Regularly some posters talk about the way they scalp for 4 point target with a 10 point stop. Can't that seem like it's horrible? I thought scalping was when you were pretty sure of the immediate direction and you got in and out, maybe keeping it from going more than a few points against you. But the way I described above, no. If you're going to do it that way, why not average in on every move against you? Using a high enough win rate that would increase profits. With a win rate enough that 10 points against you is still profitable, increasing position with each move against you would noticeably increase your gains. Here, with that percentage, it means you have to win at least 2 and a half times for every loss. Changing that so you inflate the position during a move against you, your failures would be bigger, but your profit would be HUGE with that win ratio. @Handle123 as one of the brightest posters on here, says his wins are like one point or less and price moves against him a lot. He gets it. May it really be called scalping if price goes against you past your profit target?
I do not know how to scalp. If I were to scalp I would try a minimum of 1:2 of risk to return ratio (preferably 1:3) per trade on a 3, 5 or 30 minute chart. I would scale in tightly and scale out tightly. I would have a longer term MA to tell me if I had a long bias or a short bias. I would try to learn how to trade a chop environment with other criteria for those times. I would practice with a simulator for a short trime and go right into live trading with low capital. I would have a low commission rate with my broker set up. I would have "one button" trading established and eventually would automate. Ok back to my Forex thread... ES
You should get @schweiz in here to teach you how. He has an almost 100% win rate on 1-2 ES points. You can read all about it here: https://www.elitetrader.com/et/threads/day-trading-and-sharpe-ratio.322726/page-6#post-4689295 https://www.elitetrader.com/et/threads/day-trading-and-sharpe-ratio.322726/page-6#post-4689307
ES: Put up a 1-minute ATR with a 6-minute SMA, and do not trade if the 6SMA is 0.50 or below. (For most of today, it ranged between 0.60 and 0.80: *premium*!) Seek just 1 tick, you've got 50¢ to play with. If you take 10 trades an hour, for 1 minute each, that's good for $85/hr. For a 6.5 hour RTH day, that's good coin. Take out 90minutes for lunch (always nuts) and 30 minutes before the close (too scary to hold overnight) and 30 for The Idiot (Half-)Hour at the open, and you've got a 4-hour work day, and $340 tick-scalping 1-lots, US$1700/week, $85k/year with two weeks off per annum. Yo.
That's not scalping. Those traders talking about 4 point target and 10 point stop are just day trading (assuming they're closing their position in the same day they open the position). Scalping is just a sub-group of day trading although the typical day trader can not afford to scalp. Scalpers usually trade via the DOM (bid/ask/spreads) and most scalpers are automated 100%. They usually look for 2 - 3 tick profit with a high percentage of winners. Scalpers rely heavily on cheap commissions that the typical day trader does not get. Scalpers need their commissions low enough to allow the 2 - 3 tick profits to keep them in the green at the end of the day after the costs of trading. Scalpers use trade execution platforms suitable for scalping very fast...special cable connections or dedicated lines that they aren't sharing with other residences or businesses in the same area they reside. Scalpers typically have trades that last seconds. Scalpers tend to risk no more than 1 - 2% of their capital on each trade. If you meet a retail scalper...they are typically using charts with time frames less than 1 minute or they're exclusively using the DOM without any charts. Retail scalpers are usually competing against the best in the business...professional high frequency traders (automated trading systems) and very sophisticated algorithms that execute trades so fast and so frequently that by the time a manual retail trader executes a trade...the HFT will have executed dozens or hundreds of trades in the same time period. Scalpers that do not have the above...its like bringing a knife to a gun battle (automatic firing with scope). wrbtrader
Scalping, in the historical sense of the term as it was originally coined in the pits, is essentially buying bids and selling offers. Experienced scalpers could, on occasion, take a few (or more) tics out of a trade but that was the exception and not the norm. I started out scalping 30 Year Treasury Bond futures. I would line up brokers working bids or offers to have an ‘out’ in order to scratch a trade. Scalpers would typically only hit a bid or lift an offer if they are taking a loss. The efficiency of electronic markets, and the order matching algorithms employed by the exchanges, has made this endeavor very difficult.
Scalp in the direction of the Weekly/Monthly chart. Build a system to trade in the direction of those highs or lows. This is going to be your trend .