The "Scalp" Strategy

[kishp_ 5]

Hey Jeremy,

This is a viable strategy and I know quite a few people who do this. I myself have started day trading by scalping large positions for very small movements. However; in order to be successful, you need to time your entry perfectly- every cent will make a difference in your P&L. You will need to watch price movement on a market for at least 5 minutes before entry keeping careful watch of the chart, volume, the tape, and level 2. Once you are certain the stock is in play, volume is strong, and the price is either oscillating in a range or moving in an upward trend, you should enter on the lower end of the range. If the 1 minute chart shows a bullish trend with candles making higher highs and higher lows, you want to enter at the around lower wick of the previous candle, and likely, sell within the same candle around the upper body of the previous candle as you do not want to wait around and risk your candle making a higher low and for the price to dip or flush. 
 

This is a very tough strategy to trade, however, if you master reading the tape and Level 2, you will be able to select entries on stocks that will produce a near instantaneous profit, but you also will have to cut your losses the very moment the trade goes against you. The most successful scalpers I know have insanely high win rates of 90%+, and they don’t let the losers stick around for long. The commission ratio (at least on IBKR) will also be quite high as you will be trading a larger number of shares for a lower %. 
 

The reason why I stopped scalping in favor of trading reversals off support/resistance is because it was taking much longer to meet my profit goals and on some days my commission would cut into 50%+ of my P&L. 

[Bailey Nevener 83]

On 1/2/2021 at 9:26 AM, JS said:

I did not invent anything. All my trades are based on existing strategies from BBT. As a beginner I do not believe you can create your own strategy. But because of the bad trade management, I feel that I am scalping all the time. Not saying that I am scalping on purpose. 

What I do want to know is that does Scalping really work? I hear and read that people do it and it is a specific type of trading style. 

 

To be frank,

The person criticizing you is currently the most active close-minded person on this site.

He isn’t crunching the numbers.  You are.  He is being far to assertive about what he is saying to you while only leaning on half-baked intro-to-statistics level reasoning.  
 

The most appropriate thing he could have said to you is, continue to increase your sample size.  Your equity curve is up, so continue to increase sample size to be certain you won’t revert to the mean 0.

 

Once again, him calling what are you doing irrational is unfounded.

However, there is truth that trying to manage such a small R profit per trade exposes you to more aggressive drawdowns if you “mess up”.

 

Your equity curve is up.  Continue to refine your parameters for entry and tracking.  Increase sample size.  I’m not sure if HE is profitable because he is basically trying to call the TOP on your equity UPTREND when it has shown NO WEAKNESS.

NOW THATS A LOSING STRATEGY!

Cheers.

[Bailey Nevener 83]

On 1/2/2021 at 8:25 AM, peterB said:

well its irrational to risk 1 dollar to get only half a dollar. especially when you know that you will succeed only 70% of times and need 240 attempts to get 20 dollars.

That’s an edge.

You literally just described an edge.

 

2 gains required to = 1 loss in his strategy

 

If he has a 70% win rate:

70 wins per 30 losses

Ratio 2:1 P/L adjusted =
70 R won for every 60 R lost

 

A 10R edge.

 

That is an irrefutable edge by your own metrics.

 

Blind leading the blind.

This kind of advice I see you regularly and unabashedly give.

 

Maybe it’s the rhetoric in the way that you write that makes you sound extremely authoritative, but in any case, it is clear that you are not an authority on the matter.

 

If one has a math degree and they say 2 +2 = 5, that doesn’t mean that is actually the case.

 

Similarly, if someone were a BBT member for 4 years with a thousand posts, that doesn’t mean what they say about trading is correct, or well thought out.

 

I’m writing this here as a warning to others.  If this wasn’t ADVICE being given by I wouldn’t say anything.  But since it’s ADVICE you are consistently giving I am saying something.

Edited April 27, 2021 by Bailey Nevener

[Bailey Nevener 83]

2 hours ago, peterB said:

i said

to me it does not look to be a worth it. you might missed the point where his P/L is 1:2 and not 2:1 as you wrote

which is just wrong.  lets see

sorry, there is not a 10R edge here

You don't need a math degree to differentiate 1:2 and 2:1 but as market will teach you too, everybody can be wrong sometimes.

So instead of throwing fireballs lets keep the discussion moderate.

You got me, I said it in a way that tripped me up.

 

Here's the quote:

"2 gains required to = 1 loss in his strategy"

 

What I meant is, if he had 100 iterations with 70 percent of the time making a gain,

then they would have 70 units of gain, and 60 units of loss.

That's 10 units of gain.

Which would be 5R in this case.   

 

Here's what I said, which framed it incorrectly:

Iteration	Gain (+0.5)	Loss (-1)
1	0.5
2	0.5
3	0.5
4	0.5
5	0.5
6	0.5
7	0.5
8	0.5
9	0.5
10	0.5
11	0.5
12	0.5
13	0.5
14	0.5
15	0.5
16	0.5
17	0.5
18	0.5
19	0.5
20	0.5
21	0.5
22	0.5
23	0.5
24	0.5
25	0.5
26	0.5
27	0.5
28	0.5
29	0.5
30	0.5
31	0.5
32	0.5
33	0.5
34	0.5
35	0.5
36	0.5
37	0.5
38	0.5
39	0.5
40	0.5
41	0.5
42	0.5
43	0.5
44	0.5
45	0.5
46	0.5
47	0.5
48	0.5
49	0.5
50	0.5
51	0.5
52	0.5
53	0.5
54	0.5
55	0.5
56	0.5
57	0.5
58	0.5
59	0.5
60	0.5
61	0.5
62	0.5
63	0.5
64	0.5
65	0.5
66	0.5
67	0.5
68	0.5
69	0.5
70	0.5
71		-1
72		-1
73		-1
74		-1
75		-1
76		-1
77		-1
78		-1
79		-1
80		-1
81		-1
82		-1
83		-1
84		-1
85		-1
86		-1
87		-1
88		-1
89		-1
90		-1
91		-1
92		-1
93		-1
94		-1
95		-1
96		-1
97		-1
98		-1
99		-1
100		-1
Total	35	-30

He has a 5R edge.

 

What I meant to say:

(Which by the way, was this: "2 gains required to = 1 loss in his strategy")

Iteration	Gain (+1)	Loss (-2)
1	1
2	1
3	1
4	1
5	1
6	1
7	1
8	1
9	1
10	1
11	1
12	1
13	1
14	1
15	1
16	1
17	1
18	1
19	1
20	1
21	1
22	1
23	1
24	1
25	1
26	1
27	1
28	1
29	1
30	1
31	1
32	1
33	1
34	1
35	1
36	1
37	1
38	1
39	1
40	1
41	1
42	1
43	1
44	1
45	1
46	1
47	1
48	1
49	1
50	1
51	1
52	1
53	1
54	1
55	1
56	1
57	1
58	1
59	1
60	1
61	1
62	1
63	1
64	1
65	1
66	1
67	1
68	1
69	1
70	1
71		-2
72		-2
73		-2
74		-2
75		-2
76		-2
77		-2
78		-2
79		-2
80		-2
81		-2
82		-2
83		-2
84		-2
85		-2
86		-2
87		-2
88		-2
89		-2
90		-2
91		-2
92		-2
93		-2
94		-2
95		-2
96		-2
97		-2
98		-2
99		-2
100		-2
Total	70	-60

He has a 10 unit gain.

Which is 5R because the units I'm talking about are worth 0.5 Risk.

(Which doesn't matter because you can just increase size)

 

"to me it does not look to be a worth it."

An edge is worth it if it works.

 

"So instead of throwing fireballs lets keep the discussion moderate."

I do not need to go post to post to point out how sideways you get on people, my last post about it has 4 people reacting in agreement.  Which really says something because most people don't even log in.

 

Edited April 28, 2021 by Bailey Nevener

[Bailey Nevener 83]

10 hours ago, peterB said:

your tables say the same as mine so at least we have the math in-line

5R over 100 trades is the 0.05R reward to risk ratio per trade and you call it an edge which is correct mathematically.

Practically, you need to risk 100 dollars to make 5 dollars. And after taking 100 trades risking 10000 dollars you make 500 dollars. If you risk 100 per trade you need to take 1000 trades to make 5000 dollars. 50 trades daily.

Now start counting the commisions on how much you need to risk to make a living out of this edge. And count the time how much it takes you to take 50 trades daily.

It does not seem worth it to me.

I'll give you that.  You would definitely need to already have a big account for the edge to be worth it with commissions.