Smaller tick size would absolutely decimate the scalpers....I am not one of em so it wouldnt effect me. I used to watch guys try and scalp the russell....tiny wins for an hour then one big losers and their whole day is gone. Crazy way to make a living. I have yet to meeet a scalper(scalping for a tick or 2) who makes anyhting worthwhile. Tough tough game they play.
The solution is to modify the matching engine to imitate what happens on the floor. On the floor, you are not allowed to bid a bid which is away from the market. You should be able to enter a limit order away from the market, but that limit order should not have the effect of saving you a place in the queue. Limit orders would be filled essentially by the market trading through the price. You would be allow to make a market (make a bid or offer and obtain a place in the queue) ONLY at the current price the market is trading at. Once the market moves, the queue is purged at traders have to re-enter orders.
FYI, Yes it is a tough game to play but i do pretty well doing it in bonds. Wouldnt even think about scalping from the retail end of trading. To scalp you front end has to have the fastest possible connection to the exchanges or your gonna get screwed. Whoever says scalping is for losers means that the person tried it and lost at it not too surprising considering there is a 90% failure rate(roughly) of people who attempt to trade or scalp. I would say though that for successful scalpers the biggest issue is trying to keep their commissions as low as possible. Also, yeah you can have 1 big loser that wipes out alot of your profits but......the 1 big loser for scalpers who a trade intra day could always have been 2 3 times worse if they lost their discipline for a min.(ie double up or waitng for a back tick). The general idea that I think most successful scalpers have is that kind of like a successful poker player in a casino i may take a big loss every now and then but in the long run because of my edge of being a superior poker player than the a majority of players I will in the long run come out ahead if i min. my losses. Edges for sucessful scalpers for example are technology, speed of execution, and calmness in violent markets. I know of a highly successful scalper who would normally trade 300+ lots in the 10yr/30yr and whenever he would feel he was not "seeing" the market would take his size down to a 5 lot. Money management is another factor that seperates succesful scaplers from the ones that fail. Just my 2 cents
Why not combine these factors, so trade intrday swings as a pro trader.... Due to the markets becoming more and more efficient and an enormous increase of 'pro' traders lately (who are all looking for the same thing) I think even as a pro trader, the way forward is to increase your time frame...
FT - 1, How much capital do you need to trade prop Futs? 2.How many RT's do you need to do in order to qualify for such low rates. I scalp now ( but also of course not in the traditional buy bid sell ask sense - which is moronic) and am actually quite profitable making 50 basis points per day and that after IB! So can you post some info on how a retail trader could possibly improve his tactics with a pro platform? Thx.
Hi H2O, You are absolutely right. This is my direction now. I still take my largest bite by scalping. However, I find that my scalping experience is extremely useful when getting into longer term trades. I try to hold some of my trades for much larger swings on a different product while I scalp the DAX. I am a lot less focused on the book and more focused on the tape and charts. Charts didn't take as much of a precedence before because the trade was cleaner and everything I needed was in the DOM. I have gotten to a point now where I can scalp swings more efficiently and it suits my age and temperament much better.
JBT, 1. If you are trading in a prop situation, you shouldn't be putting any money up at all. Prop means you will be trading someone's proprietary accounts using their strategies (if they have any... most don't). 2. At a prop firm, you should be trading at cost. The way to figure that out is to find out what the exchange charges per turn including clearing fees. This can be found on the exchange's website. As a pro customer, you can probably negotiate a very reasonable commission at 10,000 turns per month or so. The fewer turns you do, the higher the commission. This translates into 500 turns per day; which is a lot for most people. The best way to approach it so that there is no pressure on you to trade more and less exposure to an unprofitable candidate for the broker is to work with caps. Your commission might be $1 up to $5000 and then $0.8 for the next $4000 and then $0.5 for the next $3,000 and then $0.10 or so for any commissions you pay above $20,000 for the year or something. There are many ways to approach this. It depends on how good a negotiator and businessman you are. Good luck.
Thxs very much appreciated. I do 12 RTs a day - max 20 so there is no way I could do 500/day unless I traded size on the ES ( I trade YM) no more than 4 lots into one trade. Still it would be nice to shave it to at least 2 per RT instead of 5. Right now IB makes about as much money as I do.
What a load of crap in this thread. Dreaming of scalping in allegedly black box saturated markets with watchemecall "pro" traders mingling with "retail" traders trying size with money management voodo. There ain't such a thing like scalping, swinging and the like. Only winning and loosing.