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mentrader

Is Scalper Better Than Day Trader??

By mentrader, in Beginners Forum

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Ammeo    10

Ammeo
Posted

With my experience in trading & investments so far, i have come to the conclusion that long term investing in a single entity is the best thing to do...

After that its the swing trading which is good one...all the billionaires and multi-millionaires that i see today are either long term investors or longer term swing traders..

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BlueHorseshoe    10

BlueHorseshoe
Posted

Firstly, what do you mean by scalper?

 

Assuming you mean buying at bid and selling at ask to make the spread, then there is an advantage if you can do it profitably. The advantage is that your equity curve will be made up of lots and lots of smaller gains and losses making for a much smoother ride (which has significant implications for position sizing).

 

The key concept here has been termed "expectatunity" - a portmanteau of "expectancy" and "opportunity". It is fine to have a small expectancy or edge if you have the opportunity to apply it with sufficient frequency. Think of casinos - the house edge is tiny, but as long as they get enough gamblers through the doors it stacks up to huge profits (hence all the loss-leaders like free food!).

 

In this sense, Scalping is "better" than all other trading, with the exception of true arbitrage.

 

Unfortunately true scalping, which was once the preserve of floor traders and market makers, has now become a HFT dominated game, and is therefore pretty much inaccessible to the retail trader.

 

This leaves daytrading . . . Finding profitable daytrading strategies (great entries and exits) is easy . . . finding ones that comfortably overcome costs is definitely not.

 

Regards,

 

BlueHorseshoe

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MightyMouse    12

MightyMouse
Posted
.

 

This leaves daytrading . . . Finding profitable daytrading strategies (great entries and exits) is easy . . . finding ones that comfortably overcome costs is definitely not.

 

Regards,

 

BlueHorseshoe

 

Daytraders can still find opportunities. The flow of opportunities is very different these last few years from years past. You really need to be like an Eskimo seal hunter waiting patiently for that feather to move. If you do not, then you will expense yourself out of trading.

 

Scalpers: The theoretical advantage of being able to buy at the bid and sell at the ask certainly gave many floor traders an edge. For many traders that edge was not enough. A lot of Floor traders leveraged the relationships the developed with floor brokers who would fill orders for retail and institutional paper, giving floor traders better fills and position than they deserved. Think of the advantage of knowing (back then) that a fund wanted to liquidate 500 contracts of corn at market. Many scalpers relied more on relationships and less on their market savvy.

 

In modern times I think one needs to be naive to think that goldman sachs or any other firm who engages in brokerage and trades its own account, does not use the information that a customer provides to the customer's disadvantage.

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Patuca    13

Patuca
Posted
Daytraders can still find opportunities. The flow of opportunities is very different these last few years from years past. You really need to be like an Eskimo seal hunter waiting patiently for that feather to move. If you do not, then you will expense yourself out of trading.

 

Scalpers: The theoretical advantage of being able to buy at the bid and sell at the ask certainly gave many floor traders an edge. For many traders that edge was not enough. A lot of Floor traders leveraged the relationships the developed with floor brokers who would fill orders for retail and institutional paper, giving floor traders better fills and position than they deserved. Think of the advantage of knowing (back then) that a fund wanted to liquidate 500 contracts of corn at market. Many scalpers relied more on relationships and less on their market savvy.

 

In modern times I think one needs to be naive to think that goldman sachs or any other firm who engages in brokerage and trades its own account, does not use the information that a customer provides to the customer's disadvantage.

so.....manipulation...???

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MightyMouse    12

MightyMouse
Posted
so.....manipulation...???

 

What I described, I would categorize as questionable ethics and illegal trading activities.

 

Certain markets are too big to manipulate. Other markets are easier to manipulate especially when you consider the type of demand ( elastic or inelastic) that certain commodities have. I drive by oil tanks in Connecticut leased by morgan stanley who accounts for about 50-60% of the heating oil delivered each year ( on both sides). Why is the white gloved firm of MS in the oil business?

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BlueHorseshoe    10

BlueHorseshoe
Posted
You really need to be like an Eskimo seal hunter waiting patiently for that feather to move. If you do not, then you will expense yourself out of trading.

 

A funny coincidence - I have just been watching seals hunting emperor penguins on the 'Frozen Seas' episode of Blue Planet :)

 

If the feather doesn't move often enough though, then what's the point? If the frequency isn't higher than EOD trading, then why spend all day in front of a computer?

 

BlueHorseshoe

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MightyMouse    12

MightyMouse
Posted
A funny coincidence - I have just been watching seals hunting emperor penguins on the 'Frozen Seas' episode of Blue Planet :)

 

If the feather doesn't move often enough though, then what's the point? If the frequency isn't higher than EOD trading, then why spend all day in front of a computer?

 

BlueHorseshoe

 

I could not agree more.

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Matt Dye    10

Matt Dye
Posted

I think the better question is what style of trading do you like best? Every trader has a certain style that they will do better at, and that is what you should be looking for. Pretty much all types of trading money can be made, but what you enjoy most will give you the most fulfillment.

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BlueHorseshoe    10

BlueHorseshoe
Posted
is this not the same thing? ...scalper = day trader?

 

TW

 

No.

 

Daytrader = anyone who holds positions for less than a day.

 

Scalper = trading to profit from the spread (difference between bid and ask, often a single tick in liquid markets).

 

BlueHorseshoe

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tradingwizzard    10

tradingwizzard
Posted
No.

 

Daytrader = anyone who holds positions for less than a day.

 

Scalper = trading to profit from the spread (difference between bid and ask, often a single tick in liquid markets).

 

BlueHorseshoe

 

I guess it's more of a nuance......depends on your time horizon.....or maybe I am a scalper on the monthly chart :cool:

 

TW

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T.Chivers    10

T.Chivers
Posted

I found that most FX Brokers do not tolerate scalping, even though they say is acceptable. I tried it using an expert & I saw little success. I have to agree with the others, that day trading is more effective in the long term, provided that you're willing to take the time to analyse the markets.

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BlueHorseshoe    10

BlueHorseshoe
Posted
I found that most FX Brokers do not tolerate scalping, even though they say is acceptable. I tried it using an expert & I saw little success. I have to agree with the others, that day trading is more effective in the long term, provided that you're willing to take the time to analyse the markets.

 

Hello,

 

Do you mean that the broker doesn't allow scalping, or that you had little success, and would like to blame the broker rather than the method you employed?

 

If you're talking about pure scalping (buy bid, sell ask), then then the interbank spot fx market is the very last place to try and do this - you can't see any information about the order book (because there isn't one), so you have no idea how many orders are queued behind you, at what rate active participants are prepared to cross the spread etc.

 

Kind regards,

 

BlueHorseshoe

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T.Chivers    10

T.Chivers
Posted
Hello,

 

Do you mean that the broker doesn't allow scalping, or that you had little success, and would like to blame the broker rather than the method you employed?

 

If you're talking about pure scalping (buy bid, sell ask), then then the interbank spot fx market is the very last place to try and do this - you can't see any information about the order book (because there isn't one), so you have no idea how many orders are queued behind you, at what rate active participants are prepared to cross the spread etc.

 

Kind regards,

 

BlueHorseshoe

 

I tried with an EA & it seemed I never got the price that triggered the trade, but what you mentioned above makes sense. I just avoid it now.

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sergso    10

sergso
Posted
IMO Scalping is much harder than most of the other day jobs..i better be a 9-5 employee than being a scalper..

 

Well said. I agree with that.But it is not even a question about harder or easier job. Some markets do not reward scalpers. Example.

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