again, I could be wrong...:)
 
That is the worst place to start trading

Scalping is for video game junkies who are looking for a fix. Unless you have huge capital, forget it.

You'll end up paying making your broker rich.
 
You guys are talking only about scalping stocks. Has anyone even consider scalping equity options is more profitable?
 
Vulture,

Here's why:

Scalping stocks with $100k capital and making $.05 per share with 10 round trades in a stock worth $30 gives you the following profit:


3333 shares X .05 = 166.65/round trade
166.65 X 10 round trades = 1666.5 (before commission), or about 1.6% return on capital before commission.
I haven't never day-trade, so I don't know the commission involved. But the figure above is with the assumption that you are consistently successful in 10 round trades yielding a 5 cents profit per shares, paying zero commission.

If you have $10k capital, you'll be making, before commission, around $ 166.65, or 1.6% ROC.
___________________________-

If I have $5k in capital, I could trade 10 contracts per round trade in options those premium is between $2-5. If I make $.05/share or $.05 of the premim per contract, I would make a total of $5 per contract (100 shares for option contract X .05 = $5). If commission is $1/contract, my adjusted profit per contract is $3 per contract per round trade.

$3/contract X 10 contracts = $30/profit per round trade with com.
$30 X 10 round trades = $300 total profit after commission, or 6% return on capital after commission

Note: $1 per contract is a very realistic commission for active traders. Furthermore, $.05/share is the mininum you'll get if you successfully scalp options. I have around $.1 in mind now, but $.05 is easier to achieved.

As you can see, a person with $10k capital making $166.65 per day before commission scalping stocks. Compare to $300 per day after commission for scalping options with an initial capital of $5k.

How hard is it to scalp options relative to stocks? I don't really know because I have yet to try it. But, the point is, it doesn't cost much to try it out! If it works, then, that's the kind of money you'll be making relative to scalping stocks, as illustrated above. As I say earlier, if you can scalp successfully, the least you can make is $.05/shares on options, or $5 per contract.
 
Originally posted by bvam1
Vulture,

Here's why:

Scalping stocks with $100k capital and making $.05 per share with 10 round trades in a stock worth $30 gives you the following profit:


3333 shares X .05 = 166.65/round trade
166.65 X 10 round trades = 1666.5 (before commission), or about 1.6% return on capital before commission.
I haven't never day-trade, so I don't know the commission involved. But the figure above is with the assumption that you are consistently successful in 10 round trades yielding a 5 cents profit per shares, paying zero commission.

If you have $10k capital, you'll be making, before commission, around $ 166.65, or 1.6% ROC.
___________________________-

If I have $5k in capital, I could trade 10 contracts per round trade in options those premium is between $2-5. If I make $.05/share or $.05 of the premim per contract, I would make a total of $5 per contract (100 shares for option contract X .05 = $5). If commission is $1/contract, my adjusted profit per contract is $3 per contract per round trade.

$3/contract X 10 contracts = $30/profit per round trade with com.
$30 X 10 round trades = $300 total profit after commission, or 6% return on capital after commission

Note: $1 per contract is a very realistic commission for active traders. Furthermore, $.05/share is the mininum you'll get if you successfully scalp options. I have around $.1 in mind now, but $.05 is easier to achieved.

As you can see, a person with $10k capital making $166.65 per day before commission scalping stocks. Compare to $300 per day after commission for scalping options with an initial capital of $5k.

How hard is it to scalp options relative to stocks? I don't really know because I have yet to try it. But, the point is, it doesn't cost much to try it out! If it works, then, that's the kind of money you'll be making relative to scalping stocks, as illustrated above. As I say earlier, if you can scalp successfully, the least you can make is $.05/shares on options, or $5 per contract.
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As traders, we don't concern ourselves with return %. We only care about INCOME in $$$.:)
 
If you want to scalp go to a prop. firm. Find the one with the lowest commissions.

In a market like this it is a good strategy.

Don't listen to all of the negative posts, I scalp, I make a good living, and I have only had one down month in 16 months........

It is a good way to keep you powder dry in a choppy market.

Good luck!:cool:
 
Originally posted by Biomech
Just as a bit of background on my personality, I graduated with a BS in Computer Science. I immediately took a job as a network/system admin, then a few years later switched to programming which was my goal all along. The knowledge of systems I have has put me a few steps ahead of the rest of the programmers as they don't always understand the system level implications of what they are coding. This is how I approach many things in life. I like to lay a foundation first then build on that.

I'm not sure this translates to my scalping then moving to longer term trading strategy, though. It sounds like many of you think that it doesn't, and it is getting harder for me to ignore all of these voices. :)
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Hey, if you have such a technical background then good for you. You should definitely try "system trading". You can try Tradestation 6 or any number of software where you can write trading rules and backtest them to see if they are valid and get variosu statistics. Then trade off of your trading system signals.

I used to be a quant ont eh isntitutional and that's what many big firms do but using more sophsiticated statistics and modelling than Tradestation 6, but same idea.

Scalping is OK I guess. I've tried and have had mixed results. Maybe because I've mixed scalping with a big of few mins position trading. You can' t mix the two. For scalping to be effective, you have to be willing ot move in and out very quickly for small , sure profits. Else losses will mount up very quickly.

But the frustration thing abotu scalping I believe is missing the BIG trend. Let's say on a strong trending day, MOST scalpers make OK money instead of really cashing in it. If stocks take a huge run, why scalp on the way up when you can just get in early or even a little late and let the strong trend carry you??

Well, scalpers CAN'T do that, because 1they are not used to holding anything longer than 30seconds.hehe. well, you know what I mean. very short term.

But the upside to scalping is that if you are VERY good, then you can make consistent profits every single day. Positive every single calendar day. That's a nice thing. It may not be a lot of big profits but a bunch of small to medium profits do add up to something decent at the end of the month.

That's at least the ideal dream of the good scalpers. But what I actually see is that alot of scalpers are gross positive, but net negative(after commission). Which is OK to some of these tradign firms cuz they like to churn and burn. And even when they are on NET positive route, a few days or a week of loosing streak will kill their P/L! Because they haven't built up one of those HUGE HUGE days when teh market was trending. They just have a bunch of small wins, and one big loser can wipe them out.

so, those are the pros and cons. i think every method has some validity. the key is to master it and stick it to the end! otherwise you'll never be good enough at anything to make money in the market...

trader99
 
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