Question About Scalping Stocks

J

jellob

I used to think that scalping is like jumping on and off the bandwagon while it is moving. How long do you usually hold a position? I have done some simulated trades, many of which last close to an hour. Even if they never trigger my stop, I have to sit and wait for the momentum to pick up.

For example, today at 1:59, I bought WFC @ 23.93. The stock bounced around before finally moving up. I sold at 2:37 @ 24.29. Am I doing it correctly or was my bandwagon picture inaccurate? Or did I just get lucky?
 
Momentum scalping is just one type...

I like scalping churny thick garbage stocks for nickels and dimes. Average hold time under 5 minutes.
 
Quote from jellob:
For example, today at 1:59, I bought WFC @ 23.93. The stock bounced around before finally moving up. I sold at 2:37 @ 24.29. [/B]
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The stock moved to 24.17, then back to entry price before finally rallying upto 24.47. I don't want to sound smart, but it's hard for me to see a thick stock like WFC go 25 cent in favor and then come back to entry price. Hence I must have booked some shares in the first bounce. If I see a good buying level, as it was 23.90 might have added more second time. But then all these are speculative strategies; for me a secondary style of trading.
I base my scalping on few patterns on level2 and 2 minute charts which have a avg win/avg loss more than 6.
 
WFC does look like a thick stock, but according to my calculation from another system, it is still volatile enough. I am entirely new to scalping, deciding to take a look after reading something in ActiveTrader about leaning on a support or resistance.

It seems to work, but I must say the mechanism is a lot more subtle. I am just afraid that I am looking at something imaginary when there is nothing happening. It looks like I have more work to do.
 
an hour is an eternity in scalping, look up average true range, you should try to get a small chunk of the range. If the stock moves a dollar then maybe you catch .10 cents or 10%, this is just one way.


here is a chart of GOOG today sharp rally with boring consolidation pattern, then sharp sell off. You have to figure out what is getting you in and out of a trade. A good scalper would have caught enough of the early rally to call it a day. Good trading.
 

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There was a nice post long back:

Quote from Pabst:

Clearly there's a wide ranging dispute over the definition of the word scalp.

As a former local, a "scalper" if you will, I'll offer my take.

A scalp must be a defined edge. A "scalp" is a quasi arbitrage trade.
I'll re-post something I wrote a while back:

"Trades on the futures floor are not time prioritized. That means large customer orders, no matter when they are entered, stand no better chance of being filled, than the local who decides at the last moment that he too would like to buy at that price. That's what scalping is essentially, trading in front of resting orders. Or in the case of spread scalping it may be possible to buy September contracts at let's say 17 cents over where I can sell December, but simultaneously a spread order is willing to do the spread 18 cents over. By and large, spread brokers will not assume the risk of "legging" spreads, so the risk/reward for spread scalping locals is pronounced."

As we all know, in the electronic marketplace orders ARE time prioritized, so unless you enter your order early in the queue you have no opportunity to receive a "transaction" edge. In turn, by virtue of being "early" you have no idea whether anyone at all is going to join your order afterwards. Thus you're merely guessing whether a fill at that price will be a true "edge". So I'd say in electronic trading there is no TRUE transactional/ execution edge and that type of scalp is nonexistent.

Now I'll go so far to say that a skilled electronic trader with uncanny ability to spot imbalances in the basis between futures and the underlying "cash" market can create an edge. What I mean is: If you're a ZN trader and you have multiple cash screens and you know that if cash is x bid and that buying futures at a price of x- basis is the equivalent of buying cash with an edge then by all means you've gotten a trade that you can "scalp." Surely another participant will be willing to make the same trade that you did as long as the cash market bid remains at that level. When that happens you then have an opportunity to "lean" on that player and voila' you have a scalpable edge.

What are NOT scalps are the following. "The markets been chopping around between 3 and 6 so I'm just going to try and buy 4's and sell 5's." Or, "I have a great short term technical system that has a high hit rate but produces small steady gains." Those strats may work for you, although as others have mentioned, with retail commissions you'd better be right VERY often. Those are speculative strategies however and not scalps. Scalping is method. It's not just any short duration trade, and just because a trade only provides a small profit, most certainly, does not make it a scalp.
http://www.elitetrader.com/vb/showt...culative and method and scalping&pagenumber=1
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PS: there's nice posts from FT71 too in that thread.
 
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