What is scalping?

P

padutrader

I searched investopedia :
https://www.investopedia.com/terms/s/scalping.asp
Scalping is a trading strategy geared toward attaining many profits on minor price changes. Traders who implement this strategy place anywhere from 10 to a couple hundred trades in a single day with the belief that small moves in stock price are easier to catch than large ones; traders who implement this strategy are known as scalpers. Many small profits can easily compound into large gains if a strict exit strategy is used to prevent large losses.

There is an impression among many traders that scalping means transacting large no of transactions for small profit.
This is totally wrong.it is almost impossible to make a profit doing this.

a true scalper only takes those trades where the probability of success is very high-this may mean he take only one trade a day or even none-it does not mean you make a lot of transactions.

If probability is very high then the reward will be small compared to the risk [stop loss]

How do you calculate probability?:there is no fixed formula; it is left to the traders' judgement and experience.
 
TGod, you're thinking about too much money. Scalpers might make a sub-1000 share trade to earn 10$us after commissions, taxes, exchange fees, etc, are all included, if they think they can do that consistently and make money doing it. Some brokers have a 1$us/trade commission, so the entry and exit can be very inexpensive. Some of these trades are literally minutes, even seconds long, on momentum, to catch a very small (but extremely likely) move.
 
'but extremely likely move'
that is high probability.
Probability is the key not no of transactions or small profit target.
If probability. is high profit has to be small:you cannot make a sure trade and makes millions of usd
 
No. Scalpers make 10s sometimes hundreds of trades per day. Scalpers look to make 1 tick or so each trade. They have a high probability of success because they take profits as soon as they show, but they are usually wiped out with a loss.
 
traderGOD said:
There is an impression among many traders that scalping means transacting large no of transactions for small profit.
This is totally wrong.it is almost impossible to make a profit doing this.
More...

It depends on the trader. The point to realize is... the number of trades is not a defining factor of a style of trading. Number of trades may be a methodology, but it is not a style. A swing trader may put on a dozen trades simultaneously and take them off one at a time over the next 2 weeks. A position trader may put on one trade a day for a week, and a week later take them all off at once. A scalper, is LIKELY to make many trades a day. You mention for small profit... that is relative. If I was to put on say 50 ES contracts, and able to exit with only 2 ticks, even with retail commissions and fees, 1 tick covers commissions and fees with leftover, and 1 tick is pure profit. 12.50 per ES tick x 50 contracts = $625 (minimum)NET!! A range of 3 ticks(3 ticks, not 3 points/handles) would generally needed to ensure limit price execution for this. During RTH (regular trading hours), the above could be done dozens, hell, hundreds of times, profit or loss in seconds. For those disciplined, with a proven system, I say it's almost impossible NOT to make profit!

traderGOD said:
a true scalper only takes those trades where the probability of success is very high-this may mean he take only one trade a day or even none-it does not mean you make a lot of transactions.
More...

Again, the number of trades is irrelevant. It is not a defining factor of the style. However, to use your words, a "true scalper" would have no problem finding many many many opportunities to trade on any given day (except weekends, and other times of minimal price movement and/or liquidity)

traderGOD said:
If probability is very high then the reward will be small compared to the risk [stop loss]
More...

Where the hell do people come up with this bullshit?

traderGOD said:
How do you calculate probability?:there is no fixed formula; it is left to the traders' judgement and experience.
More...

It is called back-testing. And it should be run against different calendar periods, not only the most recent 10 years. When you backtest, you get an answer of probability... Go or No-Go. Experience and Judgement is built from No-Go, and you backtest another strategy. Experience and judgement are refined with an answer of Go.
 
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tiddlywinks said:
It depends on the trader. The point to realize is... the number of trades is not a defining factor of a style of trading. Number of trades may be a methodology, but it is not a style. A swing trader may put on a dozen trades simultaneously and take them off one at a time over the next 2 weeks. A position trader may put on one trade a day for a week, and a week later take them all off at once. A scalper, is LIKELY to make many trades a day. You mention for small profit... that is relative. If I was to put on say 50 ES contracts, and able to exit with only 2 ticks, even with retail commissions and fees, 1 tick covers commissions and fees with leftover, and 1 tick is pure profit. 12.50 per ES tick x 50 contracts = $625 (minimum)NET!! A range of 3 ticks(3 ticks, not 3 points/handles) would generally needed to ensure limit price execution for this. During RTH (regular trading hours), the above could be done dozens, hell, hundreds of times, profit or loss in seconds. For those disciplined, with a proven system, I say it's almost impossible NOT to make profit!



Again, the number of trades is irrelevant. It is not a defining factor of the style. However, to use your words, a "true scalper" would have no problem finding many many many opportunities to trade on any given day (except weekends, and other times of minimal price movement and/or liquidity)



Where the hell do people come up with this bullshit?



It is called back-testing. And it should be run against different calendar periods, not only the most recent 10 years. When you backtest, you get an answer of probability... Go or No-Go. Experience and Judgement is built from No-Go, and you backtest another strategy. Experience and judgement are refined with an answer of Go.
More...
back testing is experience
 
Muffhands said:
No. Scalpers make 10s sometimes hundreds of trades per day. Scalpers look to make 1 tick or so each trade. They have a high probability of success because they take profits as soon as they show, but they are usually wiped out with a loss.
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yes true....because they do not take a loss as soon as they show.
 
traderGOD said:
what is the definition of scalping?
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Just like we said, taking a really short term trade for a few $us. Scalpers use things like IB's "book trader" which they configure to see the depth of book level 2, get their exact trade size the way they want it, and configure everything so they are playing it like a video game .. clicking on the lot they want and **BAM** they have it, then clicking the ask **BAM** they have a profit ... quick quick quick, no confirmations, no entering anything, just mouse click **BAM** another mouse click **BAM**.

I'll see if I can find a video showing this so you can see it in action ...
 
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