HFT primarily compete against each other. This year alone there are more regulation designed to close "special privileges" that the exchanges give these types of firms (e.g. fee reductions)...many of the privileges allows an HFT firm to be profitable. Regulators are able to see its impact on traders...professionals and retail. They also see how it eventually scares away "investor dollars" (see below info about low volatility). Yeah, HFT does impact scalpers the most. Lesser for day traders that aren't scalping and even lessor for those that are swing traders or long term position holds (position traders). For those paranoid about HFT...the only solution for you is to develop your own algorithm trading system. For those that has a trading style not impacted by HFT or tiny impact (e.g. swing traders, position traders)...no sweat. Note: I assumed SJL (thread starter) is not using automation because something that important would have been mentioned. Just as important, those guys (algo traders) usually don't start journals. Discretionary Scalpers (those not using automation or algorithm) should obviously be concerned the most about HFT...considering they are competing with HFT or other retail scalpers using algorithms for a few tick movements. In contrast, day traders trying to capture a range, trend or many points...not a big problem with HFT but its there especially when the sudden volatility shows up but price just chops around in a very tight trading range of several ticks while volatility increases. HFT results on the market is "low volatility" as explained and documented by many large institutional trading firms. That low volatility helps drive away under-capitalized traders and impacts negatively those traders that do not recognize when their trading instruments are in a low volatility market condition. Note: There's research out there that states HFT is the cause of "high volatility" in the market. Yet, regardless which research is correct...all believe HFT gives "no practical value". I believe if stiff regulations are adopted...Europe will be the first to do such. My personal opinion (no facts)...seems to me if someone wants to be a successful scalper while knowing its HFT territory...don't trade low volatility markets and don't be a discretionary scalper (a trader not using automation or algorithm). In addition, wait until volatility is high or suddenly spikes...that's the best time to trade as a scalper. I'm not saying you'll be profitable. I'm saying a discretionary scalper will have a better chance at being profitable if you wait until high volatility market conditions for your trading instrument in your efforts to grab a few ticks profit. Yet, if you can be a profitable discretionary scalper in low volatility conditions...keep doing whatever it is you're doing because you're a very special trader. Trading is tough. Don't believe anyone that makes it sound like its easy...its not easy. P.S. The other key issue (arguably more important than HFT) is the cost of scalping. Only successful scalpers I know have seats on the exchange and/or getting special commission rates because of the size/number of trades they do. Simply, if you can't control your costs...it doesn't matter if your trades are profitable...your income will be breakeven or barely profitable. P.S.S. There are different types of HFT firms (e.g. liquidity taken and liquidity providing...the former is aggressive and makes the most profits of the two). Changes in volatility allows one to have more impact on markets than the other.
That's true of me, also, but be aware that in forums (including this one) many people use the word "scalping" to means something hugely different from what you and I probably mean by it - as you can see from all the threads where people discuss things like "scalping from 15-minute charts" and so on.
Xela, Very true...I've seen more this year than any other year many traders call themselves scalpers from 5min, 15min and even daily chart trading. Thus, there's obviously a different definition of scalping to them in comparison to the traditional scalping definition all while paying regular commission rates one would see stated at a website because someone getting special commission rates at a traditional broker...those rates are not shown (advertised) at the website.
Since it is my thread, let's only talk about how we can improve the strategy not about if it will going to work or not. Let's keep the mood in positive way!
"Making too much sense" is pointing out this strategy can't be made positive - as in ummm, makes more money than it loses. This isn't Kathy Lee "positive" happy talk, no that is definitely not ET. And I am glad for it.
It could work, but it's highly improbable. A day trader should try for +18 to +24 tick scalps to even out the draw-downs from losses due to close stop placement and the average small reward target (6 ticks) or have an unspeakably efficient edge.