Scalp trading is a extremely quick style of trading where you buy and sell a stock within a time frame of seconds to minutes executing many transactions within a day. Even though your goal will be for gains of only 1 or 2 cents per transaction/trade, when you consider the high volume of shares you will be flipping, this can amount to healthy profits. Furthermore, you can still make a profit even when your trade breaks even. how come Because when you add liquidity to the market, the ECN will rebate back to you a portion of the trade. Incorporating this one strategy can manufacture a nice daily return. To be specific, scalp traders trade in between the bid-ask spread. They purchase a stock on the bid then quickly unload at the ask. Since this style of trading performs better on stocks that are under $10 that don’t move much, scalp traders generate revenue by making hundreds of trades. Scalp trading has no big one time profits, but at the same time there are lesser not being profitable thus it is a safer method of trading the stock market. But wait, not just anybody can scalp trade. You need the proper tools and rates to trade this style. It requires deeply discounted scalp trading rates and privelaged access to the NYSE floor. Both of which you would have a hard time finding at your online discount broker. So how can you do this? Well, you need to find a reliable prop trading firm that will take you on as an experienced professional trader. And if you are not, there are some proprietary trading firms that will school you.
Looking for a good prop firm means locating a firm that provides the ability for you to trade their money as well as offer rates that are discounted. Most proprietary trading companies will let you join their firm with only 5 or 10 thousand dollars. With that,For that, they will let you trade with $100,000 or more depending on your experience. It’s not unheard of for a proprietary trading firm to accept a $10,000 deposit and provide you with the ability to trade with $300,000 but you must know that Prop firms are paid a percentage of your profits. The profit sharing scale can range from you getting 50 to 95% but that will depend on your past history. The more profitable you are, the less they will require.
The most important decision when looking for a prop trading firm for your scalp trading method will be price and routes offered. Ask them how many floor routes they have access to and if they can provide you with your own personal floor broker. Many proprietary trading firms will do this if you are an active enough. Next, see what their trade rates are. You will want to find a firm that will charge .50 to .70 per thousand shares. On a 2,000 share trade, that would be 1.00 to 1.70 dollars in and out; much better than your $8.95 per trade rate at Scottrade. Also make sure that they pass the rebates back to you because as you will learn, the rebate is just as important to your scalp trading.
There are many courses available that instruct the the finer elements of scalp trading. Become educated so you can improve your chances for success. Furthermore, if you need a reliable company to trade with, the proprietary trading firm below has deeply discounted rates, good floor routes and a solid training program. Happy trading.
Author Resource:
Anthony is the Chief Operating Officer at Affinity Trading. Affinity Trading is a Prop Trading Firm that provides day trading education, seminars and courses. To be part of their successful scalp trading program, visit the website today.
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