I spent the bulk of today scalping AAPL. I was in and out of that stock over 24 times today, and made a little money. My grain spreads have been making money, the AAPL options that I sold have done well. I stayed out of the copper market, and kick myself in hindsight.
I find it interesting that the DJIA didn’t close on it’s ass, especially after it even went positive for a brief moment. The market action today has provided me with many clues.
The oil market fascinates me with it’s broad strength. One wonders what the margin increases will do over at the NYMEX. FNM and FRE had some really good action, but I didn’t have the balls to trade either. I’ve wanted to short those stocks along with LEH, for weeks, and just didn’t have the balls to do it. Who knows, I probably would end up losing money on a slam dunk short. Today turned out nicely, and was like shooting fish in a barrel.
Time to get ready to drive up to get John at the airport.
Jeff
Jeff,
Great blog, thank you.
Your talk of scalping AAPL has really peaked my interest. I have been a quant analyst for about 8 years and trading professionally and privately for about 20. While I am successful trading longer-term, I have not been able to figure out scalping.
I am going to start trading full time next year and scalping may be a good way to add some extra income and help keep me occupied while I wait for longer-term trades. I cannot for the life of me figure it out. I have watched the charts tick by tick for hours, studied the statistical properties of intra-day price movements, but I seem to be getting nowhere. All of the books I’ve found on scalping so far employ technical analysis.
Do you have any advice on a good source for more information?
Thanks,
Geoff
Comment by Geoff — July 11, 2008 @ 11:43 pm
Geoff,
It is of my opinion that scalpers are born, not trained. I learned how to scalp in the wheat pit, and was able to successfully segue over to screen trading. Scalping is an innate talent. The algos have taken a lot of the natural give and take out of the market, and made scalping a much riskier endevour. However, to successfully scalp, you’ve gotta look at the spread between two different things, decide when they’re out of whack, and put your trade on. For instance, when I scalped AAPL, I was using another instrument as an indicator and studying the spread which gave me my entry points. My methods are proprietary, but I’m sure you can figure some indicators to look against and do a comparison. Run a lot of tests, and develop a system. Lots of guys trade stocks using indicators such as indexes as signals, but they usually end up losing money. Find something else that has correlation, and you’ll be on your way.
I don’t scalp a whole lot, but I was bored and wanted to see if I could still pull money out of the market.
When I play the stock market, I usually buy the best of breed, and sell a dog against it to minimize risk and stay delta neutral. I’ve had success in the past using this method. I also use uptions to protect winning positions. The price to pay for an option lets me sleep at night.
Since I’m mainly a commodity trader, I usually spread grains. I put on huge spread positions that might last for months. Spreading grains, in my opinion, gives the safest bang for the buck one can get in the mrket. I’m extremely risk adverse.
Technical analysis, candlesticks, oscillators, fib numbers, and all that stuff is unscientific mumbo jumbo meant to give the public more tools to lose money. Technical analysis has never been proven using the scientific method.
Nothing does better than good statistics and counting methods(it seems you’re on the right path) that one can employ using real science to give you an edge. Look for recurring patterns, run some statistical analysis on those patterns, and find your edge. Get some good data and run your systems tests on the data. You have a lot of homework to do, and feel free to run any ideas by me. However, I have been known to be really, really wrong.
Good luck,
Jeff
Comment by masteroftheuniverse — July 12, 2008 @ 1:16 am
Jeff,
Thank you, that was very helpful.
You are right on with respect to technical analysis. I spent a year at a hedge fund programming and testing over 50 popular technical signals. The best performing strategies didn’t come close to a basic relative value strategy. It’s nice to be reminded that there are still independent non-technical traders out there.
You’ve given me a lot to think about. Would it be ok if I emailed you on occasion to run ideas by you?
-Geoff
Comment by Geoff — July 12, 2008 @ 5:56 am
Geoff,
You’re welcome to contact me anytime.
Jeff
Comment by masteroftheuniverse — July 13, 2008 @ 1:07 am
Spreading grains, in my opinion, gives the safest bang for the buck one can get in the mrket.
Jeff, do you trade seasonal grain spreads? I know some people put on the same trades year after year.
One I love, but you rarely see, is fading the beans/corn spread when it blows out to 3:1. They can’t ever sustain that kind of price ratio.
Comment by We Are...Penn State email list — July 14, 2008 @ 9:20 pm
I wrote a nice long response to your question and it got lost in cyberspace. To sum it up, I do like to do seasonal spreads….sometimes.
Jeff
Comment by masteroftheuniverse — July 14, 2008 @ 9:36 pm
I wrote a nice long response to your question and it got lost in cyberspace.
Maybe that’s an indication the subject deserves its own post.
I’d like some guidance for a starting point for my own research, definitely not looking for you to give away your proprietary methods. (When I traded back month Dow, I learned how to create my own “fair value” calculation by consulting a CBOT product brochure, of all things.)
Comment by We Are...Penn State email list — July 15, 2008 @ 10:53 pm
Pen State:
Exactly what are you looking for? Perhaps I can help.
I have tons of old data, systems, and other stuff that one could tweak.
Jeff
Comment by masteroftheuniverse — July 20, 2008 @ 1:20 am