explain 'scalping' to a newbie

Discussion in 'Trading' started by pauk, Mar 22, 2011.

  1. Sorry, but I have to disagree with you there too. While he may have overestimated the capabilities of most non-direct access online retail brokers, I still believe he's an active scalper and a decent one at that. I base that opinion on his other posts and the P&L screenshots he submits from time to time.

     
    #41     Apr 26, 2011
  2. To make the spread with a "retail" account is possible and plenty of people do it. Being the last person filled on a level means you probably started a bad trade but not always. There are a couple of solutions.

    One that immediately comes to mind is to trade stocks where the spread is sufficiently large that you can beat the NBBO by a penny. As long as you've got that, if you're filled, you'll be filled first. One that people used back in the day was to trade NYSE stocks through the specialists. They filled orders first come, first filled and it was quite possible to get filled without the level clearing.

    And if you're trading with a broker, and you're making the best bid, and he happens to be a market maker in the security and has a market sell order coming in, he legally has to fill you before he fills himself. It's called the Manning Rule. So if you want to make the spread, it might help to have a really big company handling your order.

    <<
    For example, when a securities firm is holding a customer limit order (a limit order is an instruction to buy or sell securities at a certain price), the firm cannot ignore that order.

    The firm cannot trade for their account using a price that would satisfy the customer's limit order without executing the customer limit order. The rule is applicable both in normal trading hours and in the extended hours trading sessions.
    >>
    http://en.wikipedia.org/wiki/Manning_rule

    I should probably add that if you try this without constantly watching the market and pulling your order nearly every time it looks like it's going to be disastrously filled, you will very likely end up with lots of bad entries. To make this work you're going to have to cancel dozens of orders for every one that gets filled.
     
    #42     Oct 15, 2014