Advice on scalping stocks

Discussion in 'Trading' started by Sassa, Jul 1, 2008.

  1. Sassa



    I'd need some advice on scalping stocks. Altough i'm not completely new to trading in general, (i've been trading spot forex for around 5 years now), i recently started scalping stocks and discovered that it's very different to my usual "4 hour timeframe chaos trades". That didn't really surprise me, but since i concentrated on only a few currency pairs and the 4 hour chart, i feel a little lost staring at level 2, times and sales and the tiny 1 minute chart.
    Could anyone of you give me some advice on how to use level2, tas and the chart together? Or maybe, i don't have to combine them? Or should i use the s&p future as a leading indicator?

    In forex i used bill william's methods (alligator, AO, Fractals) which worked really well in many timeframes down to 15 minutes, but anything lower doesn't, at least for me. Which, if any indicators do you use for scalping stocks?

    Thanks in advance!


  2. Trade 100 shares and don't lose more than $50-100/day... keep your losses under 10 cents... always have an out... since you're new you'll miss your out a lot at first, but learn to anticipate that - the game is RISK MANAGEMENT, if you can get out when you expect to you're on your way to making money... use charts to determine direction and if charts coincide with what the book + T&S tells you then great, but be willing to always switch directions when you see it in the book/tape... this is an edge, scalpers can see when the chart pattern will fail and find a book-based setup to manage risk and capitalize off people bailing out.... good luck. Remember: SMALL LOSER!
  3. bighog

    bighog Guest

    almost time to get trading but thought i would throw this in.

    There is a big difference between RISK management and MONEY management. Best to understand the difference in giving advice to a new trader. Good luck, lets get some handles in the ES.
  4. Sassa


    Thanks for your advice!

    Being a (currency) swing trader for some years now, i really appreciate every hint on how to scalp stocks!

    Best regards,

  5. Cutten


    What difference is that?
  6. Why would you go from swinging currencies to scalping stocks? It's like taking two steps backwards.
  7. Sassa


    Well, actually i can't agree completely. For me scalping as a trading style was much more difficult than swing trading.

    You know, when i started trading forex, i tried scalping simply because most people told me i should start in this timeframe. Honestly i could not afford big stops, not even with mini lots and since my systems needed a decent stop loss, i started as a scalper.

    Somehow scalping currencies proved to be too difficult at this time for me and i failed. Mostly out of reasons i'm aware of now, such as inconsistency in applying the rules, to much leverage etc....the usual stuff.
    I stoped, started saving a little money, (which wasn't easy being a student back then), worked on the trading system and after a while started again (micro account), but in a bigger timeframe i felt much more comfortable in.
    Today i'm making a small part of my money out of trading, but since i'd like to trade fulltime in the future, if possible in a prop firm for some time, i think it might be useful to learn how to scalp stocks. So the answer is: i just want to learn it.

    Btw...prop firms:
    There's a lot of discussion going on about swift trade and right now a new branch office opened in my city (vienna, austria) Could ST be a place to learn? The payout seems to be very low at the beginning (starting at 10%, max. 25%), but i wouldn't mind if they could teach me something.

    However, thanks for you replies!


  8. Sassa



    Any advice on using the S&P future contract for scalping? Some stocks seem to lag behind, but is it sufficient to monitor the 1 min. chart, or do i need to use the tick chart? So far i used it to trade citigroup which sometimes worked pretty well. Any other stocks you would recommend?

    That maybe a noob question, sorry, but as far as scalping stocks is concerned, that's what i am.

    Thanks again!


  9. bighog

    bighog Guest


    When i used to live in Chicago i had that discussion with a couple trader types and the difference between RISK and MONEY management is a tricky subject for many to nail down.

    I will state my opinion and you can take it FWIW or discard it. Thats the beauty of any trading discussions, we as individuals know how we think and act and might not agree with others opinions even knowing THEIR opinions WORK for them. Traders agree to disagree before sitting down to the table.

    RISK management: Are you trading in a liquid instrument? Example: Lumber compared to SP500

    Are you trading during regular trading hours and in your PRIMARY market? EXAMPLE: If you trade ES, the night session is far more risk because many players in the US are sleeping during their primary market hours. At night the RISK is greater because as example a fat finger error etc can throw the ES, NQ, ER2 STOP server into "SCREW EM" mode and ruin a perfectly good trading account 50 handles away from the STOP. Best to trade during the USA primary market hours when the NYSE and Chicago boys and girls on on the job and doing what they do best to earn a living.
    So to cut this part short, lets just say RISK management is what the MUSIC MAN meant when he said: "Ya gotta know the territory"

    MONEY MANAGEMENT: Risk management is BEFORE money management in my opinion. Many will say the SIZE of the trade relative to the account size is money management but i disagree in the sense that: SIZE is RISK TAKING relative to the $$$ amount in the account. If i traded 20 cars a trade in ES at margin of 500 a car in an account with 6 grand in the account i would be a fool because any slip up and i would be toast. THE RISK is not worth the reward. Now if i had 100K or even 50K in the account then trading 20 cars a pop would NOT be a HIGH RISK daytrading strategy. Notice i said daytrading for 500 intraday margins. Overnight the RISK would be to high because the margin requirement is much higher and even if allowed to trade that many cars overnight, i could wake up and be toast because i was forced out on a small move. You get the picture.

    MONEY management in my opinion is what you DO AFER YOU ARE FILLED. Before a trade is filled you are accessing the RISK about to be taken. Before you attempt to get filled you look at the odds relative to a signal, conditions etc. There is ZERO MONEY at risk before you are filled.

    ONCE FILLED.........different game baby. The RISK has been accepted, now it is how you MANAGE the trade that counts because real MONEY is at risk. Now you are handeling the MONEY and this is where and when the emotions kick in. Money management is the KEYWORD about making MONEY in trading. Taking RISK is what you do as a job, thats the easy part. Handeling the MONEY management part is the harder part until your trading becomes basically automatic relative to the odds that are ingrained in your brain.

    Many say manage the trade and not the MONEY. Well, DUH!!!! What are you trading for? I do agree with this axiom though: Take care of the trade and the MONEY will take care of itself. That is 100% true, BUT getting to that point is no easy task.

    I hope this helped. Continue to have a good weekend. F1 tomorrow. The race is in England on what during WW11 (the big one) was an airfield to fly over France and bomb the Nazi to bits.