# Scalping Aussie stocks



## MS+Tradesim (21 April 2009)

With respect to skc's question here:



skc said:


> MS, can I ask you a dumb (and off-topic) question?
> 
> I see plenty of penny stocks with no liquidity, and some penny stocks with huge liquidity. If there were several million in the depth of the order book, and you are joining the back of the queue, then wouldn't it be difficult, if not impossible, to get a fill? Especially if you are only aiming for 1 tick?
> 
> ...




...I've started this thread.

I used to scalp full-time in the early 2000's and made a decent living from it. Then trend trading became a better option so I let scalping go and have just started to pick it up again in the last few months. I'm still rusty and making plenty of mistakes but getting back into the swing of it.

So this thread is for anyone scalping aussie stocks. It's not just about what I'm doing, but I'll kick off with my basic strategy. Others can feel free to add their strategies/ideas.

I look for lower priced stocks preferably sub-10c but anything up to about the 40c mark works for me. I look at the odd higher price stock too like AIO in the last few days. The reality is it depends completely on liquidity, volume and volatility.

What I want to see is above average volume and decent range. I like thick buy lines and thin sell lines, with plenty of individual orders on the buy side. One or two big orders making the line raises the risk of those big buys getting pulled and leaving one with no demand. Depending on the DOM, I might put in a bid, but generally I send a limit order at the ask. All I'm looking for is 1-3 ticks on the upside with a downside risk of 1 tick. Occasionally that gets swept to 2 (infrequently 3) if some dedicated sellers appear.

It's discretionary trading so it depends on a lot on the individual trader. It's difficult to quantify. It's more of a 'feel' for how the orders are flowing, what transactions are occurring etc. I guess it's internalised patterns. 

SDL is an example of something on the watchlist. It's had great ranges, the buy lines are currently looking good, strong overhead resistance but only looking for 2-3 ticks so that wouldn't be an issue. I don't think this will trade today, maybe not tomorrow, and maybe not for weeks. Who knows? But I have my eye out here for an opportunity. In this example, if it were a real trade, I'd probably be looking to get in at 9.2 if possible or 9.3 if 9.2 builds up quickly and there are no sellers. I'd probably look at getting out at 9.4. Difficult to say exactly because it's not a real trade and the buyers aren't flowing and the sellers aren't pulling orders. 

As SDL is not presenting a real opportunity I want to make it clear in this case that the thin sell lines could very well be from sellers at market driving the price down quickly (and cascading stops) rather than a lack of sellers. As I say, it's difficult to quantify and is more about a 'feel' for the DOM. I'm sure TH and the other SPI scalpers understand what I mean. 

Will post a real trade when I get one.


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## Pairs Trader (21 April 2009)

May I ask what broker your using for scalping aussie stocks? I would have thought typical aussie broker commissions would make scalping ASX not feasible.


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## MS+Tradesim (21 April 2009)

I usually have several orders ready to go. Here's an *example*. I just send the one I want. Or if an order is already in the market and not executed, I have modified orders ready to go.


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## MS+Tradesim (21 April 2009)

Pairs, I'm using IB exclusively now.

PS. I don't claim to be an expert. I just know what worked in the past and seems to be working now. Scalping is not my main game at the moment, but it's a useful bonus.


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## Pairs Trader (21 April 2009)

You guys need to download tradesim http://www.tradingsimulation.com/index.php its an free IB front end, great for day trading/scalping, I used it for several years when I day traded the emini's and stocks before I discovered day trading was bad for your health, especially mentally it takes its toll, I prefer trading a few minutes a day, holding overnight, take 20, 30 or 80c swings out of the market. But with the frontend you can easily move your orders up and down with a click, lift the offer or hit the bid at a click, very simple and quick to use.


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## Nero64 (21 April 2009)

Is this what you mean by the buy orders stacking up in the DOM:

This AOE when it was trying to takeover PES


Number	Quantity	Price	#	Price	Quantity
2	15,000	2.61	1	2.62	10,450
1	36,792	2.6	2	2.63	2,000
1	10,000	2.59	3	2.64	7,000
1	10,000	2.58	4	2.65	38,784
1	5,000	2.56	5	2.66	5,000
4	47,323	2.55	6	2.67	3,000
2	18,461	2.54	7	2.68	2,000
1	10,000	2.52	8	2.69	1,000
1	7,968	2.51	9	2.7	9,645
1	15,000	2.48	10	2.71	15,000
277 buyers for 1,788,549 units	47 sellers for 297,266 units	


What about the idea of the ask orders hitting the DOM and the trend reversing. With the increasing ask orders going higher causing the prices to rise as and influx of buyers is willing to bid up. 

Some say the DOM means nothing as there is money on the sidelines who haven't placed orders.


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## Jack Payback (21 April 2009)

MS+Tradesim said:


> With respect to skc's question here:
> 
> 
> 
> ...




I'll be interested to see how you go, also interested in any other insights on scalping.

How long do you look to hold positions? Do you have a limit?

Cheers


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## MS+Tradesim (21 April 2009)

Nero,

There's only 1 order per line for most of that. It wouldn't interest me, as too easy for those sideline sellers to push it down.You have to be aware of people on the sidelines who are hitting the bid/ask without queueing orders but you see the trend of them by watching the DOM and COS. They are the ones who move the market. If you think about it, nothing would happen if everyone was just entering limits to buy at the bid and limits to sell at the ask. What I'm looking for in the DOM is replenishing or pulling of orders at the action levels. Plus, the levels of activity reveal overall sentiment putting the odds for or against you.....in conjunction with the activity of the sideliners.


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## Nero64 (21 April 2009)

> What I'm looking for in the DOM is replenishing or pulling of orders at the action levels. Plus, the levels of activity reveal overall sentiment putting the odds for or against you.....in conjunction with the activity of the sideliners.




Hi MS + Tradesim, 

How or where can you extract this from the DOM.


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## MS+Tradesim (21 April 2009)

Pairs, thanks for that link.

**********

Jack,

I'm only holding seconds to minutes.

I just did one on PRR. Will post pics soon.


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## ivanchuk (21 April 2009)

Hi guys, I'm absolute beginner in this game, been testing few systems based on SI indicator on ASX, but not quite happy with results (what a surprise!). I am interested in scalping since it seems it is possible to profit on small moves. So this topic is very interesting, but need few explanations: what is DOM, COS and SPI ?

Thanks and sorry for stupid questions...


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## beamstas (21 April 2009)

ivanchuk said:


> Hi guys, I'm absolute beginner in this game, been testing few systems based on SI indicator on ASX, but not quite happy with results (what a surprise!). I am interested in scalping since it seems it is possible to profit on small moves. So this topic is very interesting, but need few explanations: what is DOM, COS and SPI ?
> 
> Thanks and sorry for stupid questions...




DOM = Depth Of Market
SPI = Standard & poors index? I think? 

Brad


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## CanOz (21 April 2009)

beamstas said:


> DOM = Depth Of Market
> SPI = Standard & poors index? I think?
> 
> Brad




SPI = Share Price Index

TLA = Three Letter acronym

Cheers,


CanOz


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## MS+Tradesim (21 April 2009)

Example trade from PRR. Two things of note. (1) I was distracted and I shouldn't have even traded, so though it went in my favour it was still a mistake. (2) Because I was distracted, I didn't trade it the way I should have and left a lot on the table. Mistake #2. 

But as I say, I'm still rusty and trading will improve with more practice and review (nods at TH). 

Comments on pics:

Was looking at this at 0.044 but went to lunch so missed that run. Having a real off day today. No focus. Not good for trading. Period.

*p1)* Ok. Looks interesting. Chart indicating retracement over, looking for a retest of the highs.

*p2)* Retest starts.

*p3)* 0.054 soaked up by buyers. 0.055 starts so I'm in too.

_(p4) Pic accidentally deleted from clipboard, but just showed plenty of buying.)_

*p5)* 0.057 chomped through. I'm out here. Less than 2 mins. Mistake here. Should have held for 0.058 which got decimated too. Nevermind.  From p3 to p5 you can see the orders flooding into the DOM. No-one is selling. All the action is up. Thin line at 0.058. I should have waited.

*p6)* Sit on sidelines and wait for another opportunity. Comes later. Rinse and repeat from 0.06 to 0.062


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## MS+Tradesim (21 April 2009)

Rinse and repeat on close for another 2 ticks. Wouldn't recommend others attempt taking closing gaps but I do it regularly.

Please for newbies: scalping is the front line of trading. If you can't brutally cut your losses you will wash out quickly. Don't think this is easy and all profits. It's not. It is mentally and emotionally taxing - as I'm sure the SPI guys will agree. You've got to be on your game.

Oh, and the acronyms:

SPI = Share Price Index. Futures contract traded by a bunch of people here.
DOM = depth of market, the order book or buy and sell lines
COS = course of sale, the actual transactions that have occurred

Now, I took 6 ticks over 3 trades and a swing or pattern trader might get the whole or bulk of the day's move. But this thread is about scalping, not other styles.


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## Wysiwyg (21 April 2009)

MS+Tradesim said:


> Now, I took 6 ticks over 3 trades and a swing or pattern trader might get the whole or bulk of the day's move. But this thread is about scalping, not other styles.




MS+Tsim, did you look at the reason why the stock was running first or did you just trade the feeding frenzy after a market scan/alert?


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## MS+Tradesim (21 April 2009)

Wysi,

Just traded the action. I've no idea about the stock. I assume something interesting happened. Probably could have just held for a better profit with less comms but anyway, still getting back into the flow of it. No doubt, a dozen things I could have done differently.


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## AlterEgo (21 April 2009)

MS+T,

What criteria are you searching on to find suitable stocks to trade?


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## MS+Tradesim (21 April 2009)

AlterEgo said:


> MS+T,
> 
> What criteria are you searching on to find suitable stocks to trade?




Just the market movers searches in Paritech Pulse. I do have access to their Marketscan search tool as well with which I can do user-defined searches but I haven't needed it yet. What I screen for is primarily volume at lower prices, between about 3c and 50c usually. Then eyeball the DOM and immediately discard the ones with thin lines. Put them on a watchlist, keep an eye on their order lines and just take opportunities that arise.

Also, my end-of-day searches for one of my mechanical systems often throws up possibilities that I will look at the following day. It's a breakout system and is looking for strong volume and momentum. Sometimes when the signals don't work for my mech.system they still prove nice scalps.


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## skc (21 April 2009)

MS+Tradesim said:


> With respect to skc's question here:
> 
> ...I've started this thread.




Thank you MS for a great thread. I am glad that I have helped in a small way to enriched this forum .

With your 1 tick stops, how do you place that order? Would you exit as soon as the entry minus 1-tick price is traded? Or would you keep watching the DOM and wait till it gets too thin for comfort?

Is the screen shot Paritech?

Thanks again.


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## MS+Tradesim (21 April 2009)

skc said:


> Thank you MS for a great thread. I am glad that I have helped in a small way to enriched this forum .




Well, I figured I should do my bit to add some content too. 



> With your 1 tick stops, how do you place that order?




I don't. I have a limit order ready to go and finger on the trigger.



> Would you exit as soon as the entry minus 1-tick price is traded? Or would you keep watching the DOM and wait till it gets too thin for comfort?




Keep watching the DOM. I like to see the sell-off on volume. Often a sell-down seems to be just someone who sends in a market order right before the price line flips so they get filled a tick below what they were expecting....that's my best guess anyway. EDIT: to clarify this, say the spread is 0.05/0.051 and then buyers flip it up to 0.051/0.052 but only a small quantity of order volume left at 0.051. A seller then flips it back by putting in a limit at 0.051 so the spread returns to 0.05/0.051 and a milli-second later a sell order goes through at 0.05 but no more selling occurs and then price flips back up....I suspect the sell at 0.05 was probably just a market order that the seller was hoping to get 0.051 but missed because of someone faster. 





> Is the screen shot Paritech?




Yep. Comsec discontinuing ProTrader 1 was the best thing to happen to me! I signed up for the real thing instead of their scaled down version. And Comsec Iress inspired me to just complete the move to IB for broking. 



> Thanks again.




All good. Might help someone else and also opens me to hear some constructive critiques.


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## MS+Tradesim (21 April 2009)

MS+Tradesim said:


> What I'm looking for in the DOM is replenishing or pulling of orders at the action levels. Plus, the levels of activity reveal overall sentiment putting the odds for or against you.....in conjunction with the activity of the sideliners.






Nero64 said:


> How or where can you extract this from the DOM.




Nero,

In reviewing the first trade from above, in at 0.055 and out at 0.057, you can see in the DOM what the sellers are angling for, and had I been focused I would have held longer and maybe got out at 0.058.

Below are the 3 shots and I've circled the lines at 0.058 and 0.059. As the action unfolds and price rises, the line at 0.058 is getting smaller and the line at 0.06 is bulking up significantly. 0.059 is also gaining some orders. I read this as the majority of sellers there are really hoping to get 0.06 and there are always the frontrunners so they're looking to get out at 0.059. But 0.058 is diminishing ie. orders are being pulled, and as the price is rising the buying lines are thickening nicely. 

This is of course only the orders in the book and I'm also closely watching the COS to see how orders are hitting at the bid or ask. At the time there was lots of buying and little selling.


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## Nero64 (21 April 2009)

Hi MS + Tradesim, 

So the rising number at .06 says more people are setting there profit target to .06 as they can see the price is rising, i.e the initial profit target sell is being ammended from .058 to .06 hence the former is getting smaller. 

Why didn't you work this out when you bought in? - Is it the pressure or do you need hindsight after the fact.

I suppose you can't work this sort of stuff out in the normal Commsec DOM (Laughs and chuckles) so I need some real time data feed?

By the way PRR came out with a company presentation about their treatment for Ovarian Cancer, and they have hit an all time high. Who says news doesn't move the share price, i can't see how normal supply and demand could of moved it 88%.


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## saiter (21 April 2009)

MS+Tradesim said:


> Nero,
> 
> In reviewing the first trade from above, in at 0.055 and out at 0.057, you can see in the DOM what the sellers are angling for, and had I been focused I would have held longer and maybe got out at 0.058.
> 
> ...




This explains so much lol. Thanks


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## MS+Tradesim (22 April 2009)

Nero64 said:


> So the rising number at .06 says more people are setting there profit target to .06 as they can see the price is rising, i.e the initial profit target sell is being ammended from .058 to .06 hence the former is getting smaller.




I don't know where the orders from 0.058 have gone. They could be sitting on the sidelines or they could have sold down already. But basically, watch the lines and the COS and you can work out probable outcomes. In this case though, 0.06 was a clear choice for sellers. Round numbers have a remarkable pyschological value. It can be used as an advantage to frontrun getting in or out. Often, people in those lines never even get filled. 



> Why didn't you work this out when you bought in? - Is it the pressure or do you need hindsight after the fact.




I'm normally working it out on the fly. Usually I pick up on the majority of those clues, but this wasn't a well executed trade. Nevermind. It is what it is, warts and all. 



> I suppose you can't work this sort of stuff out in the normal Commsec DOM (Laughs and chuckles) so I need some real time data feed?




If you want to scalp, a live data feed is a basic necessity.


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## Jack Payback (22 April 2009)

Can anyone recommend any books or resources on this topic?

Cheers


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## MS+Tradesim (22 April 2009)

Jack,

I don't know what's useful or not. I learnt through screen-time. I think that's the only real way to get it. This style is fast moving, so it doesn't lend itself to theory and detailed analysis that might help in longer term trading.

Learn on sim. Make your positions sizes smaller than you think you should. Cut your losses quickly. One loss left to run can wipe out a day's or week's profits. And if the loss is running away it won't come back.


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## Trembling Hand (22 April 2009)

MS+Tradesim said:


> I don't know what's useful or not. I learnt through screen-time. I think that's the only real way to get it. This style is fast moving, so it doesn't lend itself to theory and detailed analysis that might help in longer term trading.
> 
> Learn on sim. Make your positions sizes smaller than you think you should. Cut your losses quickly. One loss left to run can wipe out a day's or week's profits. And if the loss is running away it won't come back.



 XACTLY







Jack Payback said:


> Can anyone recommend any books or resources on this topic?
> 
> Cheers



 Don't do this cus you think its easier than position trading or because you can't make "normal" trading work. You scalp because you can see it working.


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## Jack Payback (22 April 2009)

Trembling Hand said:


> XACTLY Don't do this cus you think its easier than position trading or because you can't make "normal" trading work. You scalp because you can see it working.




I'm still too much in newb territory to be attempting this, just exploring the concept, there's is not too much written about it.

Question for Tradesim - do you use DOM and COS only? Do you use chart indicators like MACD, relative strength, moving averages etc?


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## MS+Tradesim (22 April 2009)

Jack Payback said:


> Question for Tradesim - do you use DOM and COS only? Do you use chart indicators like MACD, relative strength, moving averages etc?




I look at the chart prior to a trade but don't use any indicators. Just daily volume to confirm suitability and possible support/resistance areas to help focus potential entry/exit. Once I open the trade, I'm only looking at DOM and COS.

Listen to Trembling Hand. He's a very accomplished scalper.


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## skc (22 April 2009)

Slightly off-topic question:

Assume a DOM that looks like below...
$1.00, 2000
$1.05, 1000
$1.10, 1000

If someone just hit the market for 4000 shares, will he/she always sweep these orders up? Is it possible for anyone else to sneak in? e.g. If someone had a stop sell order at $1.05, or a stop buy for $1.05.

Does it depend on individual broker at all?


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## MS+Tradesim (22 April 2009)

skc said:


> Slightly off-topic question:
> 
> Assume a DOM that looks like below...
> $1.00, 2000
> ...




If they hit at market, yes, they will keep sweeping up until filled. What can happen and fairly frequently is a sell order going in a split second either side of the buy order hitting which results in the sweep not going as high. Say someone sends an ask at 1.02 for 1000.

I guess what you're describing is theoretically possible and may cover some instances of the event I referred to, but since contingent orders necessarily lag action I suspect it wouldn't happen very often. I could be wrong.


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## MS+Tradesim (22 April 2009)

3 ticks. Perfectly traded as I've been outlining above. It did keep on running though beyond the target. In future, might look at taking off say 2/3 at target and let a portion run. Moved too quick to take screenshots, sorry.

Looking beyond the scalping possibilities on this one, PNO is a micro biotech/pharm. company. Position traders might be interested in looking at it in light of what has happened over the last few days with PRR and NEU. This is *NOT* a recommendation. Just might interest some to check it out further for other styles of trading.


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## MS+Tradesim (22 April 2009)

This is a potential set-up. It looked interesting but stock kept getting drip fed into the line at 0.008. The buyers couldn't take out the line. It has failed in the minute or two since then, but it will stay on the watchlist for another opportunity.

Also, the buy/sell lines at the action area here are roughly even so the sentiment of the sideliners is key to whether or not this one can work. Buy orders weren't flooding into the buy side and the sells kept replenishing.


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## Jack Payback (22 April 2009)

MS+Tradesim said:


> With respect to skc's question here:
> 
> I look for lower priced stocks preferably sub-10c but anything up to about the 40c mark works for me.




Can I ask why these stocks? Why would ASX20 stocks with high volume not be suitable?


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## beamstas (22 April 2009)

MS+Tradesim said:


> 3 ticks. Perfectly traded as I've been outlining above. It did keep on running though beyond the target. In future, might look at taking off say 2/3 at target and let a portion run. Moved too quick to take screenshots, sorry.
> 
> Looking beyond the scalping possibilities on this one, PNO is a micro biotech/pharm. company. Position traders might be interested in looking at it in light of what has happened over the last few days with PRR and NEU. This is *NOT* a recommendation. Just might interest some to check it out further for other styles of trading.




Am i correct in thinking you just made around $28,500 (after comms) in a few minutes?

Bloody hell

Nice one ms

Cheers,
Brad


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## Trembling Hand (22 April 2009)

beamstas said:


> Am i correct in thinking you just made around $28,500 (after comms) in a few minutes?




You are out by one decimal point.

it was $285,000



Just kidding $3000


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## nomore4s (22 April 2009)

beamstas said:


> Am i correct in thinking you just made around $28,500 (after comms) in a few minutes?
> 
> Bloody hell
> 
> ...




How did you work that out? I got $3000 before comms.

Edit: TH beat me


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## Timmy (22 April 2009)

What a great thread, thanks MS and other contributors.

Question for you MS re times, do you tend to take off the 'lunch time' and only trade the higher volume/activity parts of the day, or no?


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## MS+Tradesim (22 April 2009)

Jack Payback said:


> Can I ask why these stocks? Why would ASX20 stocks with high volume not be suitable?




For me it's about bang for the buck. I'm only wanting to take a couple of ticks so I need high volume and low costs to make the small movement worth while. To do this on a top 20 stock you would have to take a smaller position and thus need far larger movement for similar returns.

Just say I'm shooting for 3 ticks on something at $0.05 and I take a 250,000 share position. If I get my target the round trip will cost me $20.60 in comms and gross $750.

To make $750 on a top 20 stock the numbers are very different. Take ANZ for example. I could comfortably take a position size of maybe 2000. To get a return of $750 before comms it would have to rise 38c. Assume I buy at 16.40 the entry comm is 26.24 and to exit at 16.78 another $26.85. That's now $53 for the round trip in brokerage plus movement of 38 ticks. But looking at a target of 38c is a very different ballgame.

I only take scalps that make sense for a move of a few seconds to a couple of minutes. That makes it easy for me to find targets at low price points and take a position size that is logical to the volume, DOM and intended target plus the total value of the trade is a lot less, meaning less brokerage.


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## MS+Tradesim (22 April 2009)

Timmy said:


> What a great thread, thanks MS and other contributors.




You're welcome. Thought it was time I added something a bit more substantial. 



> Question for you MS re times, do you tend to take off the 'lunch time' and only trade the higher volume/activity parts of the day, or no?




Totally depends. Sometimes there's plenty going on across lots of shares and kept busy most of the day. The majority of time is spent stalking the trades. Actual execution is rarely more than a few minutes. On average, though, I would say volume does drop off over the middle of the day.

For me, the open is hard to trade as plenty of things go up quickly and then settle off and stay flat. Like this morning, I lost one tick on CER. It looked ok, but there was just no follow through volume so I exited. Afternoon tends to be nice as you find the shares that have held up through the day and are continuing to attract buyers.


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## beamstas (22 April 2009)

nomore4s said:


> How did you work that out? I got $3000 before comms.
> 
> Edit: TH beat me




Oops 

Thought it was 9 cents and 12 cents, not 0.9 cents and 1.2 cents

My mistake

Brad


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## CanOz (22 April 2009)

MS, Great Stuff! A couple of years ago in the big resource bull there were heaps of penny stocks making big moves on tons of volume almost every day or every other day. This strategy would have been like taking candy from a baby back then....do you recall those days?

Cheers,



CanOz


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## Jack Payback (22 April 2009)

MS+Tradesim said:


> For me it's about bang for the buck. I'm only wanting to take a couple of ticks so I need high volume and low costs to make the small movement worth while. To do this on a top 20 stock you would have to take a smaller position and thus need far larger movement for similar returns.
> 
> Just say I'm shooting for 3 ticks on something at $0.05 and I take a 250,000 share position. If I get my target the round trip will cost me $20.60 in comms and gross $750.
> 
> ...




Do you trade on news or announcements or just fast movers?


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## cutz (22 April 2009)

I'm not sure how relevent this is but this system of brokerage appears to be attractive for interday scalping of aussie stocks, http://www.traderdealer.com.au/Why-Use-Us.aspx?sec=TradeLikeAPro .


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## sails (22 April 2009)

cutz said:


> I'm not sure how relevent this is but this system of brokerage appears to be attractive for interday scalping of aussie stocks, http://www.traderdealer.com.au/Why-Use-Us.aspx?sec=TradeLikeAPro .




It's one of the plusses with TD - works the same with options and allows for scaling during that day provided it's inside their limits.


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## Nero64 (22 April 2009)

Did Anyone see PNO today, it went from a low of 0.003 to 0.015 (500% Gain). Imagine putting 1,000,000 shares on that. 

I was tempted to get on it seeing it at .011 then in the space of 5 mins after I read its background it went to 0.015. Then it went back down to .011 again. 

I can just imagine 1000s of people doing this daily like you MS&T. I tried it last year with Coal and coal seam Gas stocks. Made a bit of light change, it was fun to.


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## MS+Tradesim (22 April 2009)

In adding to the overall picture I'll run through a setup that didn't work out with the result I didn't take a scalp on it. I was watching IMI at the 0.007/0.008 level as posted earlier. I was hoping it would co-operate the way PNO did.

Something that's important to me is the 'feel' of how the orders and transactions are flowing. It has to feel 'easy'. IMO, if the action makes you feel like getting behind and pushing or zapping a few modems on the other side of the exchange to clear the sellers, then it probably isn't going to work.
This played out like that.

1) At around 14:30 there was plenty of action at 0.008. You can see the size of the buys. The orange dotted line goes around one at 14:35:15. On the DOM buyers bulk at the 0.008 level.

2) One seller starts the off-load with 2,000,0000 then a few more bigger sellers follow up. What I'm looking for now is a lack of further selling, perhaps a pause and then buying at 0.009 to start. But others dump in and the price is flipped back. The DOM keeps flipping 0.007/0.008 to 0.008/0.009 and back again but all transactions are occurring at 0.008.

3) 10 mins later you can see some brave soul take a little nibble at 0.009 for 50,000. But there's no follow-up and the sellers keep unloading at 0.008. At 14:49:26 another small bite at 0.009 for 150,000. This is why I never set price. I only follow it. I just want a small bite of the pie. I'm not trying to cause anything to happen. This example shows why. If no-one else shares your view, then it isn't going anywhere.

4) There's no follow through. The sellers are motivated and they're unloading. 

5) Worse, you can see the buy line at 0.007 is diminishing but that was occurring without transactions. That means the orders are being pulled. The buyers are expecting the sellers to keep going now. It's no longer a question of can it keep rising, but how far are they prepared to push down?


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## MS+Tradesim (22 April 2009)

6) Skip forward about 10mins and the outcome is clear. The buyers never had a hope of overwhelming the sellers who were prepared to keep feeding in stock at 0.008. When this occurs, sideliners start thinking about the fact that they're just not going to see any better and they're prepared to push down further so 0.007 gets the next wave.

This stays on the watchlist to see if tomorrow brings another assault from buyers.


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## MS+Tradesim (22 April 2009)

CanOz said:


> MS, Great Stuff! A couple of years ago in the big resource bull there were heaps of penny stocks making big moves on tons of volume almost every day or every other day. This strategy would have been like taking candy from a baby back then....do you recall those days?




Yeh, but I was trend trading then, which was easier and maybe more profitable.



Jack Payback said:


> Do you trade on news or announcements or just fast movers?




Not really looking at news. The movers are usually running for a reason and sooner or later it shows up in a speeding ticket or an announcement. Although both PNO and PRR gave good trades today after news. In that case, trading the news was coincidental. They were both already on my watchlist.

And that's about all of it. Just screen-time and practice. After a while you can see what's happening in the DOM and COS and you just wait for good setups.


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## Jack Payback (23 April 2009)

MS+Tradesim said:


> And that's about all of it. Just screen-time and practice. After a while you can see what's happening in the DOM and COS and you just wait for good setups.




Thanks for the insights.

Cheers.


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## skyQuake (23 April 2009)

MS did you catch the DYL run today? It was almost the same as what you put up!


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## MS+Tradesim (23 April 2009)

skyQuake said:


> MS did you catch the DYL run today? It was almost the same as what you put up!




Didn't see it till too late. Only got 2 ticks on it. Have been wasting most of the day looking for an entry on WOW. Long or short. Trying to set a position trade on it.


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## skc (23 April 2009)

Hey MS, have you tried the IB book trader to do your scalping? It seems ideal, although you will still need another feed as IB don't provide full depth.


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## MS+Tradesim (23 April 2009)

skc said:


> Hey MS, have you tried the IB book trader to do your scalping? It seems ideal, although you will still need another feed as IB don't provide full depth.




Thanks for the suggestion. It looks 'weird' on stocks. I'm so used to seeing the side by side style of DOM, it's hard to adjust, but I agree it could be useful.


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## MS+Tradesim (23 April 2009)

skyQuake said:


> MS did you catch the DYL run today? It was almost the same as what you put up!




If 0.28 gets decimated, might get another bite.


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## skyQuake (23 April 2009)

MS+Tradesim said:


> If 0.28 gets decimated, might get another bite.




Agree, first test was fast and vicious, but it looks like there's a dedicated buyer coming to break those highs.


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## MS+Tradesim (23 April 2009)

It's like magic. Orders flood in at a round number and the action just stalls. Everyone's waiting for someone else to make the first move.


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## MS+Tradesim (23 April 2009)

This is why as a scalper you never want to set the price. You want to follow the movers. Dunno what 10 shares is about but it never traded at that price again. Next run was down. In any case, like the IMI setup I ran through before, a new high on low/miniscule volume is dangerous.


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## Nero64 (23 April 2009)

MS, 

So say you have 

Last price .205

Buy                 Sell

116,978  .20     743,125 .205

then 

Buy                 Sell

116,978 .20      606,145 .205

Since the sell number is going down and there is not enough buys to fill the excess supply prices will go back down to .20 right.

Just to note I used the DOM to buy into IPL yesterday after a 7% plunge. I could see the buyers stacking up and the price just hovering 1-2c up and down and it finished off its lows. Today it went down to 2.05 to finish at 2.11 which suggests to me that there was absorption volume in play. Will see how it pans out.


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## MS+Tradesim (23 April 2009)

Just a general tip: learning to read DOM/COS has its own rewards and is useful beyond scalping. It becomes easier to pick good entry/exit points for other styles of trading rather than jumping in or dumping out. It also becomes easier to create or unwind large position sizes without overly influencing price.

As an example, my mechanical systems are designed and tested on entering at the close of the day. By watching the action in the last half hour I can often get better entries than the close turns out to be. That adds to the bottom line. 

For traders, it is a skill worth cultivating.


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## MS+Tradesim (23 April 2009)

Nero64 said:


> Since the sell number is going down and there is not enough buys to fill the excess supply prices will go back down to .20 right.




I couldn't possibly say without having watched that DOM/COS. If it's a pause in a run and the buying lines are thin and sellers have been active then it is more likely to go down. Unfortunately, a tiny glimpse of the picture isn't enough to go on. It's the overall flow that reveals the highest probability.



> Just to note I used the DOM to buy into IPL yesterday after a 7% plunge. I could see the buyers stacking up and the price just hovering 1-2c up and down and it finished off its lows. Today it went down to 2.05 to finish at 2.11 which suggests to me that there was absorption volume in play. Will see how it pans out.




That's possibly more in the territory of VSA. But yes, the skill of DOM reading is very useful outside of scalping. Your post just beat my previous one mentioning this.


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## MS+Tradesim (24 April 2009)

As a low-price stock scalper, this is the Holy Grail of R:R. If you buy at 0.10, 1 tick down is worth 0.001, but 1 tick up is worth 0.005. That's a risk/reward of 5:1 for 1 tick in either direction. Unfortunately, being the Grail it is elusive and rarely much use in real-time.


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## Daveee (16 July 2009)

Great Thread, many thanks for your knowledge & experience

May i ask what would be the best place to view & learn how to read charts as indicated below in your threads

For example how to read a trend, or how to spot a trend including when a trend breaks

Any assitance would be greatly appreciated


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## jinprince (7 March 2012)

MS what program are you using? 

Thanks.


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