What kind of techniques do heavy scalpers use?

Discussion in 'Index Futures' started by CFerret, Apr 6, 2007.

  1. After reading the following article:


    I got curious, how do guys like him trade 50-100 or even more RT's a day?

    I mean their setups should be really simple and not require much analysis and at the same time have an edge (or they wouldn't trade like that, right?).

    So my question is to people who are aware or maybe use such techniques: what's it like? Is such high frequency scalping mostly charts based, DOM based, T&S based or what?

    I've read several threads about index future scalping using DOM, but didn't see examples of real setups that appear every couple of minutes.

    Of course I don't ask anyone to disclose their edge, but maybe someone can show examples of setups (maybe older ones, which don't have much of an edge anymore) which are used for such heavy scalping just to know what this kind of trading is like?

    Best wishes
  2. I don't claim to know what these blokes are doing, but I suggest you read the ACV thread as a starting point.
  3. I did and in general I understand how DOM acts and how it can be a base of trading decisions.

    Just would be great to see a real example of a trade. Guess these patterns must be simple, cause trader has seconds to react, but I have never seen an example of such trade.

    I really try to understand mechanics of scalping (steps performed by a trader), just like I know a mechanics of intraday swing trading (the way I trade every day): I see a setup on charts and volume, evaluate risk/reward and if it's good I place orders, wait to get filled etc. etc.

    But I don't understand how trades are performed by scalpers. What their setups looks like, how they enter and exit etc...
  4. steenbab



    Since I wrote the initial article, maybe I can contribute a bit of perspective while still maintaining the proprietary information and strategies employed by the very short-term traders I've worked with.

    Volume is key. That includes shifts of volume in DOM for some traders, but also includes trades in size that are actually executed and *where* they're predominantly executed: at the bid or at the offer.

    In a study of ES volume a while back, I found that the 3% of largest trades accounted for more than 50% of total volume and that total volume was very well correlated with market volatility. Knowing what those large traders are doing is key to determining both trend direction and likelihood of moves continuing vs. reversing.

  5. ==================

    Probably best to be an eyewitness;
    but some one carereful with his words/word can be very helpful also.

    Thanks for Kingstree link;
    top of this page, right hand corner,
    click search, and enter nickname

    He runs/has run a hi-frequency drrivatives trading company;
    they dont have enough time to use charts much:)
  6. Brett and Murray -

    Thanks a lot for valuable hints! Will begin to pay special attention to T&S and DOM for large sizes.

    Happy Holidays!
  7. Read all of Dr. Bretts blog. Every post. traderfeed blogspot
  8. steenbab



    Thanks for the kind words about the blog, James. Reading every post, however, wouldn't leave much time for a long holiday weekend! :)

    My April 1st post on the TraderFeed site contains many of my "how-to" trading posts. Some are particularly relevant to this thread, such as the ones concerning the NYSE TICK (which summarizes the number of stocks trading at offer minus those trading at bid at any given time).


    Other tools that come to mind that are relevant to this thread (note: I'm not a vendor; I don't offer commercial services to the trading public; and I don't have any commercial ties to vendors) include:

    Market Delta - A charting application that parcels out volume at bid vs. volume at offer for any given stock or futures contract;

    Trade Ideas - A real time screening application that scans any defined stock universe and tells you when unusual volume is entering the market and even when bids and offers are beefing up;

    All that having been said, I'd like to caution about becoming *too* focused on high frequency data, such as DOM. Even the best scalpers, such as the one I wrote about, have a very small edge that they replicate with frequency. If you take away their favorable commissions at member firms, that edge goes away. IMO, it is not reasonable to expect that a trader paying retail commissions could trade with such frequency. The house is just taking too much vig to make that feasible.

    So what I like to do is aggregate the data regarding how large traders are trading (at bid vs. offer) to get a longer-term (but still intraday) picture of how the market is trading. When you see a shift in sentiment among the large traders (more hitting of bids or lifting of offers), a short-term trend is often brewing.

    Hope this is helpful. Thanks for the excellent forum.

  9. Brett: Just want to commend you on a great/valuable blog. You've been a part of my day for quite some time. Often when I need to get my head together over a particular issue, I'll re-read one of your articles specifically addressing my problem. Thanks!
  10. Awesome blog indeed!

    I'm busy for this weekend. :)
    #10     Apr 6, 2007