Scalping ideas

TraderPattern · Aug 11, 2004

Sledgehammer said:
I've been at this about two years now, and was not successful at the "big picture" swing stuff using wide stops. I consistently lost money.

I'm now much happier with what I call scalping. I trade the FTSE future using DA and pay USD 3.00 commission and GBP 0.56 exchange fee per RT. After I enter a trade I wait with the ticket to put a stop for a half point profit - GBP 5.00. Sometimes I get stopped out almost immediately, other times I will trail the stop and then get out for anywhere between three and ten points. Unless it makes a big move in my favour, I will usually be happy with ten points and then wait for the next opportunity. (If I find myself 5 points offside I'll just get out).

For me, this is a much more comfortable way of trading. Most days now are profitable ones. But I don't suppose I'll ever be a millionaire!

This is really excellent news.

For experienced intraday practitioners like you and me, the real-time control and trade management is a genuine boon to the umbrella of scalping techniques.

Well done, and keep up the good work.

TraderPattern · Aug 11, 2004

stevet said:
a lot of learners pick up on the term as it sounds good - and they think that its an easy way to make money - the soon learn!

Yes, the majority of those that attempt the technique will probably wash out. But the majority of those attempting any business will wash out. Nothing new there !!!

But it is a wonderfully rewarding and profitable approach for those of us who can do it.

TraderPattern · Aug 11, 2004

stevet said:
scalping is not possible at retail rates since the methodology works on doing a lot of scratch trades - and thats for stocks or futures

It is very dangerous to make such an assertion. It makes me and the other profitable scalpers in this community feel like statistical outliers !!

stevet · Aug 11, 2004

you cant scalp if your comms are in dollars - you need to think in cents

TraderPattern · Aug 11, 2004

stevet said:
you cant scalp if your comms are in dollars - you need to think in cents

Maybe you can't, but many of us can. Are you a currently profitable trader (using any style) ?

$50 of retail commissions to scalp $1 million face value of ES futures is not a killer; trust me on this

TraderPattern · Aug 11, 2004

mr.marcus said:
...are we saying true scalping in its purest sense is making the spread only...i might be way off...but ive seen that defintion before somewhere cheers mark j

I used to be a Nasdaq spread scalper a few years ago. This was when spreads were fractional (1/8, 1/16). We would take say 2000 shares for 1/8s and teenies all day long, much to the annoyance of institutional market makers.

But the decimalisation of spreads by the US Securities and Exchange Commission killed this game. In a Nasdaq context, scalping must now be taken to mean something along the lines of 'participating in transient momentum'.

wisestguy · Aug 11, 2004

sledgehammer,

" After I enter a trade I wait with the ticket to put a stop for a half point profit - GBP 5.00. "

is this stop profit or stoploss order ?

Sledgehammer · Aug 11, 2004

wisest

it's an order to give me at least a half point gross profit.

if I buy at 4324, i will prepare a ticket to sell one on a stop at 4324.5. I may then wait whilst it trades either side of that, with no stop or anything. I will execute the order as soon as the bid is 4325. Or, if i see it trade at 4319, I will execute the order and get filled. If I get the feeling, at any time before 4319, that I was wrong I will execute the order.

edit: I agree that, strictly speaking, this is not scalping. Maybe I should have called it "taking little bites of the cherry" or something.

BBB · Aug 11, 2004

wisestguy said:
OK , i've just spoken to an ex collegue of mine , and have found the answers to my own question.

Dow emini comms for Refco = $ 8 per order .

not sure what it is for the large contract , irrelevant in anycase unless you like trading 3 bid against 5 offer , ie ) illiquid contract.

I use Refco, and I can tell you I pay a lot less than $8!!

A mistake a lot of newguys make, is thinking they can make money scalping because they cant make it on larger time frames. They are just thinking that if they take their profits quicker, they will be winners. This aint so, although they are on the right path, they are still missing a few pieces of the jigsaw.

Using indicators and fib levels is a sure way for a hiding. The more active you are, the more closer you must be to price action, bid ask, and more of the market 'micro structure' if you like. You need to see stuff for what it is, not hide it.

TraderPattern · Aug 11, 2004

BBB said:
I use Refco, and I can tell you I pay a lot less than $8!!

A mistake a lot of newguys make, is thinking they can make money scalping because they cant make it on larger time frames. They are just thinking that if they take their profits quicker, they will be winners. This aint so, although they are on the right path, they are still missing a few pieces of the jigsaw.

Using indicators and fib levels is a sure way for a hiding. The more active you are, the more closer you must be to price action, bid ask, and more of the market 'micro structure' if you like. You need to see stuff for what it is, not hide it.

Excellent post, BBB. You have pretty much summed up my take on scalping, and I couldn't agree more with what you have said.

stevet · Aug 11, 2004

TraderPattern

the face value of es futures has nothing to do with scalping or is even relative to comms - so no idea why you think it has

the only important element in scalping is the spread and the volatility of the contract and the size that you can get on and the algorythm that the exchange uses

wisestguy · Aug 11, 2004

" use Refco, and I can tell you I pay a lot less than $8!! "

I really don't care what comms my ex firm pays , if they are getting shafted , then so be it !

dbphoenix · Aug 11, 2004

I suspect that the reason why people become so mired in semantic distinctions is that there are far more people who reason deductively -- or try to -- than inductively. They want a smorgasbord of choices -- position trading, swing trading, scalping, trend trading, counter-trend trading, daytrading, short-term trading, etc, etc -- along with the characteristics of each so that they may choose what looks tastiest and most nutritious. They then implement their choice thinking Yes, this is scalping so I can do this and no that's not scalping so I may not do that. The most obvious problem, of course, is that the principles upon which the "concept" are based may not be attached to any particular reality, or the concept may be attached to a reality that is not shared by everyone else who is attempting to apply the "principles".

An inductive trader, on the other hand, will study price action and formulate a number of ideas on why price moves as it does, define a few setups, test them, apply what is most promising, then adapt to changing conditions without ever having labeled anything or having concerned himself with what "belongs" and what doesn't.

This is not to say that inductive traders will automatically make money while deductive traders will not. But the inductive will be focusing on the movement of price while the deductive are still trying to decide what to call it.

TraderPattern · Aug 11, 2004

stevet said:
TraderPattern

the face value of es futures has nothing to do with scalping or is even relative to comms - so no idea why you think it has

the only important element in scalping is the spread and the volatility of the contract and the size that you can get on and the algorythm that the exchange uses

You are not making much sense to me.

I scalp ES. I make a living out of it.

End of story !!

TraderPattern · Aug 11, 2004

dbphoenix said:
I suspect that the reason why people become so mired in semantic distinctions is that there are far more people who reason deductively -- or try to -- than inductively. They want a smorgasbord of choices -- position trading, swing trading, scalping, trend trading, counter-trend trading, daytrading, short-term trading, etc, etc -- along with the characteristics of each so that they may choose what looks tastiest and most nutritious. They then implement their choice thinking Yes, this is scalping so I can do this and no that's not scalping so I may not do that. The most obvious problem, of course, is that the principles upon which the "concept" are based may not be attached to any particular reality, or the concept may be attached to a reality that is not shared by everyone else who is attempting to apply the "principles".

An inductive trader, on the other hand, will study price action and formulate a number of ideas on why price moves as it does, define a few setups, test them, apply what is most promising, then adapt to changing conditions without ever having labeled anything or having concerned himself with what "belongs" and what doesn't.

This is not to say that inductive traders will automatically make money while deductive traders will not. But the inductive will be focusing on the movement of price while the deductive are still trying to decide what to call it.

Good post, DB. Direct and to the point.

wisestguy · Aug 11, 2004

sledge,

" if I buy at 4324, i will prepare a ticket to sell one on a stop at 4324.5. I may then wait whilst it trades either side of that, with no stop or anything. I will execute the order as soon as the bid is 4325. Or, if i see it trade at 4319, I will execute the order and get filled. If I get the feeling, at any time before 4319, that I was wrong I will execute the order. "

so basically , you are trading with mental stops only , not an order already logged in .

Sledgehammer · Aug 11, 2004

wisest

yes, a mental stop to start with usually. not always. it depends.

i lost a couple of points just now actually. i had a limit order to buy at 4298.5, with a stop at 4296. the order at 4298.5 got filled, then so did my stop! if i had suffered the pain for a few minutes with no stop then now i would be in the money. but thats life.

(today was a rare day. liffe's opening call at 7.45 this morning was 4358 +/- 60 ticks. it very rarely goes out of their range. today it did. my entries are normally based on a combination of price/volume, market action at the time, deviation from liffe's opening call and deviation from vwap).

Mr. Charts · Aug 11, 2004

Nice posts from those real traders, TraderPattern and dbp, a pleasure to read.

I am not interested in definitions or semantics, only high probability consistent profits.
I find these almost every day on Nasdaq stocks.
Today my early trading was very brief time period trades, (some would call them "scalps", I don't care about terminology), where I felt on the basis of the evidence in front of me and the way I trade the possibility of any losses was extremely low.
In this type of trade I am not looking for the tops or bottoms of moves, instead I take repeated profits out of moves as micro trends reverse.
My overall expectation with approx. 80% probability was of an initial sell off lasting 30 to 45 minutes, then either a bounce or a low volatility range. I felt however there was an approx. 20% chance of a much briefer fall of 5-10 minutes after the gap down.
My initial approach of quick "scalps" was predicated on this assessment.

I am sure readers of this thread would like to see hard facts to back up opinions as well as simply debate, so I am attaching a screen shot of my early "scalps".

TraderPattern · Aug 11, 2004

Thank you for your kind words, Mr Charts. Given that you have stayed with Nasdaq post-decimalisation, I would assume that your style of trading is similar to Naz i.e. an incorporation of basic technicals to go alonsgide Level II ?

Mr. Charts · Aug 11, 2004

Hi TraderPattern,
I trade differently to Alan in many ways, including patterns, actual live position management, risk management, volume analysis and I also use level 2 a little differently. However, there are certainly areas where we overlap in our approach and methods. We actually gave a very successful joint seminar at Heathrow a few months ago where our approaches complemented each other.
Richard

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