Excuse me for saying so, but I find this to be a rather trite observation. It may make a lot of sense for a newcomer with a small account, but once your account gets to a significant size (I trade high five figures) it has real limitations. To trade small position sizes with a significant account means finding, holding, monitoring and managing lots of positions. I am afraid my powers of concentration reach their limit at about 5 to 7, because when the market turns they tend to come unglued and require attention all at once. Therefore, to swingtrade a significant account, with the types of stops that entails, exposes one to significant (in dollar terms) risk in each position, because one must take fairly large positions to keep one's account working. Even if you can manage more small positions, when the market moves against you, you are still exposed to major dollar moves in your account, because as I noted above your positions tend to move together. Of course, it is easy to say that it is only the percentage amounts that matter, but I think most people are not sufficiently rational and clinical to think only in percentages rather than dollars. When a swingtrading account starts to move against you and you see it ticking down $500....$900.....$1200..... even though your stops are not being hit, because they are swingtrader's stops, it can be, as the original poster suggested, very gut-wrenching and it is not very helpful to suggest it is simply a question of adjusting one's position size. The fact of the matter is that swingtrading drawdowns can be very stressful and tinkering with position sizes isn't going to do much to help. For me, mastering the emotional aspect of swingtrading larger position sizes is the most difficult challenge I have faced; much more difficult than learning how to profitably trade a small account.
I work with a firm similar to Sweatyb and because they have dirt cheap commissions I can get away with scalping....but....I too would like to progress to swing trading but I have been conditioned to the instant gratification and scalping mentality......to make the transition requires rewiring of ones pschology....so like archangel said it, 2 different type of stlyles and skills are needed .....also like tripack said it is tough to see the forest thru the trees..... I wish you luck in ur endeavor and the greatest or weakest asset you have is your pschological makeup....I know people who can do both.....but my transition is taking longer than I expected....probably because I am more comfortable with the consistentcy of the gains.....and like another author I probably need to reverse my thinking.....but I am comfortable doing what Im doing......and after u get comfortable......it may be harder to make the change GOOD LUCK.....and happy trading
Nitro- Yes I do. I think some other places are talking about coming out with gross payouts. the firm would probably have to be self clearing to be profitable though. Esseh- I agree It is a totally different menality and it is tough to break those habits developed from scalping. I am trying to read alot and slowly make the transition. But, it's tough!
Dear Trading Brethren, Scalping is the easiest form of trading for me, since I bail on the first sign of weakness; no hanging around, no ambiguity on issues such as "is this a reversal or a pullback?"... just take the small stop or the profit and get the hell out, no questions asked and no regrets if the stock runs to the moon. I also do swingtrading, but it is much tougher to handle psychologically for me, since a swingtrader must have the fortitude to withstand wiggles that can take a profit to a loss to a profit and back to a loss. Having said that, a handful of well made swingtrades can make your entire trading year. With the love for you all that can only be imbued from one trader to another member within this most worshipful of fraternities, Candle
Part of the issue I'm having with this thread and similar ones is the definition of terms like scalping. It seems to vary from person to person. This makes it hard compare people's opinions. I'm still very much at the paper trading stage. I've developed a database to keep track of all my trades so I can do some statistical analysis. The technique I've evolved into is to trade one high valued, high volume, volatile, listed stock all day long. Yesterday was a typical day with some of the key stats being: Total round trips trades = 36, (20 winners and 16 losers). By sheer coincidence, 20 were long and 16 were short. Performance was actually better on the shorts. Average gain for winning trades: $0.24. (5 were under $0.05, 7 were $0.05-$0.09, 3 were $0.10-$0.25, 7 were $0.25-$0.49, and 3 were $0.50-$1.00) Average loss for losing trades: $0.08. (4 were under $0.05, 8 were $0.05-$0.09, and 4 were $0.10-$0.25). Average times for winning trades: 12.9 minutes. (1 under 2 min., 3 were 2-5 min., 5 were 5-10 min., 10 were 10-30 min., and 1 was 30-60 min.) Average times for losing trades: 3.0 minutes. (5 were under 2 min., 7 were 2-5 min., 4 were 5-10 min.) Right now I'm focusing on improving my entry to reduce the percentage of losing trades. Is this scalping, intraday trading, position trading, or what? Not that it really matters; but just so I can reference to what experienced traders are talking about when they use those terms. I know that I'm working in an ideal situation where fills and slippage are not an issue. For that matter, neither is the downtick rule! However I'm hoping that working with a high volume stock will minimize those factors. I also realize that I will ultimately be limited to one or at most two stocks at any one time and positions of maximum 1,000-2,000(?) shares or so. Any comments on this approach would be most appreciated.
Manrico, IMHO, scalping has as much to do with the time frame of the "inequality" that caused you to take a trade, as much as the size of the profit/loss and time frame you held the trade for. Looking at your trades, I would call it scalping, but I do not know if your setups and targets have that "mindset" at the outset. Paper trading is worth something, but, IMHO, not much. For example, I scalp all the DOW components. I can tell you that getting into a (good) trade is bitch, and no amount of paper trading is going to prepare you for that. You gotta know how to read the tape at this time frame. Also, as you point out, the PDT rule is everything. If you are at a prop firm, this _WOULD_ be easier. In fact, I would spend all my money on bullets if I were at one. I scalp the markets by anyones definition. I mostly sit on my hands. But when that opportunity arises, there is no hesitation - I am a trader trying to get in, then I am a risk manager once I am in. My trades can last anywhere from one minute to three hours. I never get out (intradday, minus news, etc) just because the trade went against me, as long as I would take the trade again at that moment - in fact, I may add to the trade. I disagree with most of what has been written on this thread (except for NYSEAt21 and a couple of others) To the original poster and you I would say - IMHO, learn to scalp - somehow, it is part of the fundamentals of a career trader. nitro PS I _HATE_ video games, and much prefer the slow action of a strategy/board game. I am an expert rated Chess player (from many years ago) and I am a way better Bridge player.
Paper trading is not generally recommended (neither are the "simulators" used by some). I would rather see new traders dive in and out with only a 100 shares, get their feet wet in the daily activity than have them make "pretend trades." I always find interesting the debate about scalping...people ask me "are you a scalper"...? Well, I enter a trade, and I exit a trade in the same day, so I guess I may be a scalper. But if you think about it, doesn't all trading require "scalping"? Even swing traders take profits when they jump at them.... I think the best way to learn about trading is to get the basics down cold. Learn about entry and exit points, read the market, read the tape, dive in when you hear the spoos starting to run on the squawk box, get yourself a "go to" stock for short term ups and downs. I don't mean to go in with "reckless abandon" - and I also don't mean to wait for the "perfect setup." This is a game of percentages, and you need to play a bunch before your average will go up. Get the basics, understand them, and start the "on the job training" by executing live orders. And, yes, you may trade anywhere you like to do this.....
Personally,when I was first learning trading in the "SOES bandit" days, I remember "scalping" to mean making markets inside the spread, which generally meant about 1/4 or less profit, with very short (< 1 minute) time frames. I personally hate the term "day-trading" because it became such a pejorative in the last couple years, due to media attention to the many losers. I always have trouble answering when someone asks me what I do. Usually I just describe it as "stock trading".
Typically scalping refers to short time frames (usually 1-15 minutes) and fractional gains/losses. All trading does not require scalping - a swing trader taking partial profits to reduce position risk is not scalping. Scalping is daytrading, but daytrading is not necessarily scalping. An intraday swing trader (which for sake of simplicity I'll include breakout and other similar non-scalping daytrading) may take only 1 or 2 trades per day per instrument riding multipoint swings on each trade while a scalper might make 50 trades in the same day on the same instrument. Their overall net profits in either case will of course depend on many factors. But commissions will be quite different in either case even if overall gross profit is the same - someone posted their actual figures from scalping a while ago on one of the threads and I think it was something like $14K in gross profits for the month but they paid $9K in commissions (using a penny/share broker). You can do the math, if your average winning profit is a nickel/share and you're paying a penny/share/side in commissions, you're paying 40% of your gross as commissions (and of course you pay commissions on your losers as well as your winners so your commissions could end up being 60%+ of your gross profits like the poster - other traders will (hopefully) incur lower % commission costs). One of the implications (although not necessarily true depending on the individual trader) is that a lot of scalping is often less about TA than about high volume execution (large lots and/or lots of trades) - although of course many scalpers do use some degree of TA as entry triggers, e.g., MA crossovers, certain short term patterns, etc., but the degree it is applied is generally much less than for intraday (and of course multiday) swing trading. The old bandit scalpers were almost 100% execution oriented with no particular thought to TA - just trying to snipe inside the spread flipping trades within seconds, hundreds or even thousands of times a day - less attractive now with generally narrower spreads but I gather there are those who still manage to make a profit doing it. Very much requires top video game skills There are also scalpers who try to play in the price action froth (i.e., jumping in and out quickly for pennies amid the price fluctuation noise also doing hundreds of trades a day) not sniping the inside spread but rather just trying to be on the right side of the typical constant microfluctuations in price - with almost equal gain or loss on each trade, they have to maintain a better than 50% hit rate over the long term or ultimately end up tapping out. Then there are those who may use something mechanical (MAs or whatever) or just their gut opinion to key their entry but they roundtrip typically in less than 15 minutes (usually less than 5) and the typical gain/loss is fractional (more than a few pennies but typically averaging less than 1/2 point). With fractional gains, they often push fairly large volumes. These are obviously definitional generalizations offered as a way of establishing a common framework (and hopefully everyone can reasonably agreee with these notes) - individual traders of course will have their own specific ways of working within this generalized framework based on their personal tolerances, preferences, and emotional makeup. Perhaps the ultimate generalization - if the maximum timeframe you want to hold a trade is less than 15 minutes (and especially if you plan to bail within 5 minutes) and you're happy with less than let's say 1/2 point on a trade, you're scalping.