Last Updated on
Subscribe
Apple | Google | Spotify | Stitcher | Soundcloud | YouTube
In this episode, you’ll discover what it truly takes to become a super scalper.
So listen to it right now…
Resources
The Price Action Trading Strategy Guide
The Complete Guide to Breakout Trading
5 Types of Forex Trading Strategies That Work
The EXACT thought process, entries, exits, and results of my recent trades
Forex Risk Management and Position Sizing (The Complete Guide)
This Trading Checklist Will Take Your Trading to the Next Level
Transcript
Hey, hey, what’s up my friend?
In today’s episode, I want to talk about how do you become a super scalper?
For those of you who are not familiar with the term scalping, it’s one of the fastest form of trading that you can be exposed to. Some traders scalp the markets just based on the order flow, based on the bids and offers that blink on your screen.
They trade off the 1-minute timeframe to 3-minute timeframe and operate on the lowest of the lowest timeframe. And they can do 10, 20, 30 trades a day, it’s not a problem for the scalpers as well.
Now the question is, how do you become a super scalper? How do you become good at scalping?
1. You must understand the nature of the markets you’re trading
What’s the behaviour, the frequency of the market that you’re trading?
Is your market having a trending behaviour? Maybe whenever the price breaks out of the previous day high, that particular market tends to have a follow-through.
Or maybe a market like AUD/CAD, whenever it breaks above the previous day high, it tends to reverse back lower and making a false breakout.
Or maybe your market is correlated to a certain market? Like in my prop trading days, the Nikkei futures and the Yen are correlated. You can use this correlation to help you time your entries.
Or maybe certain markets have certain hours of the day where volatility tends to pick up. For example, during the London session, most major currency pairs’ volatility will pick up and you can see an expansion in volatility during this period.
The bottom line is, you must understand your market and know it inside out. And for any good scalper, they will understand the behaviour of the markets that they’re trading inside out.
2. You must protect your open profits
As a scalper, you’re primarily doing this as your main source of income. To be a good scalper, you must always know how to protect your open profits.
I remember back in my prop trading days, one of my bosses has a rule of $500 rule, which means that if he’s down $500 for the day, he stops trading, and he leaves the office and carries on with his life.
And how we use this $500 rule is that let’s say he’s up $2,000 for the day, he would also have a trailing stop loss on the open profits that he has. He’s only really willing to give back let’s say $1,000. So if he loses that $1,000, he’ll walk away from the desk, call it a day, and go about doing other things besides trading. He has this rule to protect his open profits.
As a scalper, this helps him increase the odds off, going home in the green for most days. That’s number two.
3. You must be versatile as a scalper
Because as a scalper, you’re trading probably 1, 2 or 3 markets. You’re not going to be exposed to trading 30, 40 markets because you just don’t have the bandwidth to do so.
When you’re trading a few markets, let’s say 1 or 2 markets, you can’t just have a fixed trading setup like simply trading breakouts. But what if the markets are in a range and it’s not trending at the moment? Then if you trade breakouts, you’ll lose money.
As a scalper, you’ve got to be versatile, you’ve got to be willing to trade breakouts, trade false breakouts, trend continuation trades, range trades, etc. You have to adapt to the behaviour of the markets you’re trading.
So as I mentioned earlier, if you understand the behaviour of the markets you’re trading, you can adapt your trading strategy accordingly to the market behaviour.
You can’t just have a fixed pattern to trade and just look for that one pattern. It won’t work out too well if you’re the type of trader who is like this.
4. You must visualize how the markets will react
This is especially if you’re a scalper and you trade the news release. For example, the non-farm payroll or the FOMC. During such periods, the market from an intraday perspective goes wild.
The bids and offers would just go missing. You wouldn’t see anything on the order flow. People are just pulling out the bids and offers.
As a scalper, when you trade such a news event, there’s a potential opportunity for you. But to exploit these opportunities, you have to visualize how the market will react to the news release, and then trade it accordingly.
For example, there’s a cut in the interest rates and the price went up. So if the price goes up, at which level will you be looking to enter a short trade? And how many lots will you enter?
All this is planned before the news release. It could be your Plan A. Now let’s say you have a Plan B where interest rate increases and the price falls. Then at what price level will you be looking to buy and what is the entry trigger that will cause you to enter the trade?
And once you’ve entered a trade, where will you exit a trade if you’re wrong? How many lots will you buy, so that you can manage your risk?
One thing to know is that as a scalper, you don’t have the luxury of time to Google and look for a position sizing calculator and go, “Oh, my stop loss is 5 ticks, I can buy up to 10 lots and risk 1% of my trading.” No, it doesn’t work. There’s no time for it.
In your mind, all these numbers, all this risk management, all these entries and exits, the level that you’re looking at, has to be played out in your mind ahead of time, even before the news release occurs.
As a scalper, you have to be good at visualizing potential scenarios that could happen. This is what separates professional scalpers, the super scalpers from those amateurs and newbies.
5. You have to go with the flow
Scalping is very fast-paced. You don’t have the time to go through your checklist to look at step one to step five before taking a trade.
As a scalper, the pace is so fast. If you’re slow by a few seconds, you can miss the trade or you could exit with a much larger loss than anticipated.
As a scalper, this is kind of like going through muscle memory where you’ve done this trade 1,000 or 2,000 times and this is all familiar to you, so you’re just going with the flow. You know you’re gonna buy at this point, your stop loss is here, how many lots you’re going to trade because you’ve done this 1,000 times.
And as a scalper, you have to go with that flow. If you’re the type of trader who is more methodological and you need to make sure all your checklists are being checked before you take the trade, then scalping is not for you.
This brings me to my final section…
Scalping is not for everyone
In fact, for most of you watching this video now, I think scalping is not for you.
Who is scalping for? Scalping is mainly for those of you who are young, especially if you have no liabilities, you have no wife, kids, whatsoever. You have all the time in the world to learn about the markets, to learn about scalping, to stare at your screen 12, 14 hours a day. Or maybe you’ve just graduated and trading is your first job, then scalping could be something for you.
But if you’re like me and have a family, you can’t spend all the time watching the markets, then clearly scalping is not for you.
Scalping is not for you especially also if you have a full-time job and trading is only a part-time job for you, then don’t try scalping. It’s highly stressful, it’s a fast pace endeavour. Leave it to the others who have a better competitive advantage.
With that said, I hope this gives you a good idea as to what professional scalping is all about.
I hope it helps and I’ll talk to you soon.
