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There was a thread about the spreads
on SPY being too large to successfully
day trade. If you use limit orders, I
think you can get around the spread
problem. I never use market orders.
The benefit of SPY's are that they range
about $4 a day, the volume is high
and you can short a down tick.
My basic rule of thumb is to try to get
25% of the range of a intraday move
from high to low. In a day, you will
have 4 - 6 of these mini moves.
If anyone has ever scalped, it the same
drill. The SPY spread ranges from
.125 to has high as .50. My profit
stops are .375 to .75 from entry,
so if I get filled down .50,
its a big mountain to climb.
When I used to scalp, I would use the
spread as a direction indicator. If the
spread starting widening and the last
price was going negative, I followed that
as the direction. I have found that with
SPY, you can't do this. I just trade my system
and try and get in at a good price.
Use market orders, and split the spread
if its higher than .125. Don't try to
chase the trade, unless you know that
you really want in. Just cancel the order,
so you don't get filled after it goes the
wrong way.
I trade 5 minute bars and rarely is
open of the entry bar the low or the high.
You will get filled at your price.
For exits, I use profit stops, and set
it right after my fill. If I know I
have will have losing trade, I modify the exit
price to try and save a little on the
loss, again with a market order.
I print out the profit and the loss stop
in the print log, so I always know where these
two stops should be. I keep a window up
with the print log displayed. After a trade
I clear it so that I am not distracted by
old data.
Hopes this helps,
David
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