Scalping Aussie stocks

[MS+Tradesim]

With respect to skc's question here:

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?

The opposite applies - anything with liquidity that's <$10K in value per level means prices can easily gap and buyers/sellers may disappear in the blink of an eye.

Where's the happy medium? Can you name a few examples?

...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.

 

[Pairs Trader]

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.

 

[MS+Tradesim]

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.

 

[MS+Tradesim]

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.

 

[Pairs Trader]

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.

 

[Nero64]

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.

 

[Jack Payback]

With respect to skc's question here:



...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.

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

 

[MS+Tradesim]

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.

 

[Nero64]

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.

 

[MS+Tradesim]

Pairs, thanks for that link.

**********

Jack,

I'm only holding seconds to minutes.

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

 

[ivanchuk]

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...

 

[beamstas]

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

 

[CanOz]

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

Brad

SPI = Share Price Index

TLA = Three Letter acronym

Cheers,


CanOz

 

[MS+Tradesim]

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

 

[MS+Tradesim]

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.

 

[Wysiwyg]

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?

 

[MS+Tradesim]

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.

 

[AlterEgo]

MS+T,

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

 

[MS+Tradesim]

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.

 

[skc]

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.