Different Trading approach?

Discussion in 'Strategy Development' started by RunTrade, Dec 25, 2005.

  1. this post is intended for opinions from scalpers; however, i welcome all comments so please distinguish if you are or are not primarily a scalper.


    I've read left and right that scalping can be strenuous, hard money, trading upwards of 100,000's in volume each day in an effort to make a living (exact profit is not important right now).

    Here is my approach and would like feedback.

    First I am assuming that avg. profit is greater than avg. loss.

    My personal perception is that the average scalper trades upwards of 100,000 in volume each day and can hold up to and sometimes over a dozen holdings at any given time. They do this in an attempt to get as many winners as possible (of course with as few losers). However, I think there is a misconception for the majority of scalpers (even profitable ones) that you need a very large volume to reach maximum profit potential (P.P).

    I believe that you should scalp only up to 5 trades per day (none at the same time) and use close to 100% buying power each trade. The main reason for this is that I believe when your volume increases in that attempt to reach maximum profits, your maximum profit potential (P.P.) drops for several reasons.
    1)Most importantly, your "trading quality" drops with large volume. You cannot focus all of your efforts on one trade and follow it intently. I think many traders do not realize this and this creates a small P.P drop in each trade.
    2) Commisions should be lower.
    3)less time with open positions = more time to research/analyze and focus on those three or four trades you will do during the day. If you have other open positions, you may not study the technicals as much as you should and may miss important info.
    4) It eliminates most of the straight 9-4 stress that many scalpers endure.


    So in summary, I think that in the long run, you should be more profitable trying to pick 2-5 of the surest entry points each day and having more focus on each trade. In theory as a good trader, by having fewer trades, the number of winners:losers should increase and therefore create higher potential profits. 1% gain on your account each day is close to 700% annum Don't you think it's easier to focus on making one correct swing of 0.75% each day than just trying to manage more winners than losers?

  2. lescor


    I have sat next to some seriously good scalpers. Fast fingers, lots of trades, not much thinking.

    Ask yourself this. Would you rather take 5 trades a day to make 50 cents/share, or 100 trades/day to make .05 cents/share?

    Not saying your way may not work better for you, but don't assume it's the best for everyone. There are unlimited ways to take money from the market.
  3. No doubt.
    As long as you KNOW how to do this.
  4. Your method also limits you greatly as a trader. The more you can see, the more you can exploit. If you are only looking for a few setups, you are blinding yourself to many other profitable opportunities that present themselves everyday.


  5. could you add some text jonnyy. I'm not sure if you support my approach or are against it. I see 469 trades with $1085 gain. To throw my approach at that, is to say that I would only have to make around 2-3 trades (with much larger share lots then the 500ish this chart appeared to average) to have the same end result. Only difference would be those points i mentioned in the intial thread. I guess I take over trading very seriously :p

  6. I pinched it from the P&L thread.

  7. I understand that viewpoint, Steve. I believe that the more you chase after every potential profitable opportunity, that you start to overtrade (as you can see i believe many do) and your max potential profits slide. I would like to say that overtrading is a different point for each person...for me it may be 4or5 a day, for the next guy, 8 or 10. But I believe anything over a couple dozen begins to be hazardous for long run potential. There is a certain point, where after X trades in a day, you would have been just as better off trading only the few best entries you found that day. And I think many traders surpass that "x".

  8. Anytime you can gain the risk benefits of diversification, you should take it. Your take on the strategy is to reduce diversification, which is not a good idea.
  9. i saw where it came from, but as i said, not sure what I was intended to make of it.

    #10     Dec 26, 2005