Can scalping make you rich?

[Bolimomo]

Different trading approaches work well in different environments.

Position/swing trading is a rifle. You use it for sharp-shooting at a distance. Because it takes time to reload and you can't swing the gun around rapidly, you tend to be more careful with your aim and fire only when you have a high chance to hit.

Day trading is a hand gun. You use it for short range. You can rapid fire. If you don't hit the target, you shoot again. And again.

2 days ago the US Navy SEALs took out the 3 Samali pirates from the battle ship. With sniper rifles, of course. A hand gun cannot reach that far. Now if the SEALs were to swim and board the lifeboat to take out those pirates at point blank range, would they have brought the sniper rifles with them? Of course not!

Different tools tend to work well in different environments. No one tool - as much as many trading software vendors would want you to believe - would work well in all environments. It's like having a 4-wheel drive that can crawl rocks and it can also be used to win the Grand Prix. Yeah, right.

Choose the best weapon for your objective.

Scalping: Maximum share size. Ultra short duration. Trade frequently.
Swing/Position: Not take too many shares. Longer time horizon. Looser stop. Trade less frequently.

Can each style make you rich? It depends on the skill of the weapon user!

 

[GCC]

I then started day trading US shares in the evenings and on my afternoon off. I found I made more profits and realized I could make more trading full time than being a dentist, and enjoy it a great deal more, so I sold my practice in 1999 and have day traded using several set ups and triggers ever since. One of those set ups is linked below my signature.
So yes, my personal experience is that day trading is far more remunerative and you sleep well at night because you carry no overnight risk. You are flat every night, every time you go on holiday, no worries, no stress.

Hi Richard,

I really enjoy your story of coming from a full-time dentist to a professional trader. It is really encouraging to me, because I am in a very similar position to what you used to be: I am having a day job and I daytrade EUR/USD when I got home at night (may be "nighttrade" is the better term). Although my own setup is not precisely the same as yours (we are trading different things, after all), I guess what we have in common is that we both enjoy the short term advanatges of high probability and no hangovers.

I am therefore very interested in how you later successfully make a living by trading alone. I guess it might sound like all those stupid PMs you were bombarded from those Forum Rookies, but here is one thing I want to know: What concerned you most before you finally made up your mind to trade full time? Capital? Market Randomness? Lack of Experience? Social Pressure?

I hope I am not giving an impression to anybody that I am looking for quick tips for trading success. Quite the contrary, I am on my way to work slowly and steadily towards turning pro one day. It is for this reason I want to hear from other successful traders all the difficulties they have to face before trading full-time, because I guess one day I have to encounter those problems too. The feedback of any full-time trader on this will be very much welcome.

 

[Mr. Charts]

Hi GCC,
" but here is one thing I want to know: What concerned you most before you finally made up your mind to trade full time? Capital? Market Randomness? Lack of Experience? Social Pressure? "
Capital - I only needed £15000.
Market Randomness - not sure what you mean since I don't trade stocks which move randomly and markets are neither random nor efficient anyway.
Lack of Experience - I had enough experience part time in different market types. My set ups account for all market types and include different set ups for up and down trending, bouncing, ranging, grinding markets and each of those create separate set ups in different time frames. I don't even have to identify the market type.
Social Pressure - irrelevant, what others think is of no consequence to me. My wife and three children (19,16,12) at the time all supported me. They are who mattered. Everyone else thought I was out of my tiny mind giving up dentistry to trade, even if most were too polite to say that outright.
Richard

 

[Bolimomo]

I trade full-time for a living now. For over 10 years I had been trading part-time while had a full-time job as a computer programmer/tech-support.

For me, it was a "chicken first or egg first" dilimma.

I was not trading very well before (about three-four years ago). I was not consistent. Even with the couple of trading classes I'd taken and all the books I'd read. Won some, lost some. Won some, lost a lot. I evaluated the situation and came to this conclusion:

The reason why I was not trading well: I was not committed to it with 110% effort.
The reason why I couldn't commit to it: I was not trading well. I need a real job to earn my living.

After that revelation, I decided to disrupt the cycle. I decided to trade full-time.

I didn't quit my job right away. I engineered a semi swing shift schedule with my boss and that let me begin work after the market closes (I live in the US west coast, that's 1:00 pm) until late at night, with the balance on Saturdays. I began to trade the entire 6.5 hour during the time the market is opened. 6.5 hour locked down in front of the trading screen. I saw the market's movements every minute of the day. I started to see the cause and effect between market indice movements and individual stock movements, and the peculiar Time-Of-Day reversal patterns.

Another turning point event: I started off wanting to program some strategies in TradeStation to automate my tradings. After all, I am a programmer. Took the 2-day class on Easy Language. I started to take a systematic approach to trading. How can I tell a computer to trade? In order for me to write a program, I need to know exactly what I need to look at. I started looking into all the technical analysis theories and indicators. I tried out most of them. Trying to interpret them the way that was meant by the original developer. One thing led to another, I collected multiple moving averages, RSI, CCI, Stochastics, MACD, Bollinger Bands, etc.. and all sorts of indicators. And I use them all. (Over time I deleted those that I don't use often.). I came up with my "confusing mess" chart setting (which I still use everyday). I developed my set of trading tactics through observations and testing.

I never actually came up with an automated system to trade. There are too many factors that you cannot translate to a number, a "degree of certainty" (in fuzzy logic). So I remain a discretionary trader to this day. Just use my "gut feel". If I am wrong, I correct my course. I flip my position if it is warranted or just stay out. Wait, and fire again.

I came up with a general method, jot down the important supporting factors, roughly where to get in and where to get out, and roughly where to bail (stop) when things don't go as I expect. Over time, refined my methods. And lately I had extended my methodology to multiple time-frames and assess 3 different time-frames simultaneously. Most indicators and chart patterns are fractal in nature. So you can use them in all time-frames. (With the exception of Time-Of-Day, which is only applicable to intraday charts.)

Keeping a journal and reviewing all meaningful losing trades everyday are very important. They provide a feed-back loop to refine your proprietary trading methods.

That was the turning point. 3 years now. Consistent income every month. Half way through, I quit my "real" job. I didn't need it any more. Trading profits can support me and my family. Working 2 jobs, 80-90 hours a week was very hard on me. Things are easier now. No looking back.

 

[karl6666]

honest

Very interesting and honest posts fellas, well done

Karl

 

[tradespreads]

Most indicators and chart patterns are fractal in nature. So you can use them in all time-frames. (With the exception of Time-Of-Day, which is only applicable to intraday charts.)

Could you clarify this statement please?

As you might have guessed this is a nontechnical topic of discussion. So why let it down with such nonsense statements?

 

[MrGecko]

Scalping can make you rich, it can make you richer than that... but it can't make you the richest

Think Arabians hit the nail on the head here.

Scalping (or short term trading), per unit capital, will make more money than a swing or position trader.

But it isn't scaleable.

the techniques of short term trading are highly reliant on entry and exit price - in some cases, there is a 1 tick/point margin of error. The price you can get in the market for 1,000 shares and 10,000,000 shares are different!

So, while it is true that the % returns are better for short term trading, they flatten out pretty quickly. There comes a point where the market just isnt deep enough for you to get your quantity at the precise price you need in order to make your trade.

Position / swing trading, on the other hand, is scaleable.

 

[Bolimomo]

Could you clarify this statement please?

As you might have guessed this is a nontechnical topic of discussion. So why let it down with such nonsense statements?

I can understand what you said about this being a nontechnical topic. I want to understand where you are coming from. Why did you say I made "nonsense statements"? What didn't you like?

 

[theroguetrader]

Scalping

with forex and lots of practice it can yep.. !!

You can turn £10K into £130k in ONE year on just TEN pips per day - but youve got be really conservative with your capital..
I know someone who just trades a few times a " month " - and gets 100 pips off a daily chart - most people have no patience (no surprises there) - and shoot for that every DAY.........

Daily charts will take BIG swings against your open equity and require large stops (if you use them), 4 hr, 1 hr,15 min charts require smaller stops, so as long as your profit target is more than you risked - your making ££ (which is always a good thing)...

Loads of different styles and ways of looking at things and everyones different, as long as you ST I C K with your methodology and dont " SYSTEM JUMP " , if a particular trade turns into a looser ANYTHINGS POSSIBLE........... !!


NOT having a " BOSS " is THE best thing in the world......... !! (well it is for me for sure)..... !!

 

[Gogol]

I can't make consistent profit every day... And want to ask successful traders, how many days in a row you can afford to lose for yourself??

 

[GCC]

I trade full-time for a living now. For over 10 years I had been

trading part-time while had a full-time job as a computer programmer/tech-support.

Thanks for your story again. For other readers I must add that I and Bolimomo actually exchanged a bit in PM, in which Bolimomo stresses again the importance for committment. Let me quote him, "I am not advocating anybody to quit their job and trade full time. But the seriousness and level of commitment is very important. I have seen posters saying "I was gonna make that trade... I was thinking about it... but... ah... I had to walk my dog... so I missed". With that kind of attitude, those people will never make it."

That's exactly what I try my best to do. With my day job, sometimes I got tired when I come home and start to trade. At the moment, my home is exacly 12 hours ahead of New York, so when I got home at about 7:30pm, which is 7:30 am EST, things start moving soon. No time to rest, that's what it means! It's not easy to fight off a day of exhaustion to concentrate, but once you are determined to get good at the business, and when you have the HEART, things can still be done.

And quite the contrary, such a uncomfortable trading condition actually teaches me to take precautions: I avoid trading when it is consolidating (like a falling wedge); I would rather miss a trade than to enter wrongly; and I back-count from 60 to 1, with eyes shutted, before trading. With discipline, you can make profit even after a day of work wears you off.

Could you clarify this statement please?

As you might have guessed this is a nontechnical topic of discussion. So why let it down with such nonsense statements?

I believe this is the place you are looking for.

Position / swing trading, on the other hand, is scaleable.

You can turn £10K into £130k in ONE year on just TEN pips per day - but youve got be really conservative with your capital..

Thank you. I think this is precisely the sort of answer I was looking for when I started the thread. It nails down the important point. There is another member in the forum gave me a similar feedback in PM, "scalpign allows you to increase size rapidly. eventually this size will move markets hence you switch to longer TF."

I can't make consistent profit every day... And want to ask successful traders, how many days in a row you can afford to lose for yourself??

You may look at my reply to Bolimomo to get some insights. I believe you are lacking discipline for trading success. The famous trading writer Mark Douglas once said that with the right mental attitude, you can benefit even with the most mediocre systems in the world.

 

[Bolimomo]

Thanks for your kind words, GCC.

I can't make consistent profit every day... And want to ask successful traders, how many days in a row you can afford to lose for yourself??

As for Gogol: I don't think it is a matter of "how many days in a row you can afford to lose". How many days doesn't count. As you can lose small, or you can lose big. If you lose small, you can sustain many days and are still okay. But if you lose big, even one day can wipe you out.

You may want to read up some materials on "money management". Almost all trading books talk about it. Money management is very important. The small losses and small gains will balance each other out. It is the big losses that you must control. If you can't control big losses, there is no way to get ahead in this business. If you can have no big losses, then the big wins are what bring up your equity curve.

 

[GCC]

Rumor: FINFA wants no more leverage!!

http://www.trade2win.com/boards/forex-discussion/59054-death-leverage.html
FINRA trying to close the retail forex market? - Forex Forum - FXstreet.com

The end of the scalping era?!

 

[Mr. Charts]

There are plenty of US stocks where you can trade tens of thousands of shares without affecting the market. Obviously smaller less liquid stocks might be affected by a larger position size order printing.
In any case you can scale in as well as out. If you want to trade 5,000 or 10,000 of something and the depth apparently is not there, you can break your order up and work it.
There are also occasionally situations in medium liquidity and depth stocks where your order can be the tipping point and initiate or accelerate a move.
Another overlooked factor to consider is one I've already alluded to, the ability to repeatedly trade using the same capital. This is like a military force-multiplier effect. If your ground attack aircraft can carry more ordinance and have a quicker re-fuelling and re-arming turnaround time than less efficient aircraft, that is the equivalent of being capable of more sorties with the same assets.
Richard

 

[tradespreads]

I can understand what you said about this being a nontechnical topic. I want to understand where you are coming from. Why did you say I made "nonsense statements"? What didn't you like?

Could you clarify this statement please?

As you might have guessed this is a nontechnical topic of discussion. So why let it down with such nonsense statements?

I see you are no longer taking offence to my comment.

To clarify what you have written. It is not a question of what I like or dislike.

Indicators and charts are not fractal in nature! You can not even say that about an indicator. An indicator is what it is, "an indicator". Put in your thinking, an indicator merely describes a chart at certain discrete points, perhaps "continuouss" in time.

It is the chart that you should really be interested in. A chart can be deterministic or nondeterministic but not fractal. I will not bother with the definition of a fractal here. Charts are actually nondeterministic and run according to an underlying motion/motive which is random in its nature. It is then the task of the trader to make some sense of chart data through indicators, albeit on short term intervals. A fractal on the other hand is something completely different.

 

[tradespreads]

I believe this is the place you are looking for.

No it is not! I do not condone disregarding indicators.

Please don't second guess from my earlier comment.

 

[Gogol]

Thanks for your kind words, GCC.



As for Gogol: I don't think it is a matter of "how many days in a row you can afford to lose". How many days doesn't count. As you can lose small, or you can lose big. If you lose small, you can sustain many days and are still okay. But if you lose big, even one day can wipe you out.

You may want to read up some materials on "money management". Almost all trading books talk about it. Money management is very important. The small losses and small gains will balance each other out. It is the big losses that you must control. If you can't control big losses, there is no way to get ahead in this business. If you can have no big losses, then the big wins are what bring up your equity curve.

I know what you mean... I have certain amount for the day to lose I set for myself. I can reach it by 4 to 6 stops and that's it, I'm done for the day. And that's why I also have a minimum profit I must get in 1 trading day, it's 1.5 greater than my lost amount. But... something wrong here, because I have no visible results in my bank account...
And want to add, I can control big losses, I mean I have no big losses anymore, but the problem is I can't take big wins, maybe that's why I'm balancing around zero so far...

 

[GCC]

No it is not! I do not condone disregarding indicators.

Please don't second guess from my earlier comment.

That's great. I don't think indicators by themselves are good or bad. It's just whether you make a profit with them or not.

There are plenty of US stocks where you can trade tens of thousands of shares without affecting the market. Obviously smaller less liquid stocks might be affected by a larger position size order printing.

I think you are referring to an earlier comment that scalpers move on to be position traders because of increased size. Well, I think when that person said that, what he had in mind was those big fund managers who started off as a scalper, instead of individuals who would seldom get to such position. Still, I wish you all the best of luck so that one day you may move the market too.

I know what you mean... I have certain amount for the day to lose I set for myself. I can reach it by 4 to 6 stops and that's it, I'm done for the day. And that's why I also have a minimum profit I must get in 1 trading day, it's 1.5 greater than my lost amount. But... something wrong here, because I have no visible results in my bank account...

I am afraid I don't get what you mean by "reach it by 4 to 6 stops". Perhaps that's because we are not familiar with your methodology. Do you use multiple entries? If you describe your method in more details we may be able to help you.

 

[Gogol]

I am afraid I don't get what you mean by "reach it by 4 to 6 stops". Perhaps that's because we are not familiar with your methodology. Do you use multiple entries? If you describe your method in more details we may be able to help you.

Just meant that I reach my fixed amount with several negative trades... with 4-6 trades.

 

[jmarkham]

occasionally I scalp trades in seconds - not recommended for the inexperienced.
Richard

Why is this?