What’s the best thing to talk about when the market is firing on all cylinders? Recessions, of...
Scalping Pennies for Profits
01/31/2013 12:00 pm EST
Ben Tippen traded for over 18 months before finding a strategy and trading method that worked for him and finally made him a consistent trader.
I haven't done many interviews with scalpers lately, mostly because many traders have given up on the tactic that was wildly popular when stocks were quoted in fractions. But there are groups of traders out there who are still scalping stocks profitably because of fast order routing capabilities and drastically reduced commissions.
In this interview, Ben Tippen talks about how he makes a living scalping one to three cents per share on trades by buying on the bid and selling on the offer. He talks about how he does this, why it requires patience, and how other traders might be able to take advantage of the same things he does to make money this way.
Play in Windows Media format
Play in RealPlayer format
Play mp3 stream
Direct link to mp3 file
Tim Bourquin: Hello everybody. Thanks for joining me for another show this week. We're going to be speaking with Ben Tippen and he's a trader that is going to talk to us about how he approaches the markets and ways he finds opportunities. So, Ben thanks very much for joining me on the phone today.
Ben Tippen: Thanks, Tim.
Tim Bourquin: Well I'm calling Ben here internationally. You're over in London, correct?
Ben Tippen: That's right yeah. I live just near the outskirts of London.
Tim Bourquin: Okay, so do you trade US markets or you trade European markets?
Ben Tippen: No, just the US. Certainly the UK market for me is difficult to trade because of a number of reasons. The main reason is it's got stamp duty when you buy...
Tim Bourquin: Right.
Ben Tippen: ...buy shares over here and it's half a percent, which is huge.
Tim Bourquin: Yeah. Now I understand most traders are doing spread betting because they don't have to pay taxes on that. So why not do spread betting.
Ben Tippen: Well, the reason I don't like spread betting is because you're not actually buying or selling a real instrument. You know, although you don't pay tax on it, you're essentially trading against your broker. And although they say the price that you get is—you know it follows certain shares and stuff, it doesn't actually say it follows it exactly. And that allows them to play around with the price and I just think it gives them an opportunity to wheedle your money out of you, I guess.
Tim Bourquin: Right. All right so what hours do you have to trade to trade US markets from where you are?
Ben Tippen: I start—the market opens 2:30 pm my time and I normally start about half an hour before that preparing.
Tim Bourquin: Okay. So, not too bad.
Ben Tippen: Preparing.
Tim Bourquin: Not too bad in terms of hours. Not a bad lifestyle if you're an evening person I suppose.
Ben Tippen: No. I mean from my personal situation, which I won't go into too much detail about. But you know I'm a single parent and I look after my son. He goes to school during the day and it does allow me to earn a living without having to do a full 9 to 5 job.
Tim Bourquin: Absolutely. All right. So you're a full time trader, what markets in the US do you trade?
Ben Tippen: The NYSE and the NASDAQ, although I focus mainly on the NYSE.
Tim Bourquin: Okay, so index futures then?
Ben Tippen: No. No. Only stocks.
Tim Bourquin: Okay so...
Ben Tippen: Only on the NYSE. I only trade stocks on the NYSE and stocks on the NASDAQ.
Tim Bourquin: Understood. Okay. And do you have a basket of stocks that you trade on a daily basis or how do you decide what you're going to trade each day?
Ben Tippen: Obviously, you know the firm part of it, they cover news and there are a lot of eyes on the market. But for scalpers, we generally have a much smaller handful of stocks that we watch because the stocks have to fit very specific criteria. They have to be slow moving. You know I'm a scalper so I'm only looking for one to three cents moves. And I'm hopefully looking to take in the worst case is a cent against me. Now the stocks have to be very low priced to move smoothly enough for me to play that game. They also have to have good thickness i.e. volume on the bid and ask to allow me to control the risk and read the Level II more precisely.
NEXT PAGE: How Long Will These Trades Last?|pagebreak|
Tim Bourquin: Wow. So, at one to three cents, that is definitely a scalping play. How long do these trades typically last for you?
Ben Tippen: They can last from a minute to half an hour. Very occasionally, they go over half an hour if the fills are bad or if suddenly the whole thing just slows down in volume as I get in. A good trade will finish in five minutes.
Tim Bourquin: And how many trades a day do you typically take?
Ben Tippen: I get asked that a lot and it does vary hugely depending on what the market is doing and how good the fills are. On a day when the fills are very good, I could do about 50 trades in a day. If the fills are poor or if I just don't feel I've got the right mindset for that day, quite often I can finish after five trades.
Tim Bourquin: I think you mentioned you're looking for, at the most, a penny loss. That means—are you setting your stops just a penny or two away?
Ben Tippen: I don't actually use stops. What I'm doing is I'm looking—actually my goal is to take no risk and I'm looking to get out for a flat if I think it's going against me. That's why I need the thickness. So if I bid a stock for example, if I put my order on the bid to buy the shares and by doing that I'll be adding liquidity, we call that passively taking the trade. Then because I'm using special order routes straight through to the NYSE floor, I get my fill quicker. Now that costs me more. I don't get the same sort of rebates you could get if routes are through to the standard exchanges like ARCA. But that does allow me to get ahead of queue and then if I think a level is going to deplete against me, I can punch out for a market order for a flat.
Tim Bourquin: How often are you filled when you're trying to buy on the bid?
Ben Tippen: If the fills aren't coming in from my special route then I chop my size right down and I wait until I think the interest is there and the fills are coming in. I mean, how long I wait on the bid when I'm buying passively—how long is a piece of string? It's impossible to say. I mean sometimes I can sit there for half an hour and I haven't got a fill. Sometimes I can put in big size like 20,000 shares and I can get the fill within seconds, irrelevant of how thick the bid is.
Tim Bourquin: Now you mentioned...
Ben Tippen: I'm not actually in that book. My route is going straight through to the floor. So if it's very thick on one particular side, and I think there's really good support there on the bid then that would be one of the criteria for me to go long as opposed to short. Because I know that I could put my order on the bid, jump the queue, and get my fill, and then I have a lot of thickness there on the bid and a lot of support to protect my trade. And if I think that's depleting and I think the support is breaking then I can jump out with an immediate order to sell at the bid.
Tim Bourquin: All right. Now how are you getting then the special you say jump to the front of the queue to get that pricing. How does that work for you?
Ben Tippen: Instead of routing through ARCA, I route through our special route, you know our special—onto the floor and the order sits there. I don't see it go through across from the tape immediately. And when they can match the shares, I get the fill. I pay more for that privilege. I don't get good rebates that you'd get on ARCA. Although it's not absolutely essential for scalping, it does make the job far, far easier. You know every trader has times when it's going well and times when it's going bad. And when it's going bad for me I tend to lean on my route a lot and rely on it.
Tim Bourquin: And does every person who has direct access broker have the same route that they can use to execute?
Ben Tippen: No. If you got a direct access retail account, you just simply cannot do this, though. I mean even if you were getting—you know even if you are excellent in every single trade, you might actually get a cent. I mean for us that will be superb and we would be doing very well. If you could achieve that on a retail account you still wouldn't be making money. It goes from the commission structures that I've seen and the retail accounts that I've had in the past, you know even the best retail deals that I've seen are sort of $5 per thousand shares to buy or sell and they do that twice that's $10. Well on a thousand shares you're going to get $10 for one cent move. So unless if you take—more likely you've got your ECN fees going on top of that. It just doesn't work. On the retail commission structures, I pay a dollar per thousand.
Tim Bourquin: So, for this structure to work, you've got to have really low commissions i.e. a dollar per thousand and you've got to have special routing ability...
Ben Tippen: Correct.
Tim Bourquin: ...to get to the floor.
Ben Tippen: You don't have to have the special routes. It just makes the job far easier if you have them. If you're new or you know the routes are really a good way for beginners to get involved in it. You don't have to have them, but we do have methods of getting in for what we call a flat position. So if I'm bidding and routing through to NYSE and jumping the queue, getting my fill, I've got a flat position, because if I punch out I'm flat. So technically if everything goes well, I should never see gross red P&L, negative P&L. Now we do have a technique where you can achieve that without the specialist routes. And what you do is you punch in just as the level depletes with a limit order.
NEXT PAGE: Do You Always Get the Price You Want?|pagebreak|
Tim Bourquin: By doing that, by getting in just as you see the levels going down, you're able to still get in there and get the price you want?
Ben Tippen: Yes. See you don't always get it. It has all to do with timing, how good your Internet connection is, who you're routing through, quite often you end up with a partial fill. So for instance if the price is 367 by 368 and you're waiting for the 368 to deplete, just as the last one goes off, you punch a limit order in to go long at 368. And then you might pick up the last couple of shares just before it changes price level. And then, of course, you're in a flat trade and it will be 368 by 369 and you're long at 368. That's another method to achieve the same results. Now that method is much harder. It's much more dangerous because just at the last minute as you punch in the level—it can stop. Someone can hold it on a refreshing order that 68 and then the whole level suddenly repopulates and now you're looking at a losing trade if you had to punch out.
Also another thing that happens as soon as the level depletes, you get in for your flat trade. And as soon as it goes through, you get back with pressure and it snaps back down and then once again you're in a losing position. So that style of entry is something we call a momentum entry. It's much harder but it does allow—you know sometimes when a stock is really moving in a particular direction, it's very hard to buy or sell on the other side of the direction. So for instance if it's moving up very strongly, it's very hard to bid it. And sometimes that's only method you can use to get yourself into the trade.
Tim Bourquin: Why do you think more of retail traders don't try to use this type of system where they're actually buying it where the market makers are buying or they're buying on the bid? Why aren't more people doing that?
Ben Tippen: Well, I just think, you know, even if you're not scalping and you're trading on a retail account and you're trading faster stocks. So you're trading stocks between say $20 and $60. So we call that momentum or P&L trading. Even if you're doing that, you should really be practicing a lot buying on the bid and selling on the ask. And the reason you should be doing that is because it teaches you to be patient. You're learning how to be patient. You're not being impetuous. You know if you're going to keep punching in and out, you can find yourself not waiting for good setups. If you're forcing yourself to be patient waiting for the price to come and pick you up, (a) you'll be putting your orders in at correct technical analysis places and (b) just learning to be patient. And that's a really important skill when you're trading.
Tim Bourquin: It sounds like to me that you could trade just with a Level II alone, but then I also heard just now that you're—it sounds like you're looking at charts, too. So describe how you're using charts in conjunction with your Level II.
Ben Tippen: When I'm scalping, the main reason I'm looking at charts for is to find the levels and I get those primarily off the 15-minute and the daily. They're the two timeframes that I get the best levels off when I'm scalping. The smaller time frames are not so important to me because I can see that in a Level II, which way it's going to go or you know I make my mind up which way I want to be, long or short from the Level II. But when it comes up to levels that I pick off the daily and levels that I pick off the 15 minute, they're the places that I want to generally take my trade away from. So if there is a strong daily resistance level, I'll wait for the price to get there and I'll look for a trade away from it. I don't look for breaks off these levels. You know if I'm looking to take a trade past the level, I wait for the level to be broken and then the price to return to that level, and then I'll trade away from it again. So I'm not way too big to break a level than entering a trade.
Tim Bourquin: So you're looking for a certain level on a chart. And then once you have that level then you're looking for some advantageous look in Level II to determine whether or not you can get the price you want?
Ben Tippen: Yeah. If I found what I think is a good level, I'll see how Level II behaves when it gets to it. I find that if it is a really good, especially a daily level, then I find that the Level II does behave differently when it gets to that point. What I don't want in a Level II is I don't want the price to be chopping quickly. When there's downward pressure against the bid, I don't want a small amount of pressure and then everyone on the bid dispose their orders out and it switches price levels lower. I want the price levels to slowly and smoothly deplete as the volume comes in. And what I find is when it gets to these daily levels, that's much more likely to happen. And when it's chopping and people—you know their orders are getting pulled it's causing the price levels to quickly switch, that's the time when I don't want to be in the play with big size. I want to be using smaller size so I can fill. You know we call them marker lots. So I can feel my way around the Level II and how it's going. How quickly the fills are coming in which side is filling quicker. You know if the bid is filling very easily, and it's very difficult to offer the shares out then I don't want to be really long in the stock. And that's something that I'm constantly feeling. You know if it's easy to buy it, generally speaking it's going to go down.
Tim Bourquin: [Laughs]. Right the hard trades are the best ones, of course.
Ben Tippen: Yeah. So, you know, if it's easy to get it on the bid then I'll put more shares on the offer. I want to be passively on the side that's harder to get. That's just one of the things that I look for. And when it gets to these price levels, I find that the Level II just acts a bit smoother...
Tim Bourquin: I'll be honest I don't talk to a lot of traders anymore that scalp. They used to be—everybody did it, right? Five, six years ago, even longer 10 years ago, everybody was a scalper. That's considered. But you don't find a lot of people that do this anymore. Why do you think that is?
Ben Tippen: I just think it's because of the commission structures. You know it is hard to get these commission structures. I'm part of a firm. We've got a lot of traders. We've also got sister companies that all trade under the same umbrella. We do, you know, millions and millions and millions of shares a day. And with all that shared volume, we go to our clearing firm, we all get a good deal, and then it's spread around everyone. Whereas when you're on your own as a retail account, you just do the volume that you do and you know, you end up with a rate of paying sort of $6, $7 per thousand shares. Whereas when you've got all of us as an umbrella group and these sister groups all doing huge volume and then all getting a good deal based on that running with the broker, you can see how it opens up more possibilities in terms of styles of trading.
I mean scalping was obviously big back when the fractions where around, but now it has changed to the decimals. It's very hard for retail people to get involved in it. They would have to be looking at faster stocks and looking for bigger moves to do the scalp style. But really that isn't the same as what we're doing. We're playing low priced stocks, which are very thick on the bid and ask and that allows us to control it more. If you've got a stock that's thinner or higher priced then you're looking for slightly bigger moves in the scalp, you know, it's considerably higher than what we're doing. The way we trade is much more like sort of institutional trading whereas people on mutual accounts, because of their commission structures, they're really stuck with more P&L style of trading.
NEXT PAGE: What Price Are You Generally Trading?|pagebreak|
Tim Bourquin: So what price are you generally trading—I think you mentioned before 20 bucks and up is where—those are more expensive stocks. What...
Ben Tippen: Yeah. I mean I'm looking for stuff that's under $15. I mean even $15 would be dear for me. Really I'm looking—I play $3 stocks, $4 stocks that are really...
Tim Bourquin: Okay.
Ben Tippen: You know, if you just look NYSE and you look at the biggest volume stocks, they're the stocks that I play. You know, the Citigroups, the Bank of Americas, AA, GE. You only have to go into the NYSE site, look up equities and look up the biggest volume of stocks on there to be the ones that we play as scalpers.
Tim Bourquin: And surprisingly, or maybe not surprisingly anymore, they're some of the cheaper ones [laughs].
Ben Tippen: They are, yes.
Tim Bourquin: So it's probably easier to find those stocks these days than it was five years ago too.
Ben Tippen: Yeah. I mean literally that is how I've got my first basket of stocks to watch. It's just going outside and looking at the biggest volume ones. And they're still the ones that I play. I keep an eye on the news to see which ones are more in the public eye and will focus on that one more. But you know I added those stocks. I mentioned I do have a couple that I really like and I'm really familiar with. And more or less every single day I would take some sort of trades in those stocks I'm familiar with. If there is a particular one that's in the news then obviously I watch that a little closer and primarily that because of the fills. You know, when the stock is in the news, the fills tend to be better.
Tim Bourquin: Do you change your strategy at all on days like today on the US where it's a Fed day? Where they're going to talk about interest rates?
Ben Tippen: Not really. I mean I trade the first hour, hour and a half, maximum two hours, and then I come back for the last hour, sometimes just the last half an hour of the market. So the key economical news that I'm affected by is the one after half an hour. I mean the oil doesn't even really affect me that much anymore because I'm playing—you know, I'm just playing these handful of stocks and most of them—well a couple of them are financial stocks. They don't really get affected by oil and natural gas figures so. It's just those ones that come out at 10 o'clock Eastern time that can affect me.
You know sometimes when—I don't know. I can’t think of one at the top of my head—PMI or the housing or something. When one of those comes out they can because swings in the market that can affect the stocks I'm in. Even though they're really thick, people panic and they start pulling their orders like I described earlier and that can cause choppy action. That's something I don't like. You know it's hard for me to control the risk. Because if I'm in a trade, I'm looking to get out for a flat, gross flat, so all I'm going to pay is some small amount of commissions. When it's choppy, it's hard for me to control that. That's probably the most important skill for the scalpers and the people that I teach at the firm I'm with. I really stress that is the most important skill. That's the skill you've got to get down first. You have to take a position, watch it like a hawk, and if it looks like it's going against you, you have to be able to read the tape, read the Level II action, and make your mind up whether it's going to go against you. You can't wait until the very last minute to try and punch out because chances are, you'll miss it. You have to read it. You have to see how fast the tape goes. You find the tape speeds up as the volume comes in. You're looking at speed of the tape, not just the volume that goes through on it. You're looking to see how—if it freezes—if it's trades going off with the bid so you're long and you're trying to protect the position so you're watching the bid side.
You want to see how quickly the shares with the volume on the bid is refreshing. You know if it's not refreshing as much each time, it gives you a feel for how it's reacting to the trades going through with the bid. And using those two bits of information and your overall gut from looking at it a lot, you get a feel for when it's about to through it.
Tim Bourquin: Yeah, let me ask you about that gut because that's a good point. How long did it take you to develop that feel for the stocks that you're trading and be able to watch NASDAQ Level II almost like some people can watch a chart? You just kind of feel it from what you're seeing. How long did that take to happen?
Ben Tippen: That's really difficult to tell. I mean I've been trading for a little over two years and I had a lot of—majority of that time you know, I didn't have any success. It's only recently in the last couple of months where I've been doing very well. And I don't know—I guess it depends on what experience you've got already of looking at charts and looking at the Level II. I guess you can get that feeling if you're doing it full time, maybe a month and a half, two months looking at it.
Tim Bourquin: And is that because you changed something in the last few months to do this strategy or you just started getting better at it?
Ben Tippen: Yeah. I changed the strategy completely and became a scalper. I was P&L trading, so more sort of intraday swing trading style. I never held overnight positions. I never have ever. So it's always been day trading I've done. And I never really had very much success with it. And I was on the retail account and I had to settle for retail account you know, as you usually get from platforms. And a few of my friends—you know, I met a group of friends who are also into day trading from the different forums. And one of them joined the firm which—and I had a lot of lessons from different people and I just couldn't get their styles to work for me. And in the end I joined the same firm that my friend did. And I was with them for about six months and I still couldn't get it to work. Maybe it's my character or my personality but I just found myself overtrading a lot and getting frustrated.
The last thing I said to myself, "Here's the last thing you're going to do. I'm going to go over to America and for a week I'm going to sit with the boss of the firm I'm with for education." And I did that. And he took me down to one of the sister companies. When I was down there they were all just doing so well. I mean they were making thousands and thousands of dollars each a day. I mean one of them was making—well a couple of them were making over $5,000 regularly every day I was there. And what really surprised me was they were all doing almost exactly the same style. They were all trading these low-priced stocks, thick, and looking for one to three cent moves. And it just caught my eye and the frequency with which they were taking trades I just felt like it would have fit my personality more that sitting here looking at charts, waiting for the perfect setups to take one or two trades a day, which I just didn't seem to have the skill for. And I started that in October and we didn't have access to the special routes then. I just was using the standard route ARCA. I mean I had a great commission structure even back then. But I didn't have access to the specialist routes. They came in December. And although I was doing—you know my success had picked up hugely when I changed styles, it really took off when the routes turned up.
NEXT PAGE: Let's Talk About Figures|pagebreak|
Tim Bourquin: Uh-hum.
Ben Tippen: When the routes turned up—I mean in December—I won't go into figures because you probably don't want that but...
Tim Bourquin: Yeah. I'll take figures if you're willing to talk about them.
Ben Tippen: Well, in the last 11 days of December I made like 8 grand, which was good for me. I mean I'm not—before I was just losing money every month. So you know it just shocks me. As soon I started getting success with this route, it just felt so different, and I just racked my size up. I mean, there are videos on YouTube of me trading in December. And you could see those sort of days I was having and the size I was using. I mean some traders are taking 20,000 share trades. I started out from 500 shares and I just did very well the first day. Next day used 1,000 shares, next day used 2,000 shares, and I just built it up really quick like that. And then once I did well in January as well. After December just the confidence that it gave me as well as everything else, it just all helped. All these help pushed me forward as a trader. And you know so far I haven't looked back so.
Tim Bourquin: Yeah. I think it's interesting that you say you've found something finally that matched your style, your personality and it just clicked. I think that's true for a lot of traders. I think everybody's out there looking for the one thing that makes people money and that one thing is a whole bunch of different things. It just depends on what fits you.
Ben Tippen: Exactly, yeah. From the experience I've got I really do believe now that you know, different styles do suit different people. You know, we all think differently and some styles just don't work for some people and other styles do. You wouldn't think it, you'd think you could teach someone how to do exactly something, a specific style even it didn't fit their character. But it's such an intricate game, trading, that I don't think it works like that.
Tim Bourquin: And you stuck in there for two years, which is a long time to stick in there to find your thing.
Ben Tippen: It was. I mean I had some highs and some lows with that too.
Tim Bourquin: I'll bet.
Ben Tippen: Whilst it wasn't going well in my trading, I did get into other things. You know, I studied to be a certified Microsoft professional. So I can build a computer now and repair computers and whatnot. I mean I was in the car trade for ten years before I started trading. Then I left the car trade and got into the trading and when it wasn't going as well I thought I it was going to, then I started training with Microsoft and that also helped as well. You know I got my qualification roughly around the same time when I started becoming a scalper as well. So that was a boost. I had money coming in from that. I could support myself from that.
Tim Bourquin: Isn't that interesting that at that moment when the money wasn't quite as important in trading because you didn't have to have it, is when things clicked. I think that's very interesting.
Ben Tippen: It's probably just as big a point as the routes and the star changed. You know I wasn't under as much pressure. Before, when I left the car trade, I had a wife, a child, a mortgage, I just thought I've got to make money. I've got to make money [laughs]. And that extra pressure made it very difficult on bad days. On good days it was okay. But when the bad days came, you know they weren't just bad days, they were like bad weeks. You know it can go on for two weeks of bad days. I think the pressure of having to make money perpetuated the bad runs longer than they should have been and made them worse. I was trying to force it when it wasn't going well and I think that's one thing that having the second job has helped me with.
Tim Bourquin: Do you think there was anything you could have done in that two years that you wish you would have done earlier that could have kind of brought you to this point faster?
Ben Tippen: That's a very difficult question to answer because a lot of what I did was from my experiences during those two years. I think certainly if you know someone, a personal friend or a family member who is trading successfully, it's so much easier for you to get involved in it. I mean when I got involved in it, I got involved in it from just listening to an advert on the radio. I was in the car trade for 10 years and every morning—it's a long journey relative to the work. I worked in South London and I live in North London and I was driving around the M25—I mean the drive time is like an hour and a half on the best days. I had this advert over and over and over telling me about how you can earn a second income from trading. And just by listening to it over and over, just made me want to do some research in to it. And as I started looking into it, I realized that the US stock market was going to be better for day trading. And in the end, I just decided to go for it.
Tim Bourquin: And do you set goals for yourself now that you're making money? Do you say I want to make double next month or I want to make this much next month? How do you do that for yourself?
Ben Tippen: No, actually, I don't. I'm just trying to—how do I word this? I'm just trying to chill for the time being. I was not trying to push anything, I was going to ride it as I am at the moment. And then slowly I will start increasing my size. There are other elements. The firm I'm with is constantly improving the tools I've got and I don't want to overdo it until the full picture is has arrived. We're getting new commission rates. We're getting new routes. We got three new routes coming that all do slightly different things. So at the moment I'm not—I don't see any need in doing that. I mean trade 10,000 shares and I've got to 15,000 now so I think it's really good. I can earn like $500 a day a doing that with 10,000 shares. I only need 5 cent move.
NEXT PAGE: Will the Number of Shares Diminish the Returns?|pagebreak|
Tim Bourquin: Will there be a time when you think it will be diminishing returns that you won't be able to do this structure if you had to do 50,000 shares or 100,000 shares?
Ben Tippen: No, I think once you get over a couple of thousand shares—you know certainly when you're using 1,500 to 2,000 shares, the whole process is easier. Once you get bigger than that it does become slightly difficult in relation to fills. But once you're beyond that I think beyond it—you know you can—I guess if you're using bigger size you're always going to come across the problems of using bigger size. I guess it's just you have to use your experience of feeling the trade out and what size it can take.
And also as you get the experience you can trade multiple symbols. I mean I can trade two symbols just about now. I obviously do much better when I'm focusing on just one, but I can take trades in multiple symbols at once. And that's another way that you can spread the fills, you know what the route can take. Of course if you're not using the route then it doesn't matter and you can take any size. It's only our specialist routes that limit the size. If you're using an ARCA, ARCA would take any size.
Tim Bourquin: Now one of the things I've heard is that—I've heard now that because of high frequency trading, scalping is much tougher. Have you found any changes because of high frequency trading or program trading?
Ben Tippen: No. Not really. No. When I see hundreds go through on Citigroup, for example, I just ignore them.
Tim Bourquin: Okay.
Ben Tippen: I mean, a hundred is not going to do anything to Citigroup when there's millions of shares on the bid and ask. It's just algorithms.
Tim Bourquin: Did you see flash orders there that actually are taken away so that they give missed signal or they give you kind of confusing signals? Or are you able to kind of see through that?
Ben Tippen: Yeah sure. There are tricks that go in. Yeah, of course. I mean there's nothing anyone can do about stopping the tricks. I mean at the end day someone puts a hundred shares in there with you know a million shares refreshed. So it only shows a hundred, but he's really going to sell a million. You're not going to know until the last minute, until his level won't go and he's just sitting there over a hundred shares holding it. You're not going to know. You know you can't look at Level II and realize that's going. You have to realize when you see him holding it with a hundred shares. There's only limited stuff that you can see in the Level II. There are a lot of games that go on. It's not something you can just look at and just know what's happening. It only gives you certain signals at certain times. Most of the time, it's just noise in the Level II. You know, it has its moments when it does tell you something like a chart does.
Tim Bourquin: I guess that would be the reason to use both together, so maybe the two together.
Ben Tippen: You know, I do use charts. I say I get the levels off the dailies. I mean the guys—when I went to New York, those guys, some of them weren't using any charts at all. Some of them just had daily charts on. Now I don't. I use a whole mix of charts. I look at 15. I look at daily. I look at one minute. I look at five minute all for each share I'm looking at. I then watch all the shares—well not all of them but say nine shares in the same sector along with the ETF. So I have them up on another screen so I can judge related strengths between the share I'm looking at and its peers.
I look at the market. I've got multiple timeframes for the Standard & Poor’s. So you know I'm not just looking at Level II. There's a lot of other stuff going on. Of course, the firm I'm with has a room that we log into so we can all communicate. And quite often someone in there will—if I forget to look at the economical news, or if I miss something that's going on, quite often someone posts something in there and that will just remind me. So for example one of the economical news is coming out at 10 Eastern time and I have forgotten to look then someone will post that a couple of minutes before it comes out and that can just be enough for me to think, "Oh hold on a second. I better just be careful here. Maybe I'm getting too big if that news is coming out." And then the news comes out and it whips the market. The market like tanks off for some reason when the news comes out and my trade goes straight against me. And because I was a little bit more prone from knowing that news is about come to out, quite often that can save some chunks of money for me.
It's like more doing it on your own. I mean retail trading or what P&L trading, so intraday swing trading, I believe is harder than the scalping that I'm doing with the routes. And if you're doing that on your own on the retail accounts even harder. I mean if you're with a group, when you've got more people giving you ideas the stocks they're looking at, what's working for them, you know, telling you when economic news comes out. That is a really big help.
Tim Bourquin: Excellent. Well, Ben, thanks for your time today. I really appreciate you spending some time and talking to us about your strategy.
Ben Tippen: Okay. Thanks Tim.
Related Articles on STRATEGIES
One sector that has treated us right is the small cap stocks, which we recommended towards the end o...
The market has been remarkably resilient; most U.S. companies are doing well, and the S&P 500 ap...
Aging economic recoveries and bull markets carry special risk for anyone who is too easily enamored ...