This works if your entries are perfect and your win rate is incredibly high. It's highly unlikely to have both of these things(not impossible, just improbable). You'd want to do this on an instrument with very high tick values, like US treasuries.

I think you may need some more advanced semi-algorithmic order entry and stop loss too. I found when trying to scalp a few ticks I could do pretty well. However, I could read via the tape that the market was trading very efficiently because when my stop would be hit the other traders would not be. The efficiency of the markets suggest that very few if any retail traders are doing this.

The problem is if you try this with a normal exchange stop loss or whatever, you will be selling out to the top of book. You would need to use a more advanced stop that only triggers when the probability of price at least touching the next price is very high or some sort of automated strategy that moves your take profit limit right to your stop level as soon as your stop level is cleared.

Generally for point/click scalpers, scalping becomes much easier when the markets are more volatile.

module0000 

This works if your entries are perfect and your win rate is incredibly high. It's highly unlikely to have both of these things(not impossible, just improbable). You'd want to do this on an instrument with very high tick values, like US treasuries.

also jgb and n225

@ simo88

You might want to try looking up Gary Norden. It seems his strategy of scalping you may find helpful.

It sounds like R Trader has a feature called R Trader Bass designed to detect micro-instances where the spread widens by a set number of ticks and then to offer on both sides. They also have what sounds like a book stuffing algo. It sounds like they detect when the order flow is high and then stuff the book on the opposite side a few ticks below.

This is certainly interesting stuff. I have been working/thinking about similar ideas for a long time. However, I have also imagined there would be a discretionary component which would allow the trader at least some input, i.e. graybox.

However, I'm just trying to figure out if this can really work. I haven't tried it but it just seems that without some ability to add some of your own "edge" or ability to read the market the jumping to fill the bid wouldn't be a very sound idea. I mean let's just take a moment to consider the other market makers have more intelligence and have let the spread widen.

I'm curious to hear from anyone using either of these products. If one could use their market read or trading ability with these products then that would be very interesting. If it is just a "dumb" algo then I'm still interested to learn if it can really work.

DionysusToast 

It is of course, entirely possible. I know people that do it. So it's not a theoretical question as far as I am concerned. But the keys to making it work are: 1 - How will you decide that it's a safe time to trade? 2 - How will you decide to enter on the bid vs the offer? 3 - How will you decide to scratch a trade once you are in (in other words - you get in on the bid, you didn't get filled on the offer yet and you decide to exit because conditions are no longer right). 4 - How will you decide to let the trade run for more than 1 tick? 5 - How will correlated markets factor in your strategy? 6 - Who is on the other side of your trades when you enter? 7 - What is the appropriate ratio of commission fees to tick value on the instruments you see as candidates for trading. For example -this is a no go on the DOW but attractive on the Ultras If you can answer these questions, then you will be able to make it work.

Can you elaborate by what you mean in point 6 and the implications? Also, how would you verify who is trading on the other side?

tpredictor 

The consensus wisdom is that this is a losing idea for the retail trader. Now keep in mind the consensus wisdom, aka common wisdom, also leads to mostly failed traders. I've been thinking about similar strategies myself. With new commission free brokers like Tradeovate, there could be new opportunities for retail traders. I have seen in the ES (my primary market) that there are many more opportunities to capture 3 ticks of profit because most traders want that 4th (or 5th/6th etc) tick. If you can capture 3 ticks with 10 contracts in ES, that's $375. This type of strategy is probably most likely to work in a fashion where you enter on market and only capture one side of the spread. The catch is that you will probably have a low win ratio because you'll have to scratch or take many 1 tick losers. Few potential catches: (1) your commission will make up a high percentage of your wins/losses-- this will make your win rate hurdle higher, (2) you will be incurring a higher "hidden risk" of trading so many contracts-- in event of a technical breakdown or something, if that combines with sharp market movement then it could lead to very large losses, (3) you will have to deal with uncertainty risk.. you might send your orders to exchange when you think you need too but faster traders might get filled before your target price, leading to you having to take a loss, (4) there will be a delay between when exchange reports you filled and you were filled, during the interim your trading platform may have issues reporting position correctly --not sure how that works. My general feeling is that: 1 tick might not be worth the risk but that trying to capture a few ticks could be viable strategy. It is presumed that market makers, even those that are unofficial, capture the spread many hundreds of times by staying on the book at all times (and keeping top of book). They offset their risk by hedging using some other product such as a synthetic basket to replicate the market. Their edge is basically the volume that is traded multiplied by the spread. As a retail trader, you won't get top of book and you won't be able to do enough volume to make it work out and you won't be hedged. So, probably not..

great！ Thanks tpredictor

You're welcome! I think for retail scalping what is more likely to work is to think of a scalp in terms of risk but not in terms of frequency. Think lower frequency, bigger size, higher R.

my ping to Chicago 213 ms .. is vps a must?

While many answers in this thread attempt to analyze what's possible or not, few are addressing the real issue: OP is scared to take a loss. Going for just 1 tick profits is where all beginners start out. They don't realize that they'll never be able to accumulate enough profits before suffering a 5 - 10 tick loss and so on until the account bleeds to death. Kudos to posters advising OP not to do this, but it won't help unless OP understands the reasons behind it.

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