Does anyone else trade like this? I have been a consistent profitable trader for the past year. I learned a basic scalping strategy a year ago which was built for quick .05-.10 cent profits with minimal downside. After using this strategy for about a year it has been effective with average days of $300-$700 and negative days of -$200 max. All in all it is consistent if followed to a T and does work. But I am at a point now from looking at the Level II books all day where I can analyze in about two minutes of watching a security which way it is looking to move based on momentum. I believe this is a 6th sense I have developed as I do not use any indicators at all, no charts, moving averages, vol, etc, etc, nothing but a level II order entry book is all I need and I can get a good enough feel which way the stock is heading. So I have decided to forget all the rules I followed for scalping and just trade based off of "my gut instinct" (momentum). So all I am doing now is jumping in and out of different securities all day by giving the Level II book a glance and taking a direction. Sure sometimes I am wrong but right now about 70% I am right. This honestly feels like gambling to me as I can't believe I am still consistent now with doing this for 3 months without doing research or using any type of strategy. So I am wondering for all the momentum traders out there, is there really a strategy for this or are you just going with the flow and jumping in and out of stocks all day with just giving them the once over and going for it?
You take whatever is relative to the current volatility. If you want to stay in this game for the long haul, my advice is this: Learn to hold longer and grow some fucking balls.
I agree that you are gambling. Scalping, or short term target trading as I call it, requires a definite methodology to be a sustainable and successful strategy. The arena I prefer is not stocks but futures markets which can provide daily volatility and liquidity (eg CL). The rewards of a successful and consistent methodology are substantial. The target size you choose is very important, too small or too large will be less than the optimum size thats gives best net results. A target too small may mean too many trades so raising your total transactions costs to too high a level. A target too high may mean that you are hitting far too many non-runs (ie entries that do not reach your target points).
If you are watching level two and trading off of momentium and orders that are coming thru -----probably as good as looking at charts.......If you are making as much money as you say---------you are doing great.....I would not change.
Doing the same, its quite unnerving sometimes but it works... But for me its actually only one third of strategy (and I use combined DOM showing cumulative bid/ask together with avg. on during last 10-20 bars depending on market)... My issue is that sometimes it can go wrong and without SL I'm still fighting my ego and waiting for B/E...)) GV
I have automated exactly this approach but do it in futures markets but my losing % is smaller as I have many rules which are based off chart patterns and TA. I will average down at times as well, and sometimes the losses can be staggering, but cause of ten years of backtesting, I know how much loss is too much and take the loss. I tried this in stocks, but the profits are too low for my liking and don't care much for day trading stocks. Making couple nickels seems like a lot of work for little.