What is a scalp?

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Postado por: Dean

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Al often talks about a traders taking a scalp. What does he use for a reasonable scalp target? I would guess. It depends on the market. Can you give some guidelines?

There is multiple methods to determine a reasonable minimum scalp target. In general in any market, a minimum scalp target could be 5-10% of the average day range. There is exceptions to this. Another way is to always go for one times the initial risk or actual risk, and finally you can go for the size of an average bar.

Scalpers generally expect a successful trade within 1-5 bars and sometimes more, so you cannot expect many times the initial risk. Remember, going for the minimum is rarely the best. However, if you have a system that consistently wins 1 times the initial risk above 55% of the time, this system technically has a very little risk of ruin.

Targets can also depend on the environment you are trading in. If you are scalping with a strong trend, you can choose to go for 2 times the average bar size or even swing it instead. Be flexible because the market is flexible.

Hope that helps,
Andreas

From the Glossary:

scalp
A trade that is exited with a small profit, usually before there are any pullbacks. In the Emini, when the average range is about 10 to 15 points, a scalp trade is usually any trade where the goal is less than four points. For the SPY or stocks, it might be 10 to 30 cents. For more expensive stocks, it can be $1 to $2. Since the profit is often smaller than the risk, a trader has to win at least 70 percent of the time, which is an unrealistic goal for most traders. Traders should take trades only where the potential reward is at least as great as the risk unless they are extremely skilled.

PS. For current wide ranging Emini market Al has often quoted an Emini scalp size of 5 points with swings 10 points.