Bid/ask spread killing my profits

Apr 24, 2012
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#1
Hi guys,
I am a newbie day trader, just starting out. I'm currently "paper" trading using scottrade's virtual trading platform. I tried day trading with my own money before, but there was no method to my trading-i was just going based off of hunches and was not really serious about it. All of the technical indicators seemed intimidating to me, so I felt like I did not really know what I was doing.

Now, I just trade the opening range breakout using the first 5 minute candlestick of the day. The only indicators I use are price, volume, and trendlines.
I have been having a lot of success with paper trading by getting in, scalping a one cent bounce in my favor and quickly getting out.

I use "trade-ideas" to identify stocks with potential breakouts that I could trade using my strategy.
Although I am happy that I am doing well in paper trading, I know that if I was trading with my real money, a lot of my winning trades would just be break even trades.
I was wondering if you could give me advice on how to get around the fact that the bid ask spread causes me to take on a 2:1 risk/reward ratio as soon as a buy a stock (if my goal is a 1 cent profit and the bid/ask spread is one cent apart).

I already do not trade any stock with a b/a spread of more than one cent, and use nasdaq velocity and forces as my main technical indicator regarding my timing into a stock.
Thanks!
 

Shakone

Well-known member
Feb 27, 2009
2,458
665
123
#2
The bid-ask spread does not cause you "to take on a 2:1 risk/reward ratio", your profit target, and your stop does (is it really a 2:1 risk reward anyway, sounds like worse). You can change this target, and in my opinion, you should.