Can scalping make you rich?

[bennie83]

Hey Dino,

Did you get my message by the way?

Regards,

B83

 

[Lord Lucan]

Hi Tom,

Hope you're good and the markets are treating you well. As one of those you know who scalps for a living I'm going to pull you up on a few of these points as they seem slightly scewed by your love of the longer time frame.

This won't make me very popular but based on my experience (those that I know that scalp for a living) they do it because:

a) They have accounts that are too low to swing or position trade.
This certainly isn't the case for any of the successful scaplers i know and i'm suprised you think this. To scalp effectively you need the best kit/ connections you can get so it's arguably more expensive to get into/learn. You can spreadbet longer term positions for pocket change per tick if you want.

b) They cannot sit there for indefinite periods of time without trading as they lack patience.
If you don't have any patience you won't make it either way, you've got to wait for the right opportunities. In current market conditions I'm doing a lot of sitting at my desk and very few roundtrips. Maybe this would be easier if i could take time away from my desk in the way a position trader can.

c) Their temperament is such that holding a position is not their strong point. Therefore it is more profitable to them to take 5 pips out of 20 trades with each one lasting about 5-10 seconds then 100 pips out of 1 trade that will require them to stay in and watch it from anywhere between 2 to 5 hours.
Yeah, I'll give you this one in my case.

d) Their attitude to risk is that the longer you are in the market, the more risk you have so they need to get in and get out quickly.
All good traders will have a logical atitude to risk. Risk is not just dependant on time in the trade but also other factors including position size and volatility. Sure a scalper should have less down days and smaller drawdowns than a position trader but everyone balances their exposure/risk to a level that is right for them regardless of trading style.

e) They find it fun and exciting.
It is!

etc, etc, etc

 

[fayalac]

You can become rich if your system works as you want and you´re investing to win.
lets say you make a trade with 2% of your accountand lets say it paid back an amount equal to half of it so at each trade you are making up to 1%, the question must be answered by you, how many sucessful trades are you making a day?. We all understand that some days are not made for trading because the prices are moving into a very small range so in those cases simply observe and dont take any position, but most of the times the makets offer many opportunities to take positions, if you take more sucessfull positions than bad positions you can become rich with some time and a lot of work. Many scalpers go for less than the spread, if you do that believe me you will never become rich.
You can be if you want.

 

[fayalac]

Yes!

You just described me.

Just my $0.02



In the long, long run, if you have made a huge amount of money, then, I would say that swing/position will make you more money than intraday trading/scalping. I say that because, huge sums of money cannot be moved easily around in many markets but then it does depend on the product you trade I guess. If you are trading 1-5 lots you could scalp the FTSE and make more money, quicker than a swing or position trader. But you get up to 50 lots and you will find that you simply cannot scalp it anymore and the swing/position trader will d*ck all over you. (presuming of course that both employ profitable techniques). Same goes for many of the FX futures markets. You certainly can't scalp Cable with any size in the futures market. In a market like the S&P or the Cash FX then the liquidity is much bigger and you can, no doubt, go on making money for longer. Although this isn't a problem that will affect anyone (I doubt) on here...



I much prefer swing trading. Firstly I'm a lousy scalper but even if I wasn't, the thought of spending even several hours at a time infront of my PC is soul destroying. I'm much happier checking in at regular intervals (e.g. every hour) on the days when I know something may well setup.



This won't make me very popular but based on my experience (those that I know that scalp for a living) they do it because:

a) They have accounts that are too low to swing or position trade.
b) They cannot sit there for indefinite periods of time without trading as they lack patience.
c) Their temperament is such that holding a position is not their strong point. Therefore it is more profitable to them to take 5 pips out of 20 trades with each one lasting about 5-10 seconds then 100 pips out of 1 trade that will require them to stay in and watch it from anywhere between 2 to 5 hours.
d) Their attitude to risk is that the longer you are in the market, the more risk you have so they need to get in and get out quickly.
e) They find it fun and exciting.

etc, etc, etc

 

[ESscalper]

Combination of Both

Maybe the best answer is a combination of both. I scalp ES intraday, but swing/position trade in ETF's. The issue with scalping is, you have to have a consistent method and allow it to average out over time. The advantage to scalping is less capital tied up. Swing trading, you have to be patient as well, but you can scale out of positions locking profit along the way.

The problem with scalping is, as volatility has increased over the last year, stops have had to be expanded. I initially traded es with 5 tick stop for scalping, and have had to expand to 8 tick stop. This requires more trading capital, especially for multiple contracts. I use custom indicators (from Futures Trading System - Emini Trading System) and just trade the system.

For swing trading, I'm more discretionary, but also much more patient. The combination of the two works well, but it's all about available capital.

Interesting conversation.

 

[Tickdoc]

Looong discussion! Did anyone take into account the amount of money paid/lost/sacrificed in spreads, commissions and slippage due to high numbers of trades versus a more long-term approach?

 

[Aspire]

Looong discussion! Did anyone take into account the amount of money paid/lost/sacrificed in spreads, commissions and slippage due to high numbers of trades versus a more long-term approach?

The amount paid in spreads/commissions is completely irrelevant as you should be looking at the profits after costs when comparing the results of different strategies/ approaches.

Of course you need to make sure that when implementing a strategy you are doing it in the most cost efficient way by finding the best broker/clearer for the job though.

 

[zoo]

what difference does the clearer make to the equation? I'm a newbie

 

[Aspire]

what difference does the clearer make to the equation? I'm a newbie

The clearer will charge you a clearing fee which, obviously, will add to your trading costs. You may also want to consider things like the quality of their service and support.

 

[zoo]

The clearer will charge you a clearing fee which, obviously, will add to your trading costs. You may also want to consider things like the quality of their service and support.

Okay, are RCG known as a good clearing company? thank you

 

[Aspire]

I don't really know much about them to be honest although you probably don't need to worry too much about it at this stage. If you're starting at a firm then they will have organised these things themselves. If you're trading you're own money then depending on your circumstances your best bet will probably be to either open a retail account or rent a desk at prop firm/arcade who will already have everything in place..

 

[GCC]

Maybe the best answer is a combination of both. I scalp ES intraday, but swing/position trade in ETF's. The issue with scalping is, you have to have a consistent method and allow it to average out over time. The advantage to scalping is less capital tied up. Swing trading, you have to be patient as well, but you can scale out of positions locking profit along the way.

The problem with scalping is, as volatility has increased over the last year, stops have had to be expanded. I initially traded es with 5 tick stop for scalping, and have had to expand to 8 tick stop. This requires more trading capital, especially for multiple contracts. I use custom indicators (from Futures Trading System - Emini Trading System) and just trade the system.

For swing trading, I'm more discretionary, but also much more patient. The combination of the two works well, but it's all about available capital.

Interesting conversation.

Really valuable info from a pro, thx very much.

 

[new_trader]

Maybe the best answer is a combination of both. I scalp ES intraday, but swing/position trade in ETF's. The issue with scalping is, you have to have a consistent method and allow it to average out over time. The advantage to scalping is less capital tied up. Swing trading, you have to be patient as well, but you can scale out of positions locking profit along the way.

The problem with scalping is, as volatility has increased over the last year, stops have had to be expanded. I initially traded es with 5 tick stop for scalping, and have had to expand to 8 tick stop. This requires more trading capital, especially for multiple contracts. I use custom indicators (from Futures Trading System - Emini Trading System) and just trade the system.

For swing trading, I'm more discretionary, but also much more patient. The combination of the two works well, but it's all about available capital.

Interesting conversation.

That is funny. I have been trading with a 5 tick stop for a while and I am now considering tightening it to 3 ticks...

 

[zoo]

That is funny. I have been trading with a 5 tick stop for a while and I am now considering tightening it to 3 ticks...

What would your profit target be with a 3 or 5 tick stop? You must have amazing execution.

 

[new_trader]

What would your profit target be with a 3 or 5 tick stop? You must have amazing execution.

It is a case of patience and concentration and NO INDICATORS Ignore anyone who tells you that they 'scalp' with indicators. I aim for entries which will show an immediate profit then trail my stop quickly and let the market do the rest.

 

[blancspa]

It is a case of patience and concentration and NO INDICATORS Ignore anyone who tells you that they 'scalp' with indicators. I aim for entries which will show an immediate profit then trail my stop quickly and let the market do the rest.

I think he meant your broker

 

[zoo]

It is a case of patience and concentration and NO INDICATORS Ignore anyone who tells you that they 'scalp' with indicators. I aim for entries which will show an immediate profit then trail my stop quickly and let the market do the rest.

Yeah, I absolutely agree with you.

I'm not a scalper by trade, but I did have ago on my similuated account with a 5 tick stop on ES. Wow, I got whipped around real bad. In fact I think I was down by an imaginary $500 in no time! Probably because I wasn't paying attention, with it being simulated.

 

[zoo]

I think he meant your broker

no, I meant his own execution of trades.

 

[new_trader]

I think he meant your broker

I press the buttons, my orders get filled.

 

[blancspa]

no, I meant his own execution of trades.

well then...
anyway he doesnt speak anything special here I guess with some time spend on training even blind could scalp the market... the way he talks it must have cost him a lot to get there