Quick Profits Can Be Made From Scalp Trading
by: Anthony Nunes on Wed, 13 Oct 2010 at: 5:34 AM Go to: Previous Article Next Article
Scalp trading is a quick in and out style of trading where you trade stock in a frame of time from seconds to minutes executing a lot of trades within a day. Although you will be on the look out for profits of only 1 or 2 pennies per transaction/trade, if you consider the high volume of shares you will be flipping, your results can be substantial. In addition, you can still be profitable even if your trade ends up flat. Why? Because if you add liquidity to the market, the ECN will rebate back to you a portion of the trade. Incorporating this one strategy can generate a nice daily return. To be specific, scalp traders work at exploiting the bid-ask spread. They buy a stock at the bidding price then immediately sell the same position at the asking price. Because this method of quick investing performs best on equities that are priced low that don't move much, scalp traders profit by making hundreds of trades. Scalp trading has no big profit trades, but at the same time there are lesser chances of losing and so it tends to be a lesser risk style of trading. But wait, scalp trading is not easily done.
Low commission rates and the proper tools are an absolute necessity. It requires deeply discounted scalp trading commissions and direct access to NYSE floor routes. Both of which you would have a hard time finding at your E*trade or Scottrade broker. So how can you do this? There are proprietary trading firms that take you on as an experienced professional trader. And if you are not, you will need to find a proprietary trading firm that will teach you.
Finding a good prop firm is about locating a firm that allows you to trade their money in addition to offer rates that are discounted. Many proprietary trading firms will let you join them with only 5 or 10 thousand dollars. With that, they will provide you with $100,000 in buying power or more if you have a profitable track record. It's not rare for a proprietary trading firm to accept a $10,000 deposit and provide you with buying power of $300,000 but you need to realize that they will want a percent of your profits. Many will take 10 to 50% but that will depend on your experience. The better your track record, the less they will ask for.
An important point to consider if finding a prop trading firm for your scalp trading style will be price and floor access offered. Inquire as to what floor routes they have access to and if they can assign your own personal floor broker. Any good proprietary trading firms will do this if you are an active enough. Next, find out what their trade costs are. Ideally, you want to find a firm that will charge from .0005 to .0007 per share . On a 3,000 share trade, that would be 1.50 to 2.10 dollars per roundtrip trade; much better than your $8.95 per trade rate at E*Trade. Also be certain that they pass the rebates back to you because as you will learn, the rebate is just as important to your scalp trading.
Many courses are available that teach the the finer elements of scalp trading. Become educated so you can improve your chances for success. In addition, if you would like a place to trade, the proprietary trading firm below offers the above rates, good floor routes and scalp trading seminars. Profitable trading.
About the Author
Affinity Trading Group is a Trading Firm providing Online Trading to those seeking a trading career. In addition to day trading courses, Affinity also offers a scalp trading program. Visit the website today for more info.
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