Why scalping beats any other trading style

Quote from boid-dog:

i know one who's traded in the pit w/ Baldwin & co. Ask him how he trades--"by feel." (it's probably true by now). Scalps Interest Rates, and and Index. No charts just a half dozen TT doms...he has levels and recognizes bluffing. Also pays member fees, like 10 cents; commissions stop after a certain point...

...I believe a great deal of the NAZDAQ volume, as much as 20-30% is the result of one firm in Kansas City...a former trader/programmer who programs algorhythms all day as a couple dozen minions monitor their progress.
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The pit does have a feel - you can even be blindfold and go by volume and be able to judge the size of the trading "wave". Knowing who is on the other end of the order helps too so you can piggyback the known winners and heavy hitters. That's partly why pit traders usually make bad screen traders.

Yeah algo's is the way to go for those who know indicators work and understand how to speed them up. Also graybox assistance can help big time to improve a traders entries and exits, and if you know what to look for the scalp entry can run for hours.

Clever guy though to keep the human element imho if you are looking at longer term strategies.
 
Quote from Trader28Lite:

The main premises of scalping are:


Lessened exposure limits risk - A brief exposure to the market diminishes the probability of running into an adverse event.
Smaller moves are easier to obtain - A bigger imbalance of supply and demand is needed to warrant bigger price changes.
It is easier for a stock to make a 10 cent move than it is to make a $1 move.
Smaller moves are more frequent than larger ones - Even during relatively quiet markets there are many small movements that a scalper can exploit.
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Exactly.

A "scalper" is trading on a small timeframe, and more frequent trading opportunities.

...but then there is something called money management and risk control.
That means that different strategies are needed for different market conditions.

Those who think that the same strategy is always applicable are going to blow up some time,
and blow up quicker if they are scalpers since they perform more trades.

If you understand that there are opportunities and market conditions that require thinking over different timeframes;
then you are truly a winner adapting to any market,
especially if you have sound money management for varying strategies.

The key is adaptation - in every market.
http://en.wikipedia.org/wiki/Adaptation
 
Quote from greysquirrel:

just curious how many points that scalper system was trying to capture on the word document. commissions and slippage tend to bite. Commissions and Slippage are huge factors in scalping systems, I would not assign a figure like 30 percent. I have seen equity curves that go straight up go straight down in real trading.
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A good rule of thumb for ES is that commish and slippage will cost you (0.6)*nTrades in points. The 0.6 points includes 0.5 per trade (minus 0.25 each way for the spread) plus 0.1 for commissions of $4-$5 per RT. Over a large number of trades this adds up. If you take 40 random entries with a 1:1 RR you'll end up around 24 points in the hole. Makes for a good back-of-the-envelope calculation to see if your strategy is just random...

For scalping strategies this means that your average profit (which includes losses) must be at least 3 ticks per trade.
 
Quote from RedDuke:

Tick and Volume charts are very close. They both move only when something is going on, and are perfect to catch momentum.

I found volume charts to be easier to spot momentum since every bar represent constant # of contracts. With tick bar you can have several very large trades, but every one of them will add just 1 to count, where volume bars will create few bars thus highliting the momentum.
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How many contracts do you apply in your volume chart?

I have been using a 2401 volume chart for a while now and I am really starting to like it.
 
Quote from veggen:

How many contracts do you apply in your volume chart?

I have been using a 2401 volume chart for a while now and I am really starting to like it.
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You use that for ES I presume?
Are you doing more of a position/daytrade with that volume frame or are you scalping?

Thanks,
MC
 
Quote from mcichocki:

You use that for ES I presume?
Are you doing more of a position/daytrade with that volume frame or are you scalping?

Thanks,
MC
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Yes that is for ES.

I am more of a scalper than a positon/daytrader. I find 2401 volume chart especially usefull under consolidation and choppy conditions. Under these circumstances on a 1 min chart, it is often difficult to find S/R, new HH/HL or LH/LL or DB/DT etc. in the micro perspective, volume bars makes that less confusing I think.

I also have the same positive experience with tick charts ( I us 377 ticks) under choppy/consolidation.

I like to use these charts in combination with time based charts though, because I think it is often easier to see the whole picture with time charts, at least when the market is trending. Not nessecarily trending the wole day, but trending in a much shorter time frame.

Anybody have any thoughts or ideas about these types of charts? When you find them the most usefull and when not to use them?

Veggen
 
Quote from veggen:

Yes that is for ES.

I am more of a scalper than a positon/daytrader. I find 2401 volume chart especially usefull under consolidation and choppy conditions. Under these circumstances on a 1 min chart, it is often difficult to find S/R, new HH/HL or LH/LL or DB/DT etc. in the micro perspective, volume bars makes that less confusing I think.

I also have the same positive experience with tick charts ( I us 377 ticks) under choppy/consolidation.

I like to use these charts in combination with time based charts though, because I think it is often easier to see the whole picture with time charts, at least when the market is trending. Not nessecarily trending the wole day, but trending in a much shorter time frame.

Anybody have any thoughts or ideas about these types of charts? When you find them the most usefull and when not to use them?

Veggen
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I scalp the YM using the 1 minute chart. I have used 144 tick prior and it worked pretty well depending on the amount of action that day. Volume bars I've never looked at very much before but I'll be checking them out. It makes sense as a scalper to focus on actual tick or volume based market data rather than time based.

The one benefit I can see from time based is you can see when the volume is normal or abnormal much easier and I rely heavy on volume+price action.

Thanks for the tips :)
 
Quote from yoohoo:

trade4success - interesting point - but I don't believe you. However I don't dismiss your opinion - so prove it to me.

I've traded multi million $ positions in one stock and I now scalp futures. Trying to get in/out with $50m is competition. Trying to enter 10 lots on the ER2 ain't anything like it in my opinion. So I hold my view, you can't out perform a hot scalper unless you position trade with size.
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That's true. A good scalper will make more money :)
 
Excellent posts! I love to scalp...but am finding I need to use more money and pick more expensive stocks to limit my commission costs.

I have also been "squeezed out" of being able to close my position at the end of the day and found, to my amazement, that I made a bundle by allowing the trade a greater time frame.

I've also noticed that many times I used to close out trades for money management reasons...but eventually the stock did what I expected. So for me, the trouble has been expecting something to happen in a certain time frame.

And yes, flexibility is key. In a day like today, not alot of liquidity...harder to scalp in this environment.
 
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