It has come to my attention in several threads that there is a real dichotomy on Elitetrader between those who scalp for a living and those who hold longer... For the purposes of clarification, let's define scalping as trading stuff for 'small' profits (e.g. 1-3 points on the ES, 2-7 points on NQ, 5-20 cents on an NYSE stock) which may be predetermined objectives or may be a retrospective approximation of the average profit. Stop size for scalping would be roughly the same (perhaps slightly less) than profit size. The objective would be to have a high success rate (70%+) to ensure the scalping strategy had positive expectancy. Let's define 'holding stuff intraday for more' as anything using longer term studies to catch a bigger trend, with or without a profit objective (classic techniques to run profits for the bigger picture trend is using a wide rolling stop or raising stops in accordance with the progressive formation of higher lows, in the case of longs). The objective here is to catch the occasional parabolic move... such multiple R trades are obtained a relatively small proportion of the time (say 30%). It remains my view that long run $ expectancy of a successful scalper can be equivalent to the long run $ expectancy of a successful intraday trend trader. It is also my view, therefore, the the trader should expend some effort on identifying his psychological traits as a means of determining which strategy he is most compatible with (e.g. does the trader require a high frequency of wins --- positive reinforcement, is the trader more concerned about letting the big move get away without him or about the current profit in a trade retracing to nothing, can the trader handle large drawdown periods, does the trader need continuous action or is the trader capable of standing on the sidelines for considerable lengths of time, etc etc). It would be interesting to get some raw numbers on scalping versus holding stuff for longer. It would also be interesting to find out how many of you are able to dynamically assess market conditions on an intraday basis and easily switch between the scalping and the trend trading methodologies. This latter category of person has, in my view, got a very interesting psychological make-up, somehow being capable of quickly resolving the diametrically opposed personality traits required in successful scalping versus successful trend trading. Please only participate if you are actually making a living from trading a given style (a 'living' being defined as anything which enables you to trade full time and meet your life's expenses).
I don't know about the "very interesting psychological makeup" part. For me it's just a matter of swing points. If price is making higher highs or lower lows, then we're in business. If it isn't, then we're in chop or in a trading range. The only question is whether the range is wide enough to make scalping worthwhile. A five-point range just isn't enough for me. Ten, maybe, if there's lots of volume and lots of energy. Fifteen or twenty, certainly. Perhaps the biggest adjustment that needs to be made is expectations, switching from multi-point gains to gains of only two or three. --Db
wow, talk about different opinions. 10pts too narrow a corridor? Man, that's nigh on full fledged trend to me! (j/k but u get the point)
Maybe some players can make a few bucks at it, but how many of you are making enough overall to say you're making a "good return on total capital"? Seems WAY to manic and difficult to me.
Ten isn't too narrow depending on liquidity, but I know what you mean. When I detect a lot of games, I'll avoid even ten, much less five. You need at least some momentum, even when scalping. --Db
It's not something I'd want to do every day, but you go through periods where it's either that or don't trade at all. For example, we've just been through a fairly lengthy series of days where there was an early morning gap one way or the other, then an extremely tight range for the rest of the day. Therefore, you either flip a coin and buy or short the previous afternoon, scalp the intraday range, or take the day off. And of course, if you take the day off, that's going to be the trend day . . . --Db
gnome, you got it just backwards, the total return can't even be mentioned because it is so ridiculously high. But there is a cap on the amount of money you can do it with.
I enter a position looking for ahalf or even a quarter, but I will take a dime befor a loss. So, what do you call that?
LOL... That's a good one! I thought most anybody on ET would like to "mention" ridiculously high returns. (Shoot, I've even heard of people EXAGGERATING!)
Profitseer is correct. Obviously if u have a methodology that can be successfully implemented on the smaller time frames u will out perform ANY swing trading methodology. It's "expectancy" that controls max profit levels.