Scalping 101

[Woody55]

Got a few PM's since I posted the "Golden Rule" statement in one of the threads....so here it goes..............BTW, I am a barely experienced trader, about a year and most of my education is from Wolf, Doodi, and Babypips.

1. What is a scalper......the definition of a scalper TO ME is somebody that jumps in a momentum play to make a few PIPS then gets out. Most scalps take seconds....or at the most minutes to execute from the time of enrty to exit. This doesn't involve the time of waiting for an entry point to begin with.

2. The "Golden rule discovered." I have several scalping methods (indicators and such), but all of them have one thing in common that took me a lot of time to notice...............since they have one thing in common, I call it the "Golden Rule."

3. Most traders look for a "MARKET REVERSAL" to enter a trade, often times waiting on "CONFIRMATION" before entering in fear of a "HEADFAKE". If you don't know these terms, learn them. The good thing about scalping is that you can make money off of a "HEADFAKE", which seems to happen more than most "REVERSALS". You can also scalp in a fast moving market after a "CONFIRMATION" has occurred.

4. "THE EPITOMY OF A SUCCESSFUL SCALP." Looking at say the USD/JPY, you see a "HAMMER" forming, or maybe a long "CANDLESTICK." You jump in on the momentum. Immediately you are down 4 PIPS (the spread), within seconds (no more than a minute), THE SPREAD SHOULD HAVE BEEN CLOSED AND YOU SHOULD BE IN THE GREEN. Within minutes, you should be out of the play with a 5-10 PIP gain (though sometimes, if you hit a true "REVERSAL", or are onto a sustained "TREND", you will stay longer........my personal best is about 50 PIPS). Honestly, I don't really have an exit strategy.....just an entry one.....my main exit strategy is simple, always exit in the green, I've lost a lot of profit this way, but losing profit is better than losing capital.

5. "THE GOLDEN RULE" Ok here it is....very simple but hard to follow nonetheless.

When you enter a scalp which is based on momomentum.....if the spread goes the wrong way.....in other words, you called the trade wrong....GET OUT IMMEDIATELY. The worst I have done is enter into a USD/JPY trade in a fast moving market.....it went the wrong way....I was down 4 PIPS due to the spread....in the FEW SECONDS, it took me to get out, I lost a total of 8 PIPS.

THE MAIN POINT IS THIS. IT'S EASY TO CALL A MOVE IN A VOLATILE MARKET USING ALL KINDS OF INDICATORS. IN FACT DUE TO MY LOG, 9 OUT OF TEN TIMES I CALL IT RIGHT.

However, the 1 time you call it wrong, you tend to think that it is not a "HEADFAKE" or that if you were follwoing a trend, this was just "CONSOLIDATION" before the next leg up.........but the point is......YOU ARE SCALPING.........SO SCALP.........GET OUT IMMEDIATELY ON LOSERS.............DON'T GET GREEDY ON WINNERS.

[Sheldon]

Cool stuff

[Jonathan]

Yeah, this all makes sense, and thanks , but what times during the day do you trade for this volatility? What timeframe for the candles too?

Thanks again.

[Woody55]

The best times are when a new market opens.....I.E. london, New York, Japan.........these are the majors........you can use this is a slow market as well, just add a little to the time...........Last night I was playing the USD/JPY........during a move, I jumped in.......within a minute the spread was closed......it took me about 2 more minutes to make 8 PIPS..........the main thing to look for is a channel that is at least 30 PIPS wide........bollinger bands that are not tight..........................

As for the time.........5 minute chart works great..........I HAVE NOT BEEN ABLE TO FIND ANY STRATEGY FOR ENTRY ON THE ONE MINUTE CHART.

If anyone has a one minute chart strategy, please let me know.

[Jonathan]

Okay... cool! Thanks.

[MoneyMakr7]

Originally Posted by Jonathan

Yeah, this all makes sense, and thanks , but what times during the day do you trade for this volatility? What timeframe for the candles too?

Thanks again.

From my experience, most of the best scalping times are between 9:30 and 11:30 AM, you want to do your homework on the stocks you intend to scalp though, and when I say "Homework", I mean thoroughly, Verify Verify Verify, know what your getting into before you get into it, you don't want to find out the hardway by blindly jumping into something trying to make a quick buck. The rule of thumb used to be that these MOMO plays would run for 2-3 days, at the most 5 days but that is usually a rarity, but I've seen that change somewhat in the past few years, now we are seeing 1-2 day momo runs, or much longer ones on the rare side of 5-10 days. Bottom line when scalping is don't be greedy and get out faster than you got in, a 10-15% gain is always better than any loss, and when you screwed up and it is turning down get out even faster. I've played many scalps where all I actually made was lunch money, maybe $20 bucks, but say you have 20 scalp plays where you only made $20 bucks each, well thats a $400 dollar day. There are other scalp type plays that are more longer term, for instance, back in Oct.-Nov. 2005 a hostile takeover was attempted on PRGX, the Hostile takeover failed and the rich fatcat that tried it sold-out massively and fast dropping the stock from Approx. $3.50 down to .25 many people saw a Dead cat Bounce sitting there, I bought up a ton of shares between .25-.30 a few days later in ran back up to $1.15 and I cashed out and made a mint, in my opinion that was a 3-4 day scalp with a very healthy pay-off but those are rare. BTW the chart on that has a 10/1 reverse split in it if you look.

[Woody55]

This is FOREX, scalping works a lot different......BTW.....I trade stocks too. When you say MOMO plays last for 1-2 days, that's not true in FOREX. MOMO plays here are measured in seconds and minutes. Swing plays are measured in hours and long plays are measured in days.........at least in my experience.


BTW, since starting this thread.........I scalped 21 PIPS on the USD/JPY and USD/EUR.........volatile market right now. I'm done for tonight though.........Good night and good luck.

[Jonathan]

Originally Posted by MoneyMakr7

From my experience, most of the best scalping times are between 9:30 and 11:30 AM, you want to do your homework on the stocks you intend to scalp though, and when I say "Homework", I mean thoroughly, Verify Verify Verify, know what your getting into before you get into it, you don't want to find out the hardway by blindly jumping into something trying to make a quick buck. The rule of thumb used to be that these MOMO plays would run for 2-3 days, at the most 5 days but that is usually a rarity, but I've seen that change somewhat in the past few years, now we are seeing 1-2 day momo runs, or much longer ones on the rare side of 5-10 days. Bottom line when scalping is don't be greedy and get out faster than you got in, a 10-15% gain is always better than any loss, and when you screwed up and it is turning down get out even faster. I've played many scalps where all I actually made was lunch money, maybe $20 bucks, but say you have 20 scalp plays where you only made $20 bucks each, well thats a $400 dollar day. There are other scalp type plays that are more longer term, for instance, back in Oct.-Nov. 2005 a hostile takeover was attempted on PRGX, the Hostile takeover failed and the rich fatcat that tried it sold-out massively and fast dropping the stock from Approx. $3.50 down to .25 many people saw a Dead cat Bounce sitting there, I bought up a ton of shares between .25-.30 a few days later in ran back up to $1.15 and I cashed out and made a mint, in my opinion that was a 3-4 day scalp with a very healthy pay-off but those are rare. BTW the chart on that has a 10/1 reverse split in it if you look.

Uh, this is the Forex forum...

I've scalped stocks before... you know what... I'm changing my sig.

[sirensiren]

I've always loved scalping. people have tried to talk me out of it by saying a lot of hard earned scalps can be wiped out by one big loss but as logn as you limit your loss I love the scalping strategy. I think it suits certain people's personalties/trading styles also.

[mister_doodi]

Scalping stocks is so 2005.