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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Cormac who wrote (3910)	9/15/1999 5:52:00 AM
From: Bilow	Respond to of 18137

Hi Cormac; You said that if you used a 1 or 2% criterion as a stop loss, you would be in positions all day. I understand this to mean that a 1 or 2% stop loss would be much too wide for your trading style. Considering myself a scalper in training, I have noticed the same thing. A calculation is in order. Suppose a stock a daytrader maxes out his capital buying a stock at $80. Then he evidently has capital of $40 per share bought. 1% of $40 is 40 cents, and this is much too wide a stop loss for a typical scalper. Thus a scalper, who doesn't blow away his margin every day, typically trades with much less than 1% of his capital at risk. This is an interesting distinction between scalping and the longer term trading that the vast majority of the people on this thread practice, and it gets back to that darn report that the NARAA (sp?) issued last month. A scalper who is avoiding intraday margin calls has to have a lot more money in his account than would be indicated by the amount of risk he is typically taking on his trades. I believe that this is the reason that scalpers don't have any big problems with loaning each other money for overnight margin calls. The real solution, I think, is for the SEC to reduce the intraday margin requirement to 25%, thereby halving the required capital for intraday players. But maybe that would give a little too much rope to the wilder traders intraday... -- Carl