Simple probability kicks in - the greater the number of trades, the greater the cumulative probability of something disastrous happening.
JBat not sure I agree with this. A disaster in my book would entail a market going against my position by a number of ticks that far exceeds my stop loss. This could be due to, say a geopolitical calamity, exchange failure or surprise interest rate cut. Why do you think frequent trading increases liabilty to such an external shock? The requirement for vulnerability is merely that one has an open position at the wrong time. Traders who trade less frequently tend to be in the market for longer, while scalpers will dip in and out all day; either can be caught short. In fact I would say position traders might be more vulnerable because they are actually liable to be in the market for a longer total time than scalpers, prey to overnight surprises and possibly not available to react to news adjust stops etc. as quickly.
Agreed, a scalper is likely to be doing more size and obviously suffering 50 ticks slippage on a 20 lot is worse than on a 1 lot. However his stop is also likely to be much tighter than his position trading friend's which means more chance of being filled close to the last price in a disaster scenario, before everyone has had a chance to pull their bids or asks.
An intraday chart of ES from 15 Oct 1998 would be very handy at this point, but sadly I don't have one. I gather there was tremendous slippage as news hit of Greeno's surprise interest rate cut. It would be useful to know what my disaster scenario might be if a similar thing were to happen again (it will!), assuming tight stops already resting in the market. Quite surprisingly on 9/11 it was easy to get out but of course then it took some time for the enormity of the situation to filter through, whereas the fact of an interest rate cut is not open to interpretation and hits the wires very swiftly.
---
I'd like to distinguish between what I'd call purist scalping, i.e. working the bid/offer and going for literally one or two ticks hundreds of times a day and the sort of retail scalping I indulge in, i.e. going for 4-12 ticks tens of times a day. The latter is possible in a retail environment, while the former would be suicidal at retail commission rates. Purist scalpers also depend on very low latency and very fast equipment, feed, platforms etc. to whch the retail trader may not have access. One thing he can do to mitigate costs is become an exchange member or lease a seat.
Being a lazy type I dug this up from another thread -
There may be an advantage to trading from one particular time frame (with an eye on those around it too, of course) while the dominant pulse is easiest to read in that time frame. There are times when fine detail may give the best view (e.g. during extreme volatility such as post FOMC, NFP etc.) and others when more distance reveals the cleanest waves.
Technically it is easier to predict what is likely to happen a short time away than a long time away. There is less time for surprises. So in this respect a micro time frame may offer an advantage over a longer one - higher probability trades and a higher hit rate - though the more microscopic one goes, the more commissions are incurred (assuming quick exits). But there is more money in shorter time frames. Well, there should be because one is working much harder and more frequently than, say, the position trader who puts on three or four trades a month.
On the other hand, if the market is fractal and random then mathematically there shouldn't be an advantage to any choice of wavelength, as long as position sizing etc. is scaled up or down appropriately.
Does it matter, to oversimplify hideously, if I trade off a 1 minute chart with a 5 point stop loss and 10 point target using 60 lots or off a 30 min chart with a 150 point stop loss, a 300 point target using 2 lots? Assuming I am equally proficient in both time frames then as far as my capital is concerned, no. However this ignores the vital time factor, an opportunity cost. Trader A can make several trades per day whereas Trader B clearly will not. Thus Trader A can make more money in the same time for the same risk. Frequency is good.
Scalping allows for increased trade frequency and more efficient use of capital.
e.g applying the usual risk 1% of capital malarkey on a 25k account say I could risk $250 per trade on Dow futures. Assume a 50% hit rate for sake of argument.
Could do a 2 lot swing trade with a 25 point stop and a 50 point target.
Might get two of these a day. L 25 pts *$5 p/pt * 2 lots ; W 50 pts *$5 p/pt * 2lots: total gross profit $250.
Or a 10 lot scalp with a 5 point stop and a 10 point target.
Might get twenty of these a day. L (5*5*10)*10 ; W(10*5*10)*10 total gross profit $2500. Even after retail comms at $3.50 r/t that's still $1800.
Finally as JO deftly indicates who's to say one can't mix it all up? e.g take a scalp off a tiny time frame that happily turns into a day trade that turns into a swing trade. If it keeps going your way then you can hang onto it for very little initial risk. In this way perhaps you make use of several time frames to your advantage, zooming and scaling out as the trade keeps running.
We should have many tools in our box and scalping is just one of them. It is ideally suited to some conditions, suboptimal in others. I am not a system trader with rigidly defined entry / exit criteria (though I do of course follow some rules) so I have some freedom to sniff the air as the day unfolds and adjust my approach accordingly. Sometimes it works, sometimes it doesn't (the result of a partially developed discretionary method). So one day I feel like an idiot scratching for 10 pips against the trend on a 200+ up day. On others I will hold 2 lots long with the morning trend, while scalping countertrend shorts on the pullbacks until it reverses down after lunch and I can run the last scalp as a swing trade and switch to countertrend long scalps. Those days feel good.
I actually rather like working and putting in screen time, but I am probably sufficiently young, simple and green to find the daily challenge of bar-watching and pushing buttons a fascinating, novel and satisfactory way to spend the day. Each day is different and at the start of one I have no idea of the trades I will make. Besides I figure the more of it I get under my belt now the easier and more profitable it will be to step back later in life. Screen time is the best way I can find of learning about market behaviour so it's an investment gladly made.
To answer your question, my nature is such that I find short term trading a lot easier and more productive than swing or position trading, but am occasionally pleased when a shorty grows up into a swing.
Sorry wasp you wanted banter and got a tedious disquisition instead.
