what the hell is scalping

[Banff01]

You have asked for it:

Scalping is the act of removing the scalp, usually with the hair, as a portable proof or trophy of prowess in war. Scalping is also associated with frontier warfare in North America, and was widely practiced by Native Americans, colonists, and frontiersmen over centuries of violent conflict.

 

[local_crusher]

"classical" scalping is de-facto market making in futures, primarily money market or bond type.

You enter large size positions for +/- a tick, max 2-3.

 

[TraderZones]

scalping is when traders try to take small profits out of the market for very short periods (seconds to minutes), thus without taking large risks.

The major problem, is the costs, the slippage, and the fees are the same as someone who holds positions for days or weeks.

There are very few longterm successful SMALL-TIME scalpers. Many of the people who claim to be, would be hard pressed to show you solid evidence for their claims.

An institution who gets much lower trading costs and has a real research and trading team, yes.

 

[youngtrader]

Scalping defined by someone who does it for a living.

BUY THE BID AND SELL THE OFFER (as many times as possible)

You play the spread and make competitive bids/offers in the market to get orderflow but at the same time not making them overcompetitive and ending up caught on a position.

very good money and a very profitable trading method but requires member rates, very fast connections to the exchange, etc. not exactly something a retail trader can do profitably over the long run

 

[brownsfan019]

Quote from youngtrader:

Scalping defined by someone who does it for a living.

BUY THE BID AND SELL THE OFFER (as many times as possible)

You play the spread and make competitive bids/offers in the market to get orderflow but at the same time not making them overcompetitive and ending up caught on a position.

very good money and a very profitable trading method but requires member rates, very fast connections to the exchange, etc. not exactly something a retail trader can do profitably over the long run

That's an interesting premise and one that I am sure many have thought of.

What I always wondered when trading like this is are you constantly in a trade or only during certain circumstances?

 

[youngtrader]

Quote from brownsfan019:

That's an interesting premise and one that I am sure many have thought of.

What I always wondered when trading like this is are you constantly in a trade or only during certain circumstances?

Not always in a trade but yes you are in a position a large amount of the time during the trading session. Its all about the spread and where you are going to have to bid/offer to get that orderflow without being overly aggressive and getting caught in a position. Its literally all about providing liquidity at good enough prices to attract people to do business with you but at the same time making sure that you are able to turn around and dump it on somebody else relatively quickly. You always have to be looking for your out if the market starts moving against you so you always like to make a spread that leaves the most room for error.

 

[Bolimomo]

Quote from youngtrader:

Scalping defined by someone who does it for a living.

BUY THE BID AND SELL THE OFFER (as many times as possible)

You play the spread and make competitive bids/offers in the market to get orderflow but at the same time not making them overcompetitive and ending up caught on a position.

I think this is the ideal case but unless we are a market maker, wouldn't it be very difficult for individual traders to do, especially with the environment today: penny spread on many popular stocks and higher volatility?

 

[NY0BScalper]

Quote from TraderZones:


The major problem, is the costs, the slippage, and the fees are the same as someone who holds positions for days or weeks.

The fees definitely add up but the slippage is how we make our living. The guy trying to buy 200k is going to experience more slippage than me buying 10k... partially BECAUSE of my buying 10k when I get a feeling he wants to buy. Institutional slippage is how I make my living.

 

[intradaybill]

Quote from youngtrader:

Scalping defined by someone who does it for a living.

BUY THE BID AND SELL THE OFFER (as many times as possible)

In an efficient and liquid market you cannot profit from bid/ask spreads. If you try to profit by lowering the spread or opening it, others will compete with you.

You can profit from such strategy only as a market maker. There are 2 types (1) those that are assigned by an exchange to act as market makers and are responsible for providing liquidity but with the risk that comes occasionally with that and (2) those who try to act like market makers.

In the second case, you cannot do it in liquid markets and if you try in illiquid ones you will face the real market maker.

I think this type of strategy is advertised by some prop houses to lure in traders who think it is possible to do that but they actually enter in a competition that lowers spreads and who wins out of that game is truly random.

There is no free lunch in the markets. You want to make money you must take substantial risks, whether you are a trader or a market maker.

 

[MandelbrotSet]

Damn this place is clueless.