His stops are not wider when adjusted for position size. Also, you missed my point about trading more markets as a position trader, therefore compensating for the much lower frequency per market. Finally, you're assuming you can catch all the waves as a short-term trader. In reality, the short-term may have more noise than the long-term, and less signals due to absence of fundamental factors on the minute by minute timeframe.
Can't remember exactly, but it was early in the year. It may have been the nasdaq that was up that amount, not the S&P - I just remember the index futures contract that I was looking at gapping 100 odd points (the index IIRC was in the 2000s) in a few seconds as it was flooded with market buy orders, and was later up even more. Part of the reason I remember is because another daytrader I talked to was short and got absolutely creamed before he could even get out. You can ask Rearden Metal too, he lost over a million bucks before he could exit his short positions.
Cutten, Here it is ; http://money.cnn.com/2001/01/03/markets/markets_newyork/ Luckily, I was only trading "small" size
Cutten says...the short-term may have more noise than the long-term, and less signals due to absence of fundamental factors on the minute by minute timeframe. I trade sub 1 minute and fundamental factors are not of much help here. Signals always abound and noise has little impact - this is the zone where noise is tradable. I think you make valid points for longer term trades, but you have less comprehension about the art of the scalper. My assumption is that I catch most of the waves as would the longer term trader if I am comparing like for like. The fact remains that the market zig-zags in every timeframe, and he who captures most of the distance covered has lower risk and greater return. Of course there us a cut off point where size is the final limiting factor for the scalper. Many times I have seen long position traders hit with a huge 50%+ fall at market open - it goes with the job. While the scalper has the risk of an explosive move against him, he is better positioned to single click reverse and capitalise on it than the position trader.
I think Cutten has very fair points, but don't agree with his claim that scalpers are exposed to sudden 10% moves. Whenever you get these black swans, it is interesting to see exactly how futures and indices react as the news spreads and is assimilated into the market prices. It is by no means instant. Yes, a gap from one day to another can be severe either way but that isn't an exposure for a short-term scalper. Whatever the event is, it is something traders pick up electronically - either a news headline from a news service, breaking news on a TV-channel and so on. From that point on it becomes a race to understand what it means and react to it. Let's say the selling begins. And while theoretically it can be someone with huge size that reacts first, there is enormous liquidity in the S&P 500 shares to absorb selling of the futures for the first 15 seconds, with arbs holding it up. And every scalper should be able to spot that selling and get out. I'd say the biggest risk for a scalper would be the collapse of the exchange where the instrument is traded, with following movement without being able to close your position. The collapse could "just" be technical glitches, or a black swan event like a dirty bomb in Chicago.
My experience has been otherwise. All the wealthy traders I know are position traders. All the scalpers I know are still driving that same car they bought 10 years ago and bring lunch to the office.
Bsmeter says...My experience has been otherwise. All the wealthy traders I know are position traders. All the scalpers I know are still driving that same car they bought 10 years ago and bring lunch to the office.
oops - too much whisky Anyway bsmeter2, this is a reflection of who you know rather than what you know. For me the opposite is true, but that doesn't validate the point. A zig-zag is longer than a straight line. The maximum profits are gained by trading the waves - that's simple maths. Only when size becomes a problem for the scalper can the position trader achieve better returns but he carries greater risk of a gap down open.
Even when a scalper doesn't use more leverage as a position trader , he CAN make much more because the zig-zag = travel range is much bigger, simple maths , yes. To each his own !