Scalping profitable?

[BSD]

Whatchoo mean the instruments or trading styles are different ?

Most scalpers I know trade either an index future or the Bund, and anybody can scalp from anywhere in this day and age with connectivity being what it is ?

Don Miller made US$ 2 mill scalping the S&P futures from his home in Boston on a lap top and no additional screens / Bloombergs / shenanigans whatsoever last year ? OK, he is a CME exchange member so gets low fees but that's the only thing that is different between him and your other traders working out of their private office, and you could go for that as well, buying or leasing a membership, eg look what this quick google came up with:

Individual Seat Lease Instructions - CME Membership | Institutional Futures Brokerage :: Variance Futures -

A Eurex non-clearing member I know trades out of his flat in Berlin with all of two monitors, trading the Bund.

And as for psychology, isn't that really up to you and yourself to get a grip on ?

I honestly believe that if you need a risk manager to keep you from pulling dumb stunts you're not cut out for trading or success anywhere in life for that matter anyway.

Most people start at a prop firm because they don't have any money, but once they're flush they'll strike out on their own, maybe start a fund later on, but basically do their own thing, keeping 100% of their earnings.

This strikes me as typical from what I've observed:

Damien: How did you blossom from that environment and jump ship to start your own shop?
Mike: That’s a good question. After a year at the (prop) firm I made enough money to trade my own account. And, for almost a decade, that’s what I did.
Exclusive Interview: Prop Trader Mike Bellafiore at SMB Capital | Wall St. Cheat Sheet

 

[BSD]

I think the ideal progression is to start as a scalper, simply because that allows you to grow your capital the fastest, at the cost of such a style not being compoundable for eventual liquidity reasons.

But if you maintain your mental flexibility to grow your trading style along with your increasing assets in a way that will allow you to truly compound in eventual longer time frame swing and maybe even eventually position trading manner that would appear ideal.

Problem I suppose is that most get stuck in a rut, incapable of growing their game along with their funds.

But this would be the logical manner to progress.

Alternatively, if you want to stick to short time frames, do what the smb founder from the interview above did, grow lots of traders whose profits you will share who can watch / manage far more instruments on short time frames than you could alone.

That's definitely another way of scaling your trading business along with your growing ambitions.

I believe TWI has hit upn the main reason why most fail at either scalp, swing or any other trading horizon for that matter:

I have seen many many people try to do their own thing over the years and I am convinced that there are actually not too many people who can be consistently successful at it. The success does not seem to lie in the method so much as the discipline. I think the most common thing I have seen is for inexperienced traders to lose discipline when thier "bulletproof" method has a few consecutve losses. No matter how much testing and paper trading and pledges to stick to it occured before, real losses can really throw all that into the dustbin and so begins the path to failure. The reality is plan the trade and trade the plan, no exceptions.

That's abrilliant reason for explaining failure.

I mean the only difference between scalping and longer time frames is just that, time frame. But the method itself can be exactly the same.

I can use my method to scalp on a tick chart, or swing trade on an hourly or daily chart.

 

[BSD]

Definition: By scalping, I simply mean that you hold trades for anything from a second to a couple of minutes, rather than the true definition of scalping.

Ninja-san, just trying to understand where you're coming from, go and have a look at a tick or 1 min chart of the Ftse or YM or S&P or Dax (all move hand in hand more or less anway) or Bund or whatever futures from this days morning until now, and nobody can tell me that there wasn't plenty of opportunity this am per your definition above, plenty of opportunity even for those who do not have the ultra-fastest connection as Don Miller also doesn't have, no matter if you're a trend or counter trend trader ?

I mean on those time frames aren't most am's like this these days, extremely trendy and tradeable ?

If then you grab your profits and stay away from the later chop you will make and grow your money !!!

Or am I completely misunderstanding you here, having a blonde moment.

 

[shadowninja]

Woah there, horsey. I think you're getting carried away with things a bit. Interesting stuff but all I wanted to know was out of those traders who are trading profitably, how many are doing it via scalping/ultra-short term trading.

I'm not sure the current results are indicative, however.

 

[arabianights]

in any case I have found that most retail traders are delusional about their returns.

 

[BSD]

I agree with that totally AN, but I think that applies to all traders everywhere.

Or do you think any prop firm would ever publish any hard data on how many of their intake go on to fail.

They won't and for good reason.

The data on hedge funds failing is largely available however, I've posted about that here several times, and, what can one say, to quote a FORBES article on the HF misery finding a good one is like finding a needle in a haystack.

;-)

 

[shadowninja]

in any case I have found that most retail traders are delusional about their returns.

Or at least lie to others about their profits and losses. When I first signed up to T2W, I thought everyone was a trading success apart from me.

 

[tar]

I think we can do both , scalping as a money generator , and u can use the money for professional portfolio trading .

 

[bashatrader]

Do you know of any website i can get free data on hedge fund performance?

 

[stusse]

good thread

 

[BSD]

Do you know of any website i can get free data on hedge fund performance?

Here is some info:

March 2009 Hedge Fund Performance Numbers ~ market folly

That said hedge fund performance reporting is an extremely dodgy field what with amongst other issues survivorship bias being a big problem.

Same like everywhere: many feel called, few are chosen:

"Welcome to the Dark Side: Hedge Fund Attrition and Survivorship Bias over the Period 1994-2001

Abstract:
Hedge funds exhibit a high rate of attrition that has increased substantially over time. Using data over the period 1994-2001, we show that lack of size, lack of performance and an increasingly aggressive attitude of old and new fund managers alike are the main factors behind this. Although attrition is high, survivorship bias in hedge fund data is quite modest, which reflects the relatively small difference in performance between surviving and defunct funds. Concentrating on survivors only will overestimate the average hedge fund return by around 2% per annum. For small, young, and leveraged funds, however, the bias can be as high as 4-6%. We also find significant survivorship bias in estimates of the standard deviation, skewness and kurtosis of individual hedge fund returns. When not corrected for, this will lead investors to seriously overestimate the benefits of hedge funds. We find fund of funds attrition to be much lower than for hedge funds. Combined with a small difference in performance between surviving and defunct funds of funds, this yields relatively low survivorship bias estimates for funds of funds."
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=293828

Or this here:

FORBES: The $500 Billion Hedge Fund Folly

Not up-todate those articles and numbers such as eg size of industry don't apply any more, but the basic principle that many more fail than succeed are still as valid as anywhere else.

 

[shadowninja]

I suppose it is in reality the investor's fault: if you saw a hedge fund giving a return of 5% a month and the one you'd put £100k in was just earning you 2% a month, you'd withdraw it and put it in the 5% HF so HFs have to be aggressive and take bigger risks.

Similarly, if you knew Icelandic banks were offering 7% interest rates vs UK banks with 5%, where would you put your money?

 

[BSD]

I suppose it is in reality the investor's fault: if you saw a hedge fund giving a return of 5% a month and the one you'd put £100k in was just earning you 2% a month, you'd withdraw it and put it in the 5% HF so HFs have to be aggressive and take bigger risks.

Similarly, if you knew Icelandic banks were offering 7% interest rates vs UK banks with 5%, where would you put your money?

Yup ain't that the truth !

Definitely takes 2 to tango.

 

[wackypete2]

How hard can it be to trade like a hedge fund manager? They have no more special skills than a good retail trader. They just use obscene amounts of risk with other people's money. If they hit it big, they are set for life with commissions/bonuses, if they go bust...oh well, wasn't their money. Sure, there are a few good ones, but the data and links that BSD posted paint a picture of a field littered with the busts, not unlike the 90/10 for the retail traders.

Anyone here can get those huge returns too in their own account...until they go bust.

Peter

 

[FulcrumTrader]

I can scalp trade profitably on a daily basis using the Cumulative Delta based techniques I have developed the past 6 years, but it IS NOT my preferred style. I love to take shots at intraday position trades and much longer term swing trades with dynamic positions. Scalping each day is kind of a pain in the rear once you learn good intraday and longer term trading methods. I relate scalping to taking out the trash.....there are many other things I would rather be doing!!!

Now don't get me wrong, there are some excellent tools these days for proper scalp trading operations (Cumulative Delta candlesticks to track realtime order flow conviction, NYSE TICK to somewhat track BUY/SELL program activity in the NYSE, very reliable high speed data feeds, fast order entry/exit trade platform executions, etc.). The technology components needed for very robust scalping ops is definitely available to the retail side trader these days.

In my opinion, the ultimate arrangement for consistent scalping is to move towards an automated capability. This is the best option for diversification and duplication of your efforts. To sit at a screen all day watching for micro level trade opportunities just does not excite me anymore.....now sitting back while tracking several ATS systems running live in various instruments, that would be the kind of FUN I like!

 

[Fast Eddy]

I

n my opinion, the ultimate arrangement for consistent scalping is to move towards an automated capability. This is the best option for diversification and duplication of your efforts. To sit at a screen all day watching for micro level trade opportunities just does not excite me anymore.....now sitting back while tracking several ATS systems running live in various instruments, that would be the kind of FUN I like!

How much is a "scalp"? How do you solve slippage and commissions on an automated scalping system?

 

[FulcrumTrader]

I


How much is a "scalp"? How do you solve slippage and commissions on an automated scalping system?

One key aspect to proper automated scalp trading is selection of the most optimal times to enter the trade. The main problem with most automated scalp systems is over trading on loose trade entry criteria....just because you have your system developed for scalping trades does not mean it has to fire off trades 15 times a day. Several trades from properly defined trade entry criteria of 4 to 8 ticks per trade (in the ES for instance) is all that is needed most days.

Another "inside the box" trap of those who try to develop profitable automated scalp trading systems is the use of static entries and exits. The best way to handle entries and exits to address slippage and typical low performance tight stops is an entry that is NOT made from one entry execution per signal. Multiple entries and exits per trade signal greatly expand profitability when set up dynamically.

Look at the movements of price for the instruments you trade and visualize the possibilities...stop thinking about the limiting mentalities of the traditional mindsets and see for yourself what is really possible.

 

[Paul71]

Please read this post before voting.

Ok, this thread might seem on the face of it to be the cry of someone in desperation (you've seen those threads posted hundreds of times) but a couple of months ago I decided to stop wasting time (and money) trying to scalp and stick to swing trading (my account has had a healthier disposition since). And I've seen many, many scalpers come and go since starting day trading. (I do, however, believe it is possible to scalp profitably and consistently.)

This is really, therefore, for the newbies who are embarking on their trading journey. A chance to see if they are wasting their time and partly because someone mentioned in a private conversation that scalping as a retail trader was very difficult to remain profitable on a consistent basis. Let's make this the definitive poll.

And so, to answer the poll you will have been scalping (or attempting to scalp for at least two years). I don't care about exact techniques. I am not interested in your strategy. And the poll voting is anonymous. Please only reply if you have been scalping (or attempting to scalp) for two years minimum to avoid skewing the results.

Definition: By scalping, I simply mean that you hold trades for anything from a second to a couple of minutes, rather than the true definition of scalping.

Time and sizing. You can only play a certain game at all times, market times, not your times. If your time doesn't fit market time, set limits or forget the plan. Investing, swinging or scalping....it's only a matter of market time and size. If you want to trade, only the market matters,....not you.

 

[Fast Eddy]

I can scalp trade profitably on a daily basis using the Cumulative Delta based techniques I have developed the past 6 years, but it IS NOT my preferred style. I love to take shots at intraday position trades and much longer term swing trades with dynamic positions. Scalping each day is kind of a pain in the rear once you learn good intraday and longer term trading methods. I relate scalping to taking out the trash.....there are many other things I would rather be doing!!!

Now don't get me wrong, there are some excellent tools these days for proper scalp trading operations (Cumulative Delta candlesticks to track realtime order flow conviction, NYSE TICK to somewhat track BUY/SELL program activity in the NYSE, very reliable high speed data feeds, fast order entry/exit trade platform executions, etc.). The technology components needed for very robust scalping ops is definitely available to the retail side trader these days.

In my opinion, the ultimate arrangement for consistent scalping is to move towards an automated capability. This is the best option for diversification and duplication of your efforts. To sit at a screen all day watching for micro level trade opportunities just does not excite me anymore.....now sitting back while tracking several ATS systems running live in various instruments, that would be the kind of FUN I like!

Interesting site. Do you have any resources for dynamic entry systems?

 

[FulcrumTrader]

The possibilities.....

Interesting site. Do you have any resources for dynamic entry systems?

Thanks.

My exposure to dynamic entries/exits was a result of a few years I spent consulting to a fund. I built up a new order entry/exit system that could handle spreading liquidity through a range of price both on a micro scale (scalping) and on a macro scale (multi-day/week/month) position trading. In the ultimate form, we would be trading in one direction on a macro scale with one set of accounts while also trading at times in the opposite direction on a micro scale in another set of accounts......trades within trades.

I had talked with brokers and some trading fund groups at the time as I initially developed the trade management style. I never did find any perfect resource for dynamic entry systems out in the trading world at the time, but I did get some great insight into various styles of trade management. The exposure to a numerous range of commercial trading styles was very eye opening and extremely thought provoking....that experience did get the wheels in my head turning. The most powerful idea trigger for my mindset during this research and development period, was the fact there are MANY ways to extract profits out of the market each day.....a mind boggling amount of ways.

At this point I was ready for action, I just decided to open my mind and really look at the market for what it is.....it is a supply and demand driven pool of liquidity competitors. There are many movements of price, in all instruments at times, that are not in alignment with the realities of the related financial pairing (VW stock anyone?). Knowing this fact should expand the range of potential trade ideas and trade management styles you consider as you look to build a profitable system.

It was very apparent in this phase of my new mindset, that lethargic concepts for trade entry/exit management should be held in contempt. It was time to build out an operationally dynamic method to enter and then leave the market according to the conviction within the order flow. I was now fixating on the order flow bias and not on price, so the system development ideas had to be original and also realistically proficient.

Operating from an expanded range of ideas presented the possibility that scalping can be done more effectively with multiple entries and exits. The eventual system construct and forward testing verified this capability. To conclude, I would have to say the most effective resource will be how much effort and openness you involve with your system development.....the possibilities will amaze you.