Since I am new to the whole scalping world, how does one deal with trading for pennies? Was it easier to trade when it was fraction based prices? Any help on learning this method? Or is it simply a fact of examining the tape after the market? Could use any and all words of wisdom. Thank you. B
Scalping for pennies is very random and complicated, therefore you must have a simple strategy to capitalize on very fast and quick movements. Commissions must be as low as possible. Tape reading, I don't personally use, but others have told me it could help determine entries. Also depends on the number of trades you make a day. I average around 30 trades a day waiting for high probability set-ups, but others make 50 - 100 trades a day easily. I just look at price and follow it. I also use support & resistance and a few moving averages. Keep it simple, execute, set your stop tight and take your profit when you should, but don't be afraid to let winners run, letting winners run is something that I have to do myself, because I've cut off potential profits, where I have taken 10 cents, and the trade could have easily gone 50+ more cents in my favor if I just held on. But you have to develop a simple system and stick to it and execute it and have quick execution and be able to think quickly. It's hard to learn, but even for me, now I just wait for my set-up and take it and just react. It was emotionally challenging when I first started, but when I let go and read books on psychology of great traders, it became much more realistic and it allowed me to execute easier, not to say that it is easy to trade, but if you have a system and can stick to it without or at least have controlled emotions, scalping can be a nice way to trade with very limited risk. I wasn't around when it was fractional based, but from the traders I talk to, a lot say they liked it back when it was fractional, it was easier to scalp for bigger profits. I don't know personally, but am ok with the decimal system, I just hope they don't switch back to factions or something strange like that. Good luck
Those were the good 'ole days flipping for for Eighths, Quarters and an occasional Half! Now we have to trade e mini's for any kind of High Octane trading. Scalping stocks for a few pennies is not the most profitable strategy. Mowery, I do not think you shaved yet in the Fractional wonder years! PS: A nickel based system would be fine by me.
Hehe, I know I didn't shave in the fractional years.... in all honesty, I probably knew very little to nothing about the markets back then. I just like asking the better traders on ET about when they were trading in fractions, definately some crazy stories some of the great traders on ET have, I like hearing stories from them.
Scalping is hard regardless. Decimilization has lowered barriers to entry in trading, but it's also cut profitability. And it's helped to create the low volatility environment we're in - coupled of course with short-term large (hedge fund) concentrated positions.
What time frame do people usually scalp: 1min, 5min? And how long do you guys usually hold your positions?
scalping for pennies on the nyse is simple. I look for large levels on my level 2, and once momentum picks up and the level is about to get printed I try to take 2000 to 5000 shares depending on the stock, and then hope for price improvement from the specialist, or I ride the wave. Yes sometimes I get my ass kicked when I get too many shares and the stock goes the opposite way, but overall it has worked out. Find a few of those a day and you can make a little bit of change. Also if the level is thin I try to come in and by a price level to get things moving and then get out for a few pennies. I hold my positions most of the time for no more then a minute, unless there is absoultly no reason for me to get out. I personally use one minute charts, but for scalping I don't think they help much other then to give you an overall picture of where the stock is going. There are so many ways to scalp, I make about 150 round trips aday but my fees are dirt cheap so I can afford to get in and out alot.
if I go short, I also look for size to come in the openbook first on the offer (my exit), and then I'll see the momentum picks up and when it prints or about to print, I'll short it, ride it, and bid through 3 cents in front of the large size in the offer to get out. Do you base your thinking of movement on specialist participation. For example, do you keep in mind that the specialist has an institutional order to fill, and he'll manipulate situations to create panic selling by showing large size on the offer or by flashing a weak bid and a strong offer (make the stock lookd weak) orders to fill a large insitutional buy order? Or do you simply go by the numbers in the books shown?
Questions for equity scalpers seeking a target of less than 5 cents per trade: (a) What percent of your entries are limit orders? (b) What percent of your entries are market orders? (c) What percent of your exits are limit orders? (d) What percent of your exits are market orders?
a) 100%, or else it's a free ticket for the specialist to fuck you over. b) because of the above, 0%, although you can attempt to get price improvement when he spreads up and dumps an institutional size. c) 100%, again, you have the control, you set the limit. d) 0%, again, if you try to get price improvement, that's another story.