Talk:Scalping (trading)/Archives/2013

Correction

The section about market manipulation is incorrect. The author confuses it with "front running". The original meaning of scalping is to profit from the bid/ask spread by buying the bid and selling the ask. Nowadays it is widely used to describe short-term trading in the sense that one is going for small profits as opposed to "position trading" where one is going for larger profits which is usually longer term trading. I am going to clean up the article because it is misleading. Source: Me, I am a trader. —Preceding unsigned comment added by AgeKay (talk • contribs) 09:21, 4 October 2009 (UTC)

I agree with this. In over 10 years of experience, I am unfamiliar with this second use of the word "scalping", which everyone knows as "front running". Without a reference, I think this meaning should be deleted to avoid misleading people about the use of the word. Elroch (talk) 14:05, 12 March 2012 (UTC)

I've added some cites. This is what the SEC and courts think the term means, although traders have a different definition. John M Baker (talk) 20:20, 12 March 2012 (UTC)

There's no harm in keeping both definitions, but we have to remember that we already have an article about the SEC definition: Front running. Since it is not the more popular name for the practice, placing it first makes little sense. Owen× ☎ 14:21, 13 March 2012 (UTC)

I agree that it makes more sense to put the trading practice meaning first. However, scalping is not the same as front-running. Scalper are advisers that seek to manipulate their clients into making a trade that benefits only the adviser, while front-runners are brokers (or, less frequently, advisers) that seek to trade before their clients, taking advantage of their knowledge of their clients' plans. Scalping thus is a form of market manipulation, while front-running is not, although both are violations of the adviser's or broker's duty to its clients. John M Baker (talk) 01:33, 14 March 2012 (UTC)

The term "market manipulation" generally refers to the practice of influencing the market price of certain securities or derivatives to benefit the manipulator. What you are talking about is manipulating the decisions of a single market participant to act in a manner favourable to the advisor/manipulator; that is not the same thing. However, feel free to add text in that section highlighting the difference between the actions in the referenced case and what is normally called "front running". I see the former as just an extreme case of the latter, but see no harm in pointing out the differences in the article. Owen× ☎ 15:55, 14 March 2012 (UTC)

What's the point of this article?

Isn't this all covered at other articles e.g. Pump and dump? Ewlyahoocom 07:08, 15 July 2007 (UTC)

Well, not at the Pump and dump article anyway. Scalping, in the market manipulation sense, differs from pumping and dumping in that the scalper has a relationship of trust and confidence with those who receive the investment advice. I have not searched to see what articles might overlap with scalping in the arbitrage sense. John M Baker 23:28, 15 July 2007 (UTC)

By including any mention of Market Manipulation, the Reader is Mislead

I'm sorry, but I find this article is extremely misleading. I perform scalp trades all the time. I am a scalp trader. There is nothing wrong or illegal or fraudelent about it. It does not even approach market manipulation. However this article gives the impression that there is. Every day trader out there is a scalper. Many swing traders are scalpers. There is absolutely nothing wrong with the practice, nor is it an attempt to manipulate the market. IN ANY sense of the word.

First of all, if you mention scalping to any professional trader, they understand that it refers to taking small profits from small movements. What the article refers to in the section regarding "Manipulation" refers to "Pump and dumping" a stock, in which there is already an article. This section refered to the Investment Adviser act of 1940, but nothing in that act uses the word "scalping".

In essence, the practice that the first portion of the article refers to is already covered by "Pump and Dump". That's manipulation. It's not scalping. It's not even close to scalping. Scalping refers to the trade strategy a trader uses to enter and exit the market. Not his motivations for doing so. That's it. --Airelon (talk) 18:21, 29 February 2008 (UTC)Airelon

I think the article is clear that it is talking about two different things, both of which are referred to as "scalping." I suppose it could be split into two separate articles, but that seems unnecessary, especially when it isn't a terribly long article anyway. As to your other points: The Supreme Court ruled in 1963 that the Investment Advisers Act of 1940 prohibits scalping (in the market manipulation sense), even though the Advisers Act does not use the word or spell out the practice, and the article distinguishes between scalping and pumping and dumping. John M Baker (talk) 22:14, 29 February 2008 (UTC)

Agree, there is no "market manipulation" in either case. The common use of the term "scalping" has to do with legitimate bid/ask arbitrage, as the many cites show. The other use is referenced by this one SEC/court case, and describes a practice more commonly known as "front running", about which we already have a separate article. I changed the order of the sections, added a "Main" link to the front-running article, and reworded the "market manipulation" header. It may make even more sense to merge the "Fraudulent" section with Front running, and keep the section as a one-sentence reference to the court case. Owen× ☎ 14:16, 13 March 2012 (UTC)

Delete

This usage weird. The article totally confusing.

Scalping, when used in reference to trading in securities, commodities and foreign exchange, may refer to (i) a fraudulent form of market manipulation or (ii) a legitimate method of arbitrage of small price gaps created by the bid-ask spread.

Scalping in this sense is the practice of purchasing a security for one's own account shortly before recommending that security for long-term investment and then immediately selling the security at a profit upon the rise in the market price following the recommendation. The Supreme Court of the United States has ruled that scalping by an investment adviser operates as a fraud or deceit upon any client or prospective client and is a violation of the Investment Advisers Act of 1940. The prohibition on scalping has been applied against persons who are not registered investment advisers, and it has been ruled that scalping is also a violation of Rule 10b-5 under the Securities Exchange Act of 1934 if the scalper has a relationship of trust and confidence with the persons to whom the recommendation is made. The Securities and Exchange Commission has stated that it is committed to stamping out scalping schemes. Scalping differs from pumping and dumping in that a pump and dump does not involve a relationship of trust and confidence between the fraudster and his victims. —Preceding unsigned comment added by 24.234.76.24 (talk) 23:27, 3 June 2008 (UTC)

misses the point

This article leaves out the main use of the term 'scalping' in investment, which is as follows (taken from Investopedia):

"A trading strategy that attempts to make many profits on small price changes. Traders who implement this strategy will place anywhere from 10 to a couple hundred trades in a single day in the belief that small moves in stock price are easier to catch than large ones. Traders who implement this strategy are known as scalpers. The main goal is to buy (or sell) a number of shares at the bid (or ask) price and then quickly sell them a few cents higher (or lower) for a profit. Many small profits can easily compound into large gains if a strict exit strategy is used to prevent large losses."

I.e. scalping refers to the practice of taking small profits on trading positions, rather than looking for significant moves. Scalpers are a 'force for good' among speculators since they tend to reduce volatility - any given move up will immediately tend to generate a counterforce on the part of scalpers who will want to sell to realise their profit.

IMO, the article needs a substantial rewrite, giving priority to this definition.

Third definition

Someone added

3) a legitimate method of trading based on quick momentum trades triggered by order flow reading setups.

But while we have a section on each of the first two defs we don't have any material on this def. Does anyone feel up to adding it? RJFJR (talk) 04:20, 10 August 2010 (UTC)

Rewrite

Need to find some references and rewrite the article from scratch, I'd say Horatio (talk) 06:57, 7 March 2011 (UTC)

Makes no sense

This article doesn't make any XXXXX sense. Some guy 01:22, 18 November 2006 (UTC)

Agreed. It's utter nonsense.

I have added a discussion of scalping in the market manipulation sense. It's really entirely different from the arbitrage sense, but they both have to do with trading securities. I may try to clean up the rest of the article, if I get a chance. John M Baker 19:00, 8 January 2007 (UTC)

Whoever wrote this article has no understanding of trading in the financial markets (Anonymous Wall-Street trader)

This article does make sense, and is basically correct, if simplistic. I have personally made consistent profits from scalping the spread in the biggest sports betting market. However, the article suffers from confusing two different types of traders - those who aim to profit from the spread and those that aim to profit from small moves, especially in the paragraph entitled "time frame".82.21.244.201 11:02, 14 July 2007 (UTC)

Why Scalprs - The Forex Scalping Network cannot be listed ?

Hello, i am sad that the link to the only one existing social network specialized on Forex Scalping cannot be listed. Firstly i added link to the main page. When it was removed, i've edited the non-functional link that forwarded to 404 page - rather i've added functional link to general article written by someone else (i am not the author).

So please somebody review http://www.scalprs.com and rethink addition to the link section.

It can help people searching "Forex scalping"

Thank you — Preceding unsigned comment added by Elvenking7 (talk • contribs) 17:42, 7 September 2011 (UTC)