Why Don't Most Day Traders Scalp?

[TheDude 10]

Velocity offer help with a seat lease.

Otherwise, OEC and IB may offer better RT's. OEC for sure.

 

Who are you with currently?

[MightyMouse 12]

Scalped/daytraded ES today.

 

Gross Profit $1400.00

Contracts traded: Bought 125 and sold 125

Trades 35 trades

Winners 31

Losers 4

Win Rate 89%

Average loss: $100.00

Average win: $45.6

Commisions $625.00

 

NET PROFIT $775.00

 

I decided to trade some in 10 lots. usually would take 1 to 3 tick profits. Among other things I also use fib levels. I trade on an hourly chart but I look at the 3 fib levels on the previous day chart. Also on the precious 1 hour bar. Also on the intraday 1 hour bar in which I am trading. When fibs line line up in all the price frames and price trades close to one of the fib levels and just hangs there I will scalp multiple times until it breaks thru the level or drops back off. That is one of the techniques I use. I can sometimes get 1/2 point over and over until price breaks down or breaks out. When the intraday trend is down on 1min,5min,15min,30min and one hour chart I will short retracements back up to one of the fibs if price hold there for a while. Especially, if it is a fib line that shows up close in all three chart. Present 1 hour. Previous 1 hour and previous days chart.

 

What is still hitting hard is the commissions. Does anyone have any idea what price range I should try to negociate? Figuring trading 60 to 80 contracts RT a day???

 

Also when scalping the ES I am learning that if I want to capture 1/2 point I have to go for 1 pt and allow 1 tick for entry and one tick for exit...slippage.... etc. The ES moves fast. The ES is new to me. That is, scapling the ES. I have scalped stocks and swingtraded stocks for years but am trying my methodolgy on the ES. Next will be NQ and YM. I want to try and figure how to trade 2 or 3 instruments. I get tired of the analysis of multiple stocks...etc. Trying to simplifiy things. One thing I don't like is the commissions when scalping. It irks me. I know it is a cost of business but I didn't realize just how costly it is when scalping ES. It runs up real fast. If anyone knows a broker that gives better deal on say 80 cars RT day let me know. I pay 2.50 each way per contract. Is that a bad price? Have a happy New Year everyone!

 

Make sure you try your strategy under many different market conditions before you start trading live. When volatility picks up, you will likely get killed if you decide to double your position size on a whim the way you did on this day.

[Tradewinds 12]

Here is one issue that I have seen with scalping: Price goes to a new level, and if you take profit on the first wave, it's very difficult to get back in at a better price to ride the second wave in the same direction. For example, if you are in a long trade, and your trade went to a profit, and then the price slowed down before another run up. There are times when you could exit, and re-enter at a better price, but there are also times when it would not be possible. So if you scalp your profit early, then you miss out on the next price surge up.

If price needs to trade through your limit order, there is often not enough range on the bar to get out, and get back in before price shoots up again. For example, trading the ES. I see this all the time. The price will surge, then pause, and the range on the bar is 3 ticks. Well, if the price needs to trade through your limit order to be guaranteed a fill, then you need 4 ticks to safely get out, and then get back in.

If you were long, you would need to take profit at one tick lower than the price went to, and to get back in at a 1 tick better price, the price would need to fall back down to one tick under your entry order. That requires a range from the high to the low of 4 ticks, and you would need to enter and exit the absolute perfectly priced order. I'm not saying it can't be done. All I'm saying is, that it's an issue that needs to be factored in.

In my opinion, the best thing to do, is to first ADD to your position at the better price for your exit, then exit. So you are "leap frogging". If you were long, you would add to your position right before the exit target, then wait for the exit target to be hit, and decrease your position back to the original amount. It's counter intuitive, but it's the best way to exit and then reenter at a better price than the exit price. Of course, if you are wrong, and you increase your position right before a reversal, then you've have just increased your loss potential. So that risk needs to be factored into the strategy.

[jtrader88 10]

I'm not sure what I'm missing, but it seems that scalping is incredibly profitable with enough capital.

Start with 3k

Open an account with Interactive Brokers.

If you find a stock that oscillates about .1 percent, you'll be making a minimum of a dollar profit every time you trade after spending about two dollars for a round trip purchase.

Let's say you trade once every minute, that pretty much guarantees you sixty dollars each hour and usually it's way more than that.

Imagine the same oscillations except with more base capital. 30k equals at least six hundred dollars each hour...that's 5.1k in a day. My parent's didn't make that much in a month.

 

So why don't many people scalp? When does it fail?

 

Have you ever tried this even once in a LIVE account?

[PhilBeachBoy 10]

The premise of the first post has to be the most ridiculous I have ever heard in my forty year career. Maybe this response is a waste of a first post, but my instincts compelled me to speak. Iamwallex, that you put the word "guarantee" in bold type adds frosting to this cake of idiocy. Whatever literature or article or forum post or anything one could possibly looke at or study could never lead you to the conclusion that anybody could always make money and that it is as easy as you think to just start buying and selling and you need a shovel to clear the surplus dollars out of the way so you can get your Mercedes down the driveway without the tires slipping on the new hundred dollar bills. You need to go away and take up some other profession and not embarass us traders any more.

[Trader_Matt 10]

I have been day trading the es for many years and have seen many traders come and go. I just wanted to say that for those of you who want a lower commission per round trip private message me and I will hook you up with my broker. In the interest of fair disclosure and in anticipation of non-thought-out replies, I am a trader and get nothing from my broker by referring people to them. Just trying to keep commissions low.

[bakrob99 11]

Have you ever tried this even once in a LIVE account?

 

Of course not. This is possible only in simulation mode.

[xaugh 10]

My two cents. (skip if you don't like long winded posts) Under certain market conditions it is possible to make good money scalping. First you need a volatile instrument like the CL or the DAX. The CL will tend to oscillate at least 10 ticks as it moves; the DAX will oscillate at least 12 ticks as it moves (in a two sided market). For the purposes of scalping you must stay away from grinding directional markets or tightly coiled range markets. Second you must use a hidden stop (one that is generated by your platform) because with these instruments, even though the liquidity is good, the depth and volatility allows the movers who can see your stops to grab them. You must use a secondary disaster stop, far from price action, that triggers a market order and sits at the exchange to protect against possible huge momentum moves that can materialize without warning. (With these instruments that means more than $750 to $1200 per contract depending on slippage). You have to stand in front of price during a pull back using the current oscillation magnitude as a guide. You cannot wait for a momentum indicator because by then the low risk scalping opportunity will be gone. Skilled reading of price action on the DOM can help. You must be willing to double down on a momentary spike against you and then scratch (covering commissions) on the reaction. Then evaluate if a reversal is beginning. If the sudden move against you just briefly pauses and keeps going then that is what the hidden stop is for. You will want a tighter stop on the double down entry obviously and this all has to be done automatically since the market can and often does move too fast to manually react. Sophisticated front ends can be leased at a very reasonable rates to accomplish this. There is no room for any hesitation and your success will depend on your "feel" for the market. High levels of skill and trading experience are also a prerequisite. Use of real time market metrics and current inter-market relationships are required to increase the odds that you are on the right side of the market at the moment. A scalp in these contracts should net you about $80 per contract and only take a few seconds. This minimizes commission and spread effects. Only scalp in the direction you feel the market may break or is already moving. After a period of range bound trading and based on "feel", experience, indicators (dare I say discretion) you can leave an open target to take advantage of initial momentum moves (no pullbacks) of $250 to $750 per contract. These moves are relatively common with the above mentioned contracts and serve to counter the loosing trades. Once a trade is in the green never let turn into a loser. You will scratch many trades but my definition of a scratch includes covering commissions so you will also make $6 or $8 per contract. Often these markets will pull back just before making a big move (to make sure as few traders as possible are on the right side of the move). In order to stay in the market it is often possible to double down, lowering the BE, and scratch half on volatility. This can be done several times if there are still sound reasons for being on that side. When the move comes it will usually be explosive and with your superior trade position you can trail a stop at 30 ticks or more often capturing a gain of thousands of dollars per contract. Sometimes you will even have the double position when this happens. This is bonus time. It goes without saying that if attempting to trade these types of contracts with wide stops one needs a minimum account balance of 80 to 100 thousand dollars, if only to be able to handle the huge numbers psychologically.

[phantom 16]

I've found good success in CL trading 30 tic range bars consolidation breakouts with a 20sma trend filter. (Thus, I don't ever add to a loser).

 

Risk per trade is $320 but very easy to get profitable in this environment.

 

Check it out!

 

 

Luv,

Phantom

[xaugh 10]

Thanks Phantom. I like range bars but have never tried using large ones. The key in your success, I would venture, is the use of what many would consider a large stop. Have you ever tested the viability of reversing at your stop?

 

Xaugh

[steveh2009 10]

You may find that your survivability chances go up if you're willing to lose more often, lose very little on those losers and add to trades when you're winning. On a futures contract such as the CL, you can have one winner take back anywhere from 3 to 60 losers, given that 1 loser averages out to 10-12 ticks.

 

Think...arithmetic losses...geometric gains. Let the market catch you holding your smallest position when you are at your most vulnerable part of the trade (i.e., initial position) and have you holding your larger positions as the market is showing you that increasing your position is the right thing to do. The caveats to this which make it ideal are to trade a volatile contract (e.g., Crude futures) and to never take worse than a break-even loss once you start leveraging up your trade.

[noego 10]

I'm not sure what I'm missing, but it seems that scalping is incredibly profitable with enough capital.

Start with 3k

Open an account with Interactive Brokers.

If you find a stock that oscillates about .1 percent, you'll be making a minimum of a dollar profit every time you trade after spending about two dollars for a round trip purchase.

Let's say you trade once every minute, that pretty much guarantees you sixty dollars each hour and usually it's way more than that.

Imagine the same oscillations except with more base capital. 30k equals at least six hundred dollars each hour...that's 5.1k in a day. My parent's didn't make that much in a month.

 

So why don't many people scalp? When does it fail?

 

True scalping is something very few people (<3%) can successfully do long term. FACT. No offense...really, but what you are missing is the experience necessary to even frame the question. How would you possibly know when a "stock" is going to oscillate vs. trend out without really spending time learning the craft watching a live market. Also....as far as the $3k in an IB account, pattern day trading requires a minimum of $25k or you are limited to just a few round turns a week. "Guarantees" of ANYTHING in trading (profit per hour,day, week, month, year) are not only not possible but improbable. Traders who have earned their stripes simply take what the market gives based on their own reward/risk parameters/setups and nothing more or less. Again no offense to you or your question but your inexperience and current back testing method of finding a stock that "oscillates" a minimal amount are a recipe for disaster.

[JerryHatfield 10]

I'm not sure what I'm missing, but it seems that scalping is incredibly profitable with enough capital.

Start with 3k

Open an account with Interactive Brokers.

If you find a stock that oscillates about .1 percent, you'll be making a minimum of a dollar profit every time you trade after spending about two dollars for a round trip purchase.

Let's say you trade once every minute, that pretty much guarantees you sixty dollars each hour and usually it's way more than that.

Imagine the same oscillations except with more base capital. 30k equals at least six hundred dollars each hour...that's 5.1k in a day. My parent's didn't make that much in a month.

 

So why don't many people scalp? When does it fail?

 

Hoo boy, are YOU gonna get flamed over this one!

 

The biggest cliche I've seen on this topic is that scalping is "Like picking up nickles in front of a steam roller." I'm nearly 60, and I can barely recall actual "steam rollers," so it must be an oldie but goodie.

 

I'm not sure who your Forex dealer is. But if it's someone like FXCM, whose spread on the EUR/USD runs an average of about 2.7, and all you're looking for is to make "A dollar," you'll only make a bundle for FXCM or whoever it is you trade with.

 

Now, some people say that my trading style is "scalping." Sure, some trades go VERY quickly, especially when I trade the m1 chart (but that's rare), and I'm happy with ANY gain, but I do try to take more off the table than I leave for the broker. I also have several long-term trend following trades that I'm fine with. Ask ant two people how they trade Forex, and you'll get four or five opinions. Personaly, I find scalping works best for me in a moderately volatile market. Where it fails? Just what you mentioned: "Imagine the same oscillations except with more base capital. 30k equals at least six hundred dollars each hour...that's 5.1k in a day." That, my friend, is the "Greed" half of the trading equation of Fear/Greed which drives the markets. If you possess the confidence and the capital to experiment with, by all means, give it a shot. Please let us know how you did.

 

IMHO, I suspect all those people that are so down on "Scalping" are those that did a bit, made some money, got the big $$$ in their eyes, extrapolated their trading level, and got burned on a reverse breakout. This cliche is called "Sour grapes." :crap:

 

Anyway, best of luck, and ignore the flamers.

[jwhtrades 10]

Sorry to display my ignorance but I use NinjaTrader and am a bit confused when you say 30 tick range bars. I can use a tick chart with a setting of 30 or a range chart with a setting of 30. Could you clarify for my sake,

 

Thanks,

jwhtrades

 

QUOTE=phantom;124453]I've found good success in CL trading 30 tic range bars consolidation breakouts with a 20sma trend filter. (Thus, I don't ever add to a loser).

 

Risk per trade is $320 but very easy to get profitable in this environment.

 

Check it out!

 

 

Luv,

Phantom

[nakachalet 10]

IS there a "how" to know? If so, why aren't there a lot more scalping daytraders?

 

those who are successful and profitable most probably would not care to stand up, nor stand out nor to be viewed as such.... :crap: excepting those pretenders who want to merchandize something in exchange for your hard earned money.

 

most are truly busy.... further fine tuning their setups to scalp even more with maximum favorable excursion and such....

 

:haha: just curious, just how does anyone know if there are not a lot more scalpers daytraders alive and doing well....

[nakachalet 10]

I would think there are very few people who make a living doing this.

 

Really basic, I think scalping is 1:1 risk/reward. So the win:loss ratio is critical. Let's say you get 2:1 consistently. Then take out your brokerage or spread or commissions and see if it works. Or work it back the other way and see what win:loss you'd need to make to be profitable. I doubt it would stack up.

 

Anyone who has done this for a while says the money comes in letting winners run. Scalping doesnt achieve that.

 

And besides, if you are trying to set this up as a business, which does not rely on you working every single day to keep making money, then scalping isn't ideal.

----------------------------------------------

Anyone who has done this for a while says the money comes in letting winners run. Scalping doesnt achieve that.

----------------------------------------------

i am just curious, just why does scalping.... not allowed any trader/scalper to let the runner run on and on....

 

perhaps, just too many here have not been exposed to nor associated with those scalpers who could, who would and who rather remain way back in the room.... :missy:

 

cheers every one, particularly those scalpers who are learning how to scalp.... just sim trade for at least several months.... until you are able to demonstrate to a second or third significant others that you are indeed profitable.... before trading real time.... first time.... wishing everyone the best of luck in your trading live or otherwise....

Edited August 5, 2011 by nakachalet

[nakachalet 10]

It puzzles me too. BUT, the downside of scalping is covering your spread, not staying in the more profitable moves and dealing with ranging markets. It is also very intense - no problem if you want to be that active and you win a lot more than you lose.

 

You read a lot about 90% or whatever ratio of new traders failing. We also see many people saying that you shouldn't scalp but trade on daily/hourly or whatever chart. Hmmm. I say if it works for you, stick with it.

 

I've spent a fair bit of time with 50 tick and 100 tick charts attempting do do what you describe. I have to tell you that for me its been more profitable to deal on a longer time frame. Not that much longer - 15 min, 5 min and 3 min charts for strategy and 1 min for in and out decisions.

 

The reason I changed from ticks to time is that my platform won't carry through support and resistance lines on tick charts.

 

it is a popular belief that using 1 min chart to get in and out is a proper thing to do....

 

no, there is no way that anyone's 1 min chart would provide longevity for you to go long or short in your trade....

 

the 1 min chart would only chop you up and spit you out like fermented chinese tim-sum....

 

you need more than your 1 min chart to trade or to scalp....

 

many of you might retort.... ok, smart alex.... if 1 min chart is NOT THE CHART TO USE to get in and out like so many people and guru proclaim.... then what is....?

 

every trader before becoming successful and profitable must find out first.... what kind of trader am i? until you can find out for your important honorable self.... what sort of trader you are.... you are better off, not trading live yet.... it is very much like if you are unable to find out what makes you sick, why bother to waste money to buy med to cure your yet unknown illness.... cheers everyone and hope you'll be profitable soon.... :helloooo:

[nakachalet 10]

I am a scalper. Trade emini. oso set for 3 tics start with a 6 tic stop loss then adjust it lower after entry is filled. usually use limit orders but not always. Also quickly adjust profit target if I dont get immediate fill. never stay in a trade longer than 45 seconds. maybe 1 minute if lunch time. Friday was typical summer day. 27 trades filled 3 losers, 1 4 tic, 1 3 tic,1 2 tic. 2 winners less than 3 tics. 80% of trades are with my trend . Have only 2 against trend set ups I will take. I use just 1 chart for trading. Use mkt profile and cycles.

 

A trade example is is hit VAH and get a short signal. Go short. get my 3 tics . Using MP I am expecting price to continue to rotate down Next target is either POC or a cycle point. If I have at least 6 tics room to target I go short again on next short signal..I deal stop is still above VAH but depends on entry and what price is doing. Profit target is also adjusted depending on volume at upcoming prices.

 

Example profit target should be 84.25 but heavy volume is at 84.50 will move to 84.50 on a short from 85.

 

After costs still make over $8 on a 1 tic trade so even if I just take all 1 tic trades I make $. For me this is a job so I need to make a daily paycheck. I used to trade other methods that meant staying in for the ride but I got very tired of making 15 points one day and losing 10 the next.

 

hunter1

 

thx for your elaboration on how you traded profitably....

 

i would be even much more interested in seeing how you trade in graphics terms....

 

wanna show us your trading techniques as you described.... by capturing your screen and post here for everyone of us.... to perhaps learn from your profitable trades, pls....

 

many can write a beautiful dissertation but then it remains a weighty dissertation.... with no real practical use nor profitable application for any one.... now i am not challenging your honorable self now, ok?

 

thx in advance for taking time to show us how you traded profitably by not words alone but also showed some graphics presentation to accompany your dissertation, k? thx agian, hunter1....

[JerryHatfield 10]

----------------------------------------------

Anyone who has done this for a while says the money comes in letting winners run. Scalping doesnt achieve that.

 

perhaps, just too many here have not been exposed to nor associated with those scalpers who could, who would and who rather remain way back in the room.... :missy:

 

 

Ya know what, this thread is almost annoying.

 

The term "Scalping" is misapplied to very, very fast pivot, or swing-type trading, and not everyone can do it successfuly (READ: Profitably). It's just words. If I say that a certain politician "Had dinner with a group of friends, that's fine." If I instead say a certain politician "Met at a restaurant with a bunch of cronies," well, this has an automatically negative connotation.

 

I dont recall seeing Day-traders in the stock, options or futures markets called scalpers very often, and they're usually only picking up pennies per. Sure, they catch a "BIG" move once in a while, but remember that a nickel a gallon move in unleaded gasoline is the same as a $2.10 move in crude oil. Both moves net around a couple of K per contract. You need to find some volatile items to trade EVERY day, and with the exception of those stocks you see on the most active list, this can be a real challenge. Sure, the books make it sound easy, but I can write a great how-to book using hindsight.

 

I "scalp" when a major pair is bouncing around enough. I"ve had great luck with the EUR/USD and often with the CHF and GPB dollar pairs as well. Even the Yen had unassed a couple hundred pips on a good night "when I've given it serious effort and undivided attention." As for a profit, you simply have to beat the spread. If you care to "scalp", you need a very good feel for pulse of the pair(s) you are trading, and a fast finger on the mouse. There isn't time to compute r/r ratios, and by the time you've drawn a line or fibs, you probably missed that opportunity. Don't even try to do it with stops or limits, although they can be helpful in a slower ranging market. For me, it only works when it works, and I'm not too proud to call a full 4-5 pip, point or whatever you care to call them gain, a "win." Especially when I rack up a dozen of them in a couple of hours.

 

As for "Letting winners run," the very nature of a market ripe for scalping precludes having any "running winners." I don't know why this isn't obvious to anyone who thnks about it for even a moment. :doh: I'm as pleased as anyone to watch a winner walk a moving average or outer Bollinger Band, and I do long and short trades as appropriate. I've let some run for very long periods. I don't have the prejudice of not holding a position overnight if everything says it's ok. But be sure it's already well in the black, and there's a stop in there somewhere!

 

Play you own game, and tune out the extraneous noise and twisted, misused words. It'll make you crazy. If you see something you like, take it, try it out, and see if it works for you. But don't let someone elses prejudices influence you. One persons scalping is another's pivot point trading. You can call what I do a bagel with creamed cheese for all I care. As long as I make a profit. The real "Scalpers" are the Forex brokers who collect the spread on every trade going and coming.

 

Good trading.

[Enigmatics 10]

Today I took scalped/daytrade 37 trades. They ranged from 1 to 5 contracts each trade. I traded a total of 80 RT ES contracts.

 

Gross Profit $862.50

 

Total winners 34. Losers 3 .....Win/loss ratio 92%

Average win $25.37

Average Loss $100.00

Commissions RT $400.00

Net Profit $462.50

 

The win/loss ratio is still good. I took two fairly good size losses ($100.00 and $150.00 and one small loss of $50.00) that really skewed the average loss figures. I just judged the direction wrong and bit the bullet when I had to. Average win figure about the same as yesterday. What is killing me is the brokerage commisions. It costs me 2.50 each way. I have never approached a brokerage about getting a good rate for scalping purpose. Today I traded 160 contracts. That is I bought 80 and sold 80. The 5.00 RT makes the commissions 400.00. Makes one feel like they are working for the broker. Not so sure I like this method. Does anyone know about what I should be paying for commissions trading this way. Lets say I buy on average 60 contracts and sell 60 per day. What kind of commission rates should I be talking to my broker about??

 

Thanks

 

Good trading, but IMO that is a lot of dead money tied up in comms ....

[Enigmatics 10]

True scalping is something very few people (<3%) can successfully do long term. FACT. No offense...really, but what you are missing is the experience necessary to even frame the question. How would you possibly know when a "stock" is going to oscillate vs. trend out without really spending time learning the craft watching a live market. Also....as far as the $3k in an IB account, pattern day trading requires a minimum of $25k or you are limited to just a few round turns a week. "Guarantees" of ANYTHING in trading (profit per hour,day, week, month, year) are not only not possible but improbable. Traders who have earned their stripes simply take what the market gives based on their own reward/risk parameters/setups and nothing more or less. Again no offense to you or your question but your inexperience and current back testing method of finding a stock that "oscillates" a minimal amount are a recipe for disaster.

 

Join a prop firm (some only require 5k) and you can day trade.

[JerryHatfield 10]

noego wrote: "True scalping is something very few people (<3%) can successfully do long term. FACT. No offense... "

 

FACT: 28% of all statistics are made up on the spot. I think you pulled that number out of your ass. Just sayin'. No offense...

[noego 10]

noego wrote: "True scalping is something very few people (<3%) can successfully do long term. FACT. No offense... "

 

FACT: 28% of all statistics are made up on the spot. I think you pulled that number out of your ass. Just sayin'. No offense...

 

Jerry...I don't take offense. I will simply say this. I have been a professional trader for more than 15 years. I am not the best trader in the world nor do I claim to be anything but disciplined and profitable. I teach trading to 100's of people per year (and no I am not pimping my stuff-. I have a huge data set of proof from other traders as part of my training is evaluating their results. Most of the traders who try to scalp...(matching the number I posted about 3% or less being LONG TERM profitable scalping)...fail HUGE. I network in and through the broker world as part of my business and they all say the same thing....most traders put more money IN their accounts than they take out and the number that make a ton of round turns a day (scalpers) fail at a MUCH higher percentage than those who trade a few times a day. When they leave the broker for greener pastures it is usually with a very large draw down. Not me sayin'...Broker sayin'... The key in the FACT part is Long Term success. Every squirrel can find a nut or get on a hot streak in Vegas but at the end of the week, month, or year most scalpers cannot regularly pull a paycheck out of the market or their ass. Me Sayin' ....No Offense.

[doubletop11 10]

I personally hold positions for hours sometime days. Scalping is what I think of when they say floor traders. Back in the day floor traders could buy and sell the spread and had a great time doing it. They provided liquidity to the market by doing this scalping. However, with the markets now on computers and traders sitting around the world. To buy and sell good spreads just aren't there as they once were. Watch the movie "Floored" on google. Several couldn't make the change to computer trading because they were scalpers with no spreads in the computer world. Just a thought.

[nagesh 10]

scalping is the perfect solution for the today's market voltality, scalping trading should be considered on high or low breakouts with the help of the charts otherwise it will become losing game. day trading and scalping are the two different approaches to trading .