How this Trader Makes Millions Scalping Pennies

The "Rigged" Market and Retail Trader's Plight [00:00:00]

• Many believe the stock market is designed for the wealthy to profit at the expense of retail traders.
• Retail traders face constant battles against brokers, other traders, market makers, and algorithms.
• Succeeding as a day trader is an uphill battle requiring superior skill and resilience.

  "I genuinely believe the stock market was created for the wealthy to be able to get wealthier at the expense of retail traders."

The Zero-Sum Game and Hyperscalping Strategy [00:00:00]

• The stock market is a zero-sum game where one person's loss is another's gain.
• Hyperscalping focuses on small-cap, momentum stocks that experience extreme daily price swings.
• These stocks often move beyond their intrinsic value due to fear, FOMO, and manipulation.

  "The markets are a zero-sum game, right? Which means if there's a lot of people losing money, it must also mean that people make money on the other side of those trades."

Trading Against Short Sellers [00:00:00]

• Many friends are short sellers, betting on the downside of volatile stocks.
• Marcelo profits by longing stocks when they don't fade as expected, effectively trading against short sellers.
• He specifically targets short squeezes and stocks that hold up, indicating others are losing money.

  "I love trading short squeeze. I love trading stocks that are holding up multiple times because that's when I can pretty much smell the blood in the water."

Learning from Short Sellers [00:00:00]

• Marcelo learned valuable long strategies by studying the risk management criteria of short sellers like Steven Dux.
• He identifies A-plus long setups based on what short sellers avoid, such as low-float, biotech stocks under $5.
• He generally avoids trading stocks that have already extended beyond 200% gain, as this is when short sellers become more aggressive.

  "Their risk management is pretty much my long strategy."

Trading Around Halts [00:00:00]

• Halts are market pauses for securities experiencing parabolic moves.
• Beginner traders might buy into halts expecting continued upward momentum.
• Short sellers are often terrified of halts, fearing massive gaps up that could blow up their accounts.

  "Short sales are terrified of the first hold up. And because of that, whenever the stock resumes, they're going to instantly cover and get the hell out of it."

Small Caps vs. Large Caps: Psychology Matters [00:00:00]

• Small caps are more susceptible to emotional trading due to a higher concentration of retail traders.
• Large caps are harder to manipulate emotionally, often trading more like a computer program.
• Trading small caps is akin to playing poker (human vs. human), while large caps are like playing chess against a computer.

  "Whereas trading small caps is more like trying to play poker? It's like human against human."

Defining Hyperscalping [00:00:00]

• Hyperscalping involves taking a high volume of trades, but the "hyper" aspect emphasizes cutting losses instantly.
• It's a "breakout or bailout" strategy, as stops cannot be afforded on extended, news-driven moves.
• Traders aim to profit from micro-movements on the tape, often trading against beginner short sellers.

  "So hyper means you, you instantly buy. And if you are not in the profit, you cut the loss instantly. Like you're hyper about cutting a loss."

The Mechanics of Hyperscalping [00:00:00]

• Instead of holding a stock for a large profit, hyperscalpers buy and sell multiple times within a move.
• This strategy aims to capture smaller profits from fluctuations, accumulating gains over many micro-trades.
• For example, instead of one $0.10 profit, a hyperscalper might make three $0.05 profits.

  "Instead of trying to hold for profit targets, we are kind of like going in and out as the price action allows us."

High Volume and Broker Relationships [00:00:00]

• Hyperscalpers churn a massive volume of shares, leading to significant commission generation for brokers.
• They often trade large blocks of cheap stocks, executing many in-and-out trades daily.
• Brokers are aware of the high volume and often offer the lowest commission tiers to these traders.

  "He's like, oh yeah, we do that every day. He's like, what is the lowest commission you have? The lowest commission is the $5 million a month tier."

Disadvantages of Hyperscalping [00:00:00]

• The strategy is not easily scalable due to slippage issues when increasing capital.
• Larger share sizes can move the stock price, negating the small profit targets.
• Hyperscalpers focus on trade frequency and number of stocks rather than increasing capital per trade.

  "The moment you start trying to put more capital into the trades, slippage becomes a big problem."

The Need for Multiple Monitors [00:00:00]

• The use of multiple monitors (e.g., 10) is necessary to track numerous stocks simultaneously.
• Hyperscalping requires finding many small opportunities rather than waiting for large moves in a single stock.
• Any stock with sufficient volume and range is potentially tradable.

  "That's why we have 10 monitors? Because since we hyperscalped, trying to find an opportunity of 5 cents is so much easier than finding a good quality stock that is going to move a few dollars on your favor."

Personality and Stress of Trading [00:00:00]

• Hyperscalping suits individuals with fast reaction times, similar to gamers.
• The intense, fast-paced nature of the strategy is highly stressful, leading to physical health issues like stomach problems.
• Building a financial cushion can mitigate the stress associated with losing trades.

  "It's horrible. It's horrible. It's very stressful. And I have a lot of stomach issues."

Market Changes and Slower Periods [00:00:00]

• Trading conditions, particularly for small caps, have become slower in recent years compared to 2021-2022.
• Changes in market rules, like those concerning halts, have impacted strategies.
• Summer months are generally slower for small-cap trading.

  "And over the past few years, it has been the slowest years for us, we've made less money. And we're still profitable, but less money than 2021 2022."

Average Trade Volume and Risk/Reward [00:00:00]

• A hyperscalper might take around 1,000 trades per week, averaging 200 trades per day.
• The strategy typically has high accuracy but a low risk-reward ratio, potentially negative.
• A significant losing trade can wipe out many small wins.

  "It's normally like, it's one of those strategies that is higher accuracy, lower risk reward. So we might have a negative one, two to one negative risk reward, but high accuracy."

Dealing with Drawdowns and Offerings [00:00:00]

• Drawdowns can be exacerbated by events like offerings, especially pre-market.
• Traders must be disciplined in reducing risk during losing streaks and increasing it during winning streaks.
• Stubbornness and the desire to quickly recoup losses often lead to deeper drawdowns.

  "The hardest part to do is reducing when it's not working because you get stubborn and it's like, you want to make the money back and stuff."

The Role of Themes and Market Conditions [00:00:00]

• Hot weeks for hyperscalping often align with market themes (e.g., Bitcoin, specific news events).
• These themes drive small-cap companies to release related news, creating trading opportunities.
• During slow periods, the focus shifts to minimizing losses.

  "For me, a hot week looks like something is in theme? Like for example, Bitcoin is going up. It's bouncing like, like you've seen yesterday."

Pre-Market vs. Post-Open Trading [00:00:00]

• Marcelo primarily trades pre-market, as retail brokers are active, providing fuel for short squeezes.
• Post-open, the agenda often shifts to dilution as companies sell shares to raise capital.
• The imbalance shifts to the sell side after the open, making it harder for long-biased traders.

  "Once the market opens, the agenda shifts from making the stock look good and strong to dilution."

Reading the Tape and Level 2 [00:00:00]

• Hyperscalpers use one-second charts, Level 2 data, and the time and sales (tape) to make rapid decisions.
• Execution relies heavily on Level 2 to gauge bid stacking, ask walls, and immediate reactions to price levels.
• This requires immense focus and tacit knowledge that is difficult to teach.

  "I'm staring. So so I have different timeframes. So I have the daily chart is where I start. Then I go into the five minute, then I go into the one minute. And when I'm about to trade, I'm churning around the level two and the one second chart."

Platform and Execution Requirements [00:00:00]

• Essential platform features include competitive commissions, free routes, and direct access.
• Low latency is critical, with some traders even relocating for better internet connections.
• Advanced hotkeys are used for rapid order entry and exit, tailored to specific price points and liquidity.

  "It has to have extremely competitive commissions. It has to have free routes. I see. Like no ECN fees."

Position Sizing and Risk Management [00:00:00]

• Position sizing is based on setup quality (e.g., Steven Dux criteria) and current market conditions.
• "Warm-up trades" help gauge price action and comfort level before increasing size.
• Profits are often rolled into the next trade during hot streaks, while size is reduced during drawdowns.

  "Similar to what I mentioned earlier, the Stephen Ducks criteria. Oh, okay. So like, if all the criteria is aligning, I instantly go in with bigger risk."

Scalability Challenges and Future Evolution [00:00:00]

• The primary challenge is scalability; increasing capital often leads to slippage and strategy failure.
• Marcelo aims to find a balance between hyperscalping and larger-sized trades to increase scalability.
• He acknowledges that algorithms are advancing, potentially reducing market inefficiencies over time.

  "Scalability for me has been the biggest issue. And when I, when I try to go outside of, of my mindset of capturing 5 cents and then locking it in, and let's say I try to hold for 10 cents or 20 or 30."

The Path to Eight Figures [00:00:00]

• Marcelo's goal is to become an eight-figure trader ($10 million+ in profit).
• He started with $26,000, leveraging savings and a loan, and meticulously grew his account.
• The "Eight Figure Protocol" is a daily journal of his trading journey, documenting wins and losses.

  "So far right now, I'm a low seven figure trader, which is beyond my wildest dreams already."

Transitioning from Day Trading [00:00:00]

• Hyperscalping is seen as a vehicle to generate capital for other ventures like swing trading or real-life businesses.
• Once financial goals are met, Marcelo hopes to reduce trading intensity, enjoy family, and potentially combat market scams.
• He believes a detached approach can paradoxically lead to better trading outcomes.

  "Hyperscalping is the vehicle to generate cash. And then from there, I'll graduate to, well, I already do it with Tesla."

Discouraging New Traders [00:00:00]

• Marcelo actively discourages most people from day trading, viewing it as extremely difficult and time-consuming.
• He believes success requires an obsessive personality and a long-term commitment, not a get-rich-quick mindset.
• His discouragement serves as a filter: those who persist despite it might have the right temperament.

  "I try to discourage people because the discouraging is, it does two things. If you're weak minded, my discouragement is going to be enough for you to not even try."

Advice for Struggling Traders [00:00:00]

• The best advice is to practice consistently in a simulator for at least three months.
• Simulators allow learning tape reading, hotkeys, and stock selection without financial risk.
• If profitability isn't achieved in a simulator, real-money trading is unlikely to succeed.

  "So for them, if you don't have three months of consistent trading in a sim, there's no reason why you should be wasting real money."

The Vision for the Future [00:00:00]

• Over the next 10 years, Marcelo aims to cross the eight-figure mark, start a family, and trade more passively.
• He wants to focus on real-life businesses and travel with trading friends.
• He also intends to expose market scams and guide beginner traders away from predatory practices.

  "I want to be like that old grandpa with a huge family behind them."