Yes I would agree that the brain surgery analagy, if nothing else serves its purpose of changing the trader's paradigm and checking our assumptions against an alternate reality. Very nice job Babak. Scalping indeed does require the most precision of any type of trading out there because the profit expectation is also so small. Biomech: I like what you say above. Putting a lid on the losses is very important. If he can start even smaller than 100 shares he should do it because there is no doubt that when you first start you start off losing, especially with short term trading. But the thing I wanted to comment on was your perfectly worded 3 word phrase "impulsive trade meltdown." That is the best description I have heard for the phenomenon of overtrading and losing all self control. That is going on one of my trading cards as, "Take time off when stuck in an impulsive trade meltdown." Thanks a bunch Biomech!
The reason I think there are more traders than brain surgeons is that they insist (maybe unreasonably) on qualifications for brain surgery
Thanks again for all of the advice. I appreciate all of it. This is actually exactly what I am going for. I don't plan on making a profit for a while. My goals in the first 6 months or so revolve around learning and capital preservation, not making money. I figure I will end up holding positions anywhere from 5 minutes to 2 hours when I get to where I want to be, so scalping is really just for learning Level 2 and how to read the immediate trend. I don't think I agree with what you are saying here. Don't you think that learning more about short term trends will be an edge once you increase your time frame that you hold? I know! Thanks again for all the folks that have taken time to contribute. You get the right feeling. And that is good advice. Actually, instead of scalping on paper for a while then scalping small shares for a while, I am thinking of just doing the paper scalping for a longer time, then moving up to a longer time frame. The disadvantage of this is that I wouldn't be working on my execution skills at all, which is another reason I want to try scalping. Just as a bit of background on my personality, I graduated with a BS in Computer Science. I immediately took a job as a network/system admin, then a few years later switched to programming which was my goal all along. The knowledge of systems I have has put me a few steps ahead of the rest of the programmers as they don't always understand the system level implications of what they are coding. This is how I approach many things in life. I like to lay a foundation first then build on that. I'm not sure this translates to my scalping then moving to longer term trading strategy, though. It sounds like many of you think that it doesn't, and it is getting harder for me to ignore all of these voices.
Yes learning about short term trends might be helpful but many scalpers can't see the forest for the trees. If you want to learn the short term trends you should trade like a swing daytrader or a scaliping position trader. Maybe this is what you envisioned by the term "scalping" anyway. After you get into it you will understand that it is the big trend moves each day that make the big money. You might be able to learn about this from paper scalping as you hope to do, but paper scalping is quite unpredictive because the key determinant of success in scalping is the fill or execution. You really won't get a good feel for this until you start placing some trades, but by all means if you can't make $$ paper scalping then surely live scalping won't be any more profitable. The problem is that you may learn about short-term trends, but what bad habits will you pick up in the mean time that might hinder your long-term success as a trader?
It sounds like scalping position trader is more of what I want to start with, not plain scalping. The terminology here is a bit fuzzy. Maybe it is just me.
Would that be the fisherman who puts on a trade before he goes out to sea and takes it off when he returns?
Biomech, OK, I see where you're coming from. You see the smaller time frames as building blocks for larger, so a logical way to learn is start with the most basic element,ie the very short term. I felt the same way when I started, plus there was a certain need for instant gratification. I would say most experienced traders approach it from the other direction. They work backwards from the longer timeframe, say weekly or daily, to the 60 minute then to the 5 minute. On the daily, it is all about identifying the overall trend and picking an entry point using chart analysis, retracement levels, tech analysis or what have you. Pretty much the same approach using the 60 minute. Whne you get down to the 5 minute however, it becomes more about getting in and out, execution skills as another poster said. Very intense game of trying to get your position on at a favorable price, then looking for the opportunity to hand it off to someone else at a profit.