Youngtrader is grossing more than 99.5% of ET. The kid is already a major player and he's been in Chicago for a whopping 3 months.
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what the hell is scalping
- Thread starter dozu888
- Start date
From a few years ago. I'm in post recycle mode:
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.
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 bid/offer afterward. 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 a method not just any short duration trade. Just because a trade only provides a small profit does not make it a scalp.
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.
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 bid/offer afterward. 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 a method not just any short duration trade. Just because a trade only provides a small profit does not make it a scalp.
Two excellent posts. Thank you guys.
Quote from trader3cnd:
Commission get subtracted from winning trades and added to losing trades.
It may be counter-intuitive to some people but in in case of scalping minimizing the impact of commissions to the ratio of avg. win to avg. loss and thus making money with a given success rate of a strategy is equivalent to maximizing the avg. loss. This is a problem of course because it is hard to find strategies with a high enough success rate to satisfy this constraint.
This is proven mathematically in the book Profitability and Systematic Trading, pp. 53 - 56, and an example of how this result applies scalping is given in pages 59 - 60. Maybe you can access these pages using the Amazon "look inside" feature or find an online version of the book.
It boils down to the mathematical fact that scalping startegies must have a very high success rate to make money, may 80% or more. I haven't been able to find one that is that profitable but I will keep looking forever...I promise...
Quote from Pa(b)st Prime:
From a few years ago. I'm in post recycle mode:
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.
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 bid/offer afterward. 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 a method not just any short duration trade. Just because a trade only provides a small profit does not make it a scalp.
Yes. Thanks Kurt.
Which makes my classification of what I do as micro swing trading correct. I always thought I wasn't a scalper.
Which makes my classification of what I do as micro swing trading correct. I always thought I wasn't a scalper.
HAHAHAHA to the absolute douchebag who is trying to talk noise to YT, I don't even know what to say to other than what Kurt said (YT grosses more than 99.5 percent of ET) Now that's a fact jack! I have no fucking clue how YT trades the way he does, I've tried it and with pretty awful reuslts, but I am a postion spread trader. But I can definitely vouch that YT knows his shit and is a profitable trader.
I'm trying to figure this out: one ***ch*bag, YT, says he has a very simple method for making tons of money in illiquid markets, another ***ch*bag says YT is NTing and yet another ***ch*bag comes along and says he tried it but cannot make any money but the method is great and YT is making tons of money...
Conclusion: 2 many ***ch*bags around
Conclusion: 2 many ***ch*bags around
Jim there are countless ways to trade and make money. From my personal experience the guys I know that make the most money have a method they consistently use, and more often than not the method meshes pretty well with their personality. Scalping isn't for me and really probably isn't for anybody that isn't a member or gets member rates. So it is a great way to trade for YT. Any method than consistently makes money for a person is a "great" way to trade for them.
Nice refresher post by Pabst to clear up the locals "true" scalping edge vs. small swing trade electronic scalping.
I think what many of you guys arguing about scalping/market making ( I've always called this "fishing" bids/offers) are missing is the ability of a professional trader to lean on something else (hedge) if the trade isn't acting correctly. There are a ton of liquid instrument vs. illiquid instrument edges in the market where very disciplined execution and some directional bias can make you a fuck-ton of money. Question is, do you want to sit around all day working best bids and offers in a thin market. Some people look at this as a tedious waste of time. Others excel at it to the point of amazing their friends and peers. It's all a question of personality.
My feeling is that if youngtrader gets hit on one of his bids making a market, and his bid goes offer and lower, he can hit a bid and get short somewhere else (correlated hedge, different contract month, etc.). He doesn't have to "get out lower" because he can now work his position/spread.
Don't assume that all your competitors are trading with one hand tied behind their back. The "theys" that everyone likes to refer to, usually have more than one out in any given situation.
I think what many of you guys arguing about scalping/market making ( I've always called this "fishing" bids/offers) are missing is the ability of a professional trader to lean on something else (hedge) if the trade isn't acting correctly. There are a ton of liquid instrument vs. illiquid instrument edges in the market where very disciplined execution and some directional bias can make you a fuck-ton of money. Question is, do you want to sit around all day working best bids and offers in a thin market. Some people look at this as a tedious waste of time. Others excel at it to the point of amazing their friends and peers. It's all a question of personality.
My feeling is that if youngtrader gets hit on one of his bids making a market, and his bid goes offer and lower, he can hit a bid and get short somewhere else (correlated hedge, different contract month, etc.). He doesn't have to "get out lower" because he can now work his position/spread.
Don't assume that all your competitors are trading with one hand tied behind their back. The "theys" that everyone likes to refer to, usually have more than one out in any given situation.
Quote from trader3cnd:
This is proven mathematically in the book Profitability and Systematic Trading, pp. 53 - 56, and an example of how this result applies scalping is given in pages 59 - 60.
It boils down to the mathematical fact that scalping startegies must have a very high success rate to make money, may 80% or more. I haven't been able to find one that is that profitable but I will keep looking forever...I promise...
Market Makers are scalpers.
Market Making a security with a nice spread and decent volume...
Is a license to print money...
Even from a retail account.
Do you actually trade...
Or do you just browse 10 pound books?