card counting and scalping

Discussion in 'Trading' started by cashmoney69, Jul 2, 2006.

  1. In Blackjack, players can use a technique called card counting to give them a mathematical edge over the dealer by remembering the high and low cards that have already been played in the deck so the player knows their % chance of winning each time.

    Is there such a thing in scalping?..or is it all just chance?

    - nathan
  2. you'd better duck, nathan
  3. Not sure what you mean by that, but ok.
  4. I guess the indirect similarity would be that card counters normally get kicked out of a casino before they have a chance to make money... and scalpers never make any regardless of how long they stay.
  5. Good scalpers dont rely on "chance", they know when the odds are in their favor and they take the trade. They then rely on proper risk management and price action interpretation to determine how to play the trade out from there. Simple really.

  6. For card counting on blackjack, you need to take personal security risk, have min bets for the continuity of the game, have expenses on travelling and hotels, use your method to count the cards secretly, and do the "trades" manually.. for just minor edge over the dealer in the long run.. and you need to switch casinos constantly and know which casino can really scalp and that rarely anybody can tell you unless you experience it yourself.

    For scalping, you have no personal risk, no useless bets, no travelling nor hotel, nobody care you unless you trade spot fx on bucketshops, the edge can be more much and you can make an automated trading system for high frequency trading .. and most importantly you can backtest your strategy for proven competitive advantage without asking anybody .. lots of strategies out there..
  7. I don't usually respond to threads like this, but since there are a lot of discussion between bj, poker and trading, I figure I will throw in my 2 cents. There are some clear parallels between bj and poker. in bj it pays to know what is left in the deck / shoe (whether manual counting or playing by a computer), take an example, scalping on the exchange floor ("open outcry"), it pays to keep track what other traders (especially the large traders), and their current position is. For instance, if some large trader is currently short large, and the market spikes up, you know at some point he will have to throw in the towel, and push the market up a bit more, this way it is possible for you to scalp for 1-2 ticks when the large local covers. Blair Hull made obviously a highly successful transition from card counter to trader, and his mental agility was clearly an advantage in the pits back in those days.

    Of course, how to apply similar techniqiues (and assisted by computers) in electronic traded markets, where it is more difficult (not impossible) to know what each large trader is holding, is interesting. And more than a few market microstructure strategists and quants are studying this very topic. Ed Thorp is well known to have made far more money in his hedge fund than he ever made in card counting. Disclosure, I card counted occasionally my way through grad school (not just hi-lo count) over 10 years ago. Heck, as a poor grad student back then, making $500 was a good day, enough to pay for food and books for some weeks.
  8. Some traders actually use a technique called counting. I'm not sure what similarities it shares with card counting, if any.

    But worth further reseach.

  9. Counting= Data mining.
  10. In theory, good trading is exactly the same as card counting when playing Blackjack.
    When cardcounting, you are "keeping count" of the cards, not playing when you have a low probability of getting the "high cards" (presumably 18-21) and playing large sums when you have a high probability of getting the "high cards".
    When trading options, many traders only trade volatility. When vol is low they take positions, working on the belief that vol will increase (sometimes substantially, though that is never a totally known quantity).
    When trading futures, many traders enter positions with the hope of making a profit on the directional play, often looking for a breakout/breakdown of previous establish support/resistance levels. Though it doesn't happen "often" (like 4 times a week :p) when it does happen it offers opportunites for substantial profit.

    Good thread.


    Jimmy Jam
    #10     Jul 3, 2006