Re: the comments assuming scalpers make "the lowest trading income" and represent "the lowest wall st. profession" and etc. ...
The scope of the issue should not be scalping alone, but the sophistication and/or the effectiveness of the scalping.
Jim Simons' Medallion Fund, which is part of his Renaissance Technology hedge fund family, is involved in very sophisticated scalping. This is pointed out in the following link:
http://www.bulldogtrust.com/trading.htm
If you don't want to read the whole thing - this is a key takeaway, IMO:
"Anecdotal evidence indicates Medallion's trading volume is ** 'several percent' ** of NASDAQ's annual $10 trillion total, implying something like a half trillion, and a recent year's profit before fees was 80% on its $5 billion in assets, or about $4 billion. Dividing profit by volume shows a tiny trading margin of the order of three quarters of one percent. Dividing volume by its $1 billion or so portfolio shows annual turnover of 400 times, or about 2 times a day."
The effectiveness of this approach is pointed out by the following stats:
"Since its inception in March 1988, Simons' flagship $ 3.3 billion Medallion fund, has amassed annual returns of 35.6 percent (after fees - very high fees), compared with 17.9 percent for the Standard & Poor's 500 index.
For the 11 full years ended December 1999, Medallion's cumulative returns are an eye-popping 2,478.6 percent.
Among all offshore funds over that same period, according to the database run by veteran hedge fund observer Antoine Bernheim, the next-best performer was Soros' Quantum Fund, with a 1,710.1 percent return."
Some will argue that the average "day trader" does not have the sophistication that the Simons group has with all of their PhDs and etc. This is true.
On the other hand, it takes a lot of PhD type knowledge to get a computer to replicate even the most basic human functions. It is quite possible that a lot of what is done at Renaissance is taking successful daytrade approaches, automating them and then applying them over a broad array of markets that no single trader could ever trade manually.
Anyway, just like Renaissance does not like to reveal what it is they do exactly, most successful day traders don't either.
So if you are worried about what others think (and you shouldn't be - but since you brought it up) - point out that one of the most successful trading firms ever incorporates avid daytrading. And the only way to seperate yourself from the perception that you are no different than some clueless piker who bets on a horse because you "have a good feeling" without revealing the details of your approach is to trade well and to trade well consistently.
Over time, the proof will be in the pudding.
