Scalping vs. Holding

In the end, you’re trying to predict the future. The more time you add, the harder it gets. Predicting the next few seconds is substantially easier than hours, weeks, months. You’re introducing more randomness the longer you push it out. Longer, bigger plays lowers win rate substantially. Scalps boost the win rate. Scalping gives you experience.

A scalper that takes 300 trades per month vs a “Holdem” trader who takes 600 trades per year, will have far more data and experience to use to get better. The scalper will have taken 3600 trades in the year. By year 2 – 7200 vs 1200.

Assuming the trader’s do deep review work; tag things to gather data. The scalper will have a higher sample rate to parse data. A good hold trader will be wrong most of the time. That makes it harder for you to actually stick to the strategy consistently in order to get the variance to swing in your favor.

Card counters have to go on horrific losing streaks, but must bet accordingly without fucking up in order to extract edge. Some early inventors of HFTs invented a bit that could predict a roulette wheel spin. But only after the spin, as it calculated the speed of the wheel, and trajectory of the ball. It could not predict before the spin. A good scalper has learned to predict the speed and trajectory on a small level; that’s where the edge is.

The edge is small, so you’re either doing it frequently for a few ticks or rarely for big payouts that will need to pay the losers at a lower win rate.

Personally, I like being right all the time and I like being able to come in for a few hours and extract alpha.

If I’m collecting quarters everyday faster than the hold trader then sure, he will win bigger than me one day by several miles. But he will suffer far more losses eating that big win up. A hold trader needs substantially more risk than a scalper, meaning they need to size lower, whereas the scalper can size up since they don’t need as much risk and can lean into a higher win rate.

However, the scalper runs into liquidity issues whereas the hold trader won’t at some point. The hold trader can push much more size. But the hold trader will need a ton of data and experience to reach that level, whereas the scalper is far outpacing the hold trader in data and experience. Thus, they can improve their win rates and push the strategy longer durations.

My belief is the scalps equal out to a hold after you factor in the losing streaks the holder goes on. The difference is less mental turmoil, and more experience and data which allows for faster improvement. So in the end, the scalper will outpace the holder in the experience realm, allowing them to scale faster and improve win rate quicker.

Lower time frames hold more power in terms of gathering more experience faster.

Do you want to hit big trades all the time and never make shit, or grind scalps and have a salary?

I’m obviously extremely biased towards scalping. It makes more logical sense. You can always backtest as a hold trader however, to get more data, but god damn it you also need experience, because you’ll fumble fuck the management some how some way in the real world