Pete's Place

Pete,
I think you did not get my point.
Using tripacks example, say the bid is 1142.5 and ask is 1143, if the scalper only takes the trade if he gets filled at 1142.5 the trade has to move only 2 ticks for him to get a 1 point profit.
The person who plays for 10 points will generally hit the ask because he gets very few trades in the day and he does not want to miss out for 0.5 points.
Whereas for a scalpers he has tons of opportunities during the day. Infact making the spread work in his favor is the biggest part of his strategy.

I think in a purely fair and very liquid exchange like globex, spread can always be worked such that it does not hurt you.

A person who scalps needs very good reflexes. He is almost like a video game player. But then he probably does not need to spend too much time in afterhours analyzing stuff that much.

I just thought the probabilities you calculated were way too much skewed in favor of the trader who plays for larger points.
 
You have
BID ASK
1142.5 1143

If the Scalper gets filled at 1142.5,

To loose 1 point the price has to move 2 bands lower
1142 1142.5
1141.5 1142
To gain 1 point the price has to move 2 bands higher
1143 1143.5
1143.5 1144.

It is equal probability.
 
I get what you are saying Tex. This small point scalper has to effectively buy at the bid. To do this he's got to time it so that he buys the the ask just momentarily goes down to the former bid price, and then pops right back up.

So what you are saying is, at that point, for a random entry there is a 50% chance to make an amount equal to that risked. I agree this is absolutely true.

What I am saying is that you have to be good enough to do this 100% of the time, not taking the commish into account, just to have a fair bet in the long run. It very much is an extra disadvantage that a small point scalper has to deal with.
 
Quote from TexTrader:

I just thought the probabilities you calculated were way too much skewed in favor of the trader who plays for larger points.
More...

Indeed they are! That's why I'm hunting for 10+ opportunities!
 
Quote from peterfigliozzi:

This small point scalper has to effectively buy at the bid. To do this he's got to time it so that he buys the the ask just momentarily goes down to the former bid price, and then pops right back up.
More...

Can you clarify that more, the ask does not have to move down. I would say on days where I play for smaller points 30-40% of my trades have been hit at the bid without the ask moving because there are more traders behind me at the bid.
Very few times I have been pretty lucky that there are 100s at the bid and only a few at the ask and I have been hit at the bid. I can flip those for 1 point gains in a matter of few seconds.

The point I am trying to make is that on globex there is no middle man who has to move the ask lower for you to get executed. It is as fair as market gets and that is why spread is not really an issue. The only real cost is broker commission which a scalper can reduce due to high volume.
Only in markets where you have to go through a middle man spread is an issue because he has to lower the ask for you and you are always at a disadvantage.

Also from personal experience I have found that making money scalping is not as hard as your probabilities suggest.
I am a discretionary I trader and play both styles, larger trend on certain days and on slow days I play 1 to 2 point moves.
Believe me more than 70% of my slower days are profitable, with loosing days loss not larger than the winning days.
If I had a 75% disadvantage I wouldn't be profitable on slower days because I am no way a great trader to overcome such odds.
 
Quote from TexTrader:

Can you clarify that more, the ask does not have to move down. I would say on days where I play for smaller points 30-40% of my trades have been hit at the bid without the ask moving because there are more traders behind me at the bid.
Very few times I have been pretty lucky that there are 100s at the bid and only a few at the ask and I have been hit at the bid. I can flip those for 1 point gains in a matter of few seconds.

The point I am trying to make is that on globex there is no middle man who has to move the ask lower for you to get executed. It is as fair as market gets and that is why spread is not really an issue. The only real cost is broker commission which a scalper can reduce due to high volume.
Only in markets where you have to go through a middle man spread is an issue because he has to lower the ask for you and you are always at a disadvantage.

Also from personal experience I have found that making money scalping is not as hard as your probabilities suggest.
I am a discretionary I trader and play both styles, larger trend on certain days and on slow days I play 1 to 2 point moves.
Believe me more than 70% of my slower days are profitable, with loosing days loss not larger than the winning days.
If I had a 75% disadvantage I wouldn't be profitable on slower days because I am no way a great trader to overcome such odds.
More...

Tex,

Do you really expect people to believe this nonsense? Let's talk about NQ i.e. Liquidity in this product absolutely sucks. My estimate based on my own trading is that 90% of the time you have to give up the spread to get a fill. Ever noticed the size of bids and offers? Completely unbalanced most of the time, due to herds of scalpers, trying to tickfuck each other. The few times where you will get a fill and price goes your way, will be largely outnumbered by the instances, where price will move against you.
As for your two type trading style, i sure would like to know how you decide to employ which style at what time of which day.:D
 
The way I decide to employ certain styles is based on the feel of the tape.
After the first hour of trading if I see the volume is just not there and the session is very lackluster I will go to small point strategies. I also follow the eco news and individual stock news a lot to gather if a trend is possible or the market will remain lackluster. I also follow a lot of individual stocks to decide whether buyers or sellers are getting aggressive.
The key thing on lackluster days is you have to be patient for
the market to come and hit your price. Only if you get a good fill it is worth playing otherwise it is better to not take the trade.

I would agree that NQ is not as good as ES in getting hit at the bid. But my experience has not been as bad as yours. I generally enter my orders few points early. If I don't get it I don't mind missing the trade.
 
Quote from TexTrader:

Can you clarify that more, the ask does not have to move down. I would say on days where I play for smaller points 30-40% of my trades have been hit at the bid without the ask moving because there are more traders behind me at the bid.
More...

I was just dead wrong, that's all. Sorry and thanks for sticking with the thread. So that table of probabilities I posted is what happens to a trader when he buys at the ask and sells at the bid; he's at a severe disadvantage if he's gunning for under 10 points.

So I've got to change my conclusion:

If you're going for less than 10 points you've got have your buys filled at the bid, sells at the ask, to make it a fair bet.

If you're going for 10 points or more don't worry about it.


I guess the not-so-obvious point is that I would have never guessed it affected 5-6 point trades that much. Or even 3 point trades.
 
Quote from peterfigliozzi:

I was just dead wrong, that's all. Sorry and thanks for sticking with the thread. So that table of probabilities I posted is what happens to a trader when he buys at the ask and sells at the bid; he's at a severe disadvantage if he's gunning for under 10 points.

So I've got to change my conclusion:

If you're going for less than 10 points you've got have your buys filled at the bid, sells at the ask, to make it a fair bet.

If you're going for 10 points or more don't worry about it.


I guess the not-so-obvious point is that I would have never guessed it affected 5-6 point trades that much. Or even 3 point trades.
More...

It ain't that simple, Pete. When you're getting filled at b/b and s/a you'll find out that quite often the market moves in the opposite direction of your trade. You're on the right track with your focus on larger moves.
 
No doubt, Ditch, but my conclusion is still the hard truth: *if* a trader is going to go for the smaller moves he *must* buy at the bid and sell at the ask.

Personally, I don't want to mess with that extra complication, and am sticking with the 10+ moves.
 
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