Scalping And Prop Trading

saikiranray · Oct 2, 2003

What is scalping and who are scalpers,
What is its relation to Prop Trading

blb078 · Oct 2, 2003

Quote from saikiranray:

What is scalping and who are scalpers,
What is its relation to Prop Trading

scalping is basically buying and selling(or vice versa) shares for a small profit very quickly and doing it a numerous amount of times throughout the day. a scalper might buy 3000 shares of abc stock wait a few minutes(if that) and sell it for .05 cents or something small like that and do that dozens or more times in a day.
Propfirms like scalpers because they trade a lot of volume, which in returns makes the firm a lot of money through commissions. the firms might offer cheap commissions and leverage, depending on the amount of volume the trader is going to do.
that's the basics of it all.

AnonymousTrader · Oct 2, 2003

Quote from blb078:

scalping is basically buying and selling(or vice versa) shares for a small profit very quickly and doing it a numerous amount of times throughout the day. a scalper might buy 3000 shares of abc stock wait a few minutes(if that) and sell it for .05 cents or something small like that and do that dozens or more times in a day.
Propfirms like scalpers because they trade a lot of volume, which in returns makes the firm a lot of money through commissions. the firms might offer cheap commissions and leverage, depending on the amount of volume the trader is going to do.
that's the basics of it all.

Very well said, except:

Some firms charge no commission and still like scalpers because it can make money - and even more without commission

marketsurfer · Oct 2, 2003

is not "scalping" buying the bid and selling the ask ?? or am i showing my age ??

best,

surfer

blb078 · Oct 2, 2003

Quote from marketsurfer:

is not "scalping" buying the bid and selling the ask ?? or am i showing my age ??

best,

surfer

ideally, yes, but that pretty much depends on your software and your strategy.

AnonymousTrader · Oct 2, 2003

Quote from marketsurfer:

is not "scalping" buying the bid and selling the ask ?? or am i showing my age ??

best,

surfer

Sometimes hitting the bid and taking the offer is a big part.

But as the gentleman before said - IDEALLY its getting taken.

saikiranray · Oct 2, 2003

Thanx everybody for the information

I now understand what scalping is but I am now confused as to what exactly proreitary trading is. could you guys tell me clearly

what exactly is Prop Trading
what is the modus operandi of the prop shops
how do they recruit traders.

(I thought the propreitary trading firms are either banks or moneyed institutions who recruit credible traders to trade with the firms capital and share the profits. what I dont understand is why it is good for them to have lots of volumes )

AnonymousTrader · Oct 2, 2003

Quote from saikiranray:

Thanx everybody for the information

I now understand what scalping is but I am now confused as to what exactly proreitary trading is. could you guys tell me clearly

what exactly is Prop Trading
what is the modus operandi of the prop shops
how do they recruit traders.

(I thought the propreitary trading firms are either banks or moneyed institutions who recruit credible traders to trade with the firms capital and share the profits. what I dont understand is why it is good for them to have lots of volumes )

Saikiranray,

Well - you have a good understanding of what an ideal prop shop would be - and there are several.

The rest are disguised brokers acting like a prop shop.
They require to put up your money: let's say $5,000
Then they give you buying power: lets say $100,000
Then they charge you commission per trade: lets say $0.01 a share

What happens is - the more volume you do (ie shares) the bigger their profit 0.01c x Volume = Their profit.
Therefore, they wont care if you make money from the market or not - they will give u over 80% splilt. The idea is that you trade - dont loose too much to the market but pay commission. Thats were that $5,000 goes. Then you have no more capital, they take away your buying power and unless you come up with more money - your out on the street.

There are several firms that do not require (in our case, let you) put up your money. Nor do they charge commission.

In that case - the firm wins only if the trader wins - and volume has no bearing (except for cheaper clearing - which is a different topic and not that important). In this situation, the company will offer a much lower payout - because it is bearing the costs of trading. But a lower % of a + number is better than a hight % of a - number.

Hope I answered your question.

blb078 · Oct 3, 2003

Quote from AnonymousTrader:

Saikiranray,

Well - you have a good understanding of what an ideal prop shop would be - and there are several.

The rest are disguised brokers acting like a prop shop.
They require to put up your money: let's say $5,000
Then they give you buying power: lets say $100,000
Then they charge you commission per trade: lets say $0.01 a share

What happens is - the more volume you do (ie shares) the bigger their profit 0.01c x Volume = Their profit.
Therefore, they wont care if you make money from the market or not - they will give u over 80% splilt. The idea is that you trade - dont loose too much to the market but pay commission. Thats were that $5,000 goes. Then you have no more capital, they take away your buying power and unless you come up with more money - your out on the street.

There are several firms that do not require (in our case, let you) put up your money. Nor do they charge commission.

In that case - the firm wins only if the trader wins - and volume has no bearing (except for cheaper clearing - which is a different topic and not that important). In this situation, the company will offer a much lower payout - because it is bearing the costs of trading. But a lower % of a + number is better than a hight % of a - number.

Hope I answered your question.

Saikiranray,

this is a good example of a lot of prop firms, but there are some good ones out there that aren't just waiting for you to blow out your account, they want you to make money, because you will keep trading and they will keep making money on commissions, some will help you w/training, it's like anything you have your bad apples and your good apples.

rezo_s · Oct 3, 2003

Quote from AnonymousTrader:

There are several firms that do not require (in our case, let you) put up your money. Nor do they charge commission.

In that case - the firm wins only if the trader wins - and volume has no bearing (except for cheaper clearing - which is a different topic and not that important). In this situation, the company will offer a much lower payout - because it is bearing the costs of trading. But a lower % of a + number is better than a hight % of a - number.

Hello Everyone.

Could someone kindly tell me where are those magic prop trading firms that do not require from trader to trade a LOT (not that I am interestes to work there, but still...), because I am seeing the clear tendency of "not caring" of returns at all, more important is to trade 200+ tickets a month, which is about 10!!! trades a day... (on forex, even if they have 3 pips spread, its 3*10=30 PIPS A DAY for nothing!!!).
I think it's immoral what FXCM and REFCO do with this.
They do offer managed accounts.
The question is - are those accounts managed by the prop traders who they were hiring recently (requiring 2 weeks demo

trading and +200 trades a month), or are the funds managed by other professional traders? If they offer money management with those newbies, its not only immoral, but illegal as well.