1 advanced scalp trading tactics

7/22/2019 1 Advanced Scalp Trading Tactics

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The whole idea of full time trading is to identify repeatable events and be consistent in

profits while minimizing the loss.

Some traders might argue that some indicators work really well for them,

Ask the question: How consistently do they work for you?, because a flip of a coin can

work 50 % of the time.

BOLD STATEMENT: Most the time, traditional technical analysis does not work.

It makes sense, however there are enough big boys who are highly capitalized enough to

manipulate most traders mindset.

BOLD STATEMENT: A method that works far better - Price Action!

Most traders have never heard of this little known idea of trading the price, instead of

trading the indicators

The truth is that Price Action is far superior to any indicator available in the marketplace.


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Understanding Candles

Bulls Win Bears Win


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Reversal Bars

Open &Close

Low

High

Close

High

Open

Low

High &Close

Low &Open

High &Open

Low &Close

Open

High

Close

Low


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Narrow Range Bars (NRBs)

Wide Range Bars (WRBs)

Topping Tails (TTs)

Bottoming Tails (BTs)

Multiple Candlestick Patterns

Candlestick interpretations


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Topping Tail Bottoming Tail

Narrow Range Bar Wide Range Bar


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Forces you to be present, in the moment. Candlesticks help to keep you in

the here and now mentality.

Once you place capital in the market, emotions get involved resulting in a

state of denial of the actual signals that are occurring. If you choose to

ignore the signals, you choose to ignore valid information, not subjective

indicators.

If you still choose to ignore the information,

perhaps the problem is YOU, not your analysis!


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Fundamentally, an indicator will only move after price has moved.

So Price first makes its move. Then the indicator will react and calculate its value according

to price actions move.

Price moves again, then the indicator takes what price did and calculates a new move. Doyou see something wrong with this analogy?

The indicator is always following price. It never leads price, and its always behind price. It

only moves after price has moved. In essence indicators are always late.

How can a trader actually be successful using lagging indicators to trade? The answer is

they cant. They are always late to enter, late to exit and get whipsawed around.

One thing is true, indicators never lead price. Price leads and the indicators follow. Here is

a novel idea- why not trade using the price?

Lets see what price does and trade off the PRICE ACTION itself.


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Occurs when the Real Body for a price bar is larger than the Real Body for the

previous bar

Indicates a potential reversal of the previous trend

Bullish

Engulfing

Bearish

Engulfing


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Occurs when the Real Body for a price bar retraces more than 50% but less than

100% into the Real Body for the previous bar

Indicates a potential reversal of the previous trend

Bullish

Piercing

Bearish

Piercing50%

50%


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Occurs when the next bar opening for price action completely gaps over/under

the Real Body for the previous bar

Indicates a very high likelihood of potential reversal of the previous trend

Bear TrapBull Trap


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BearishReversal

Bottoming Tail

Topping TailBullishReversal


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Up-Down-Up Down-Up-Down

Up

Down

Up

Up

Down

Down

upper third of bullish bar

lower third of bearish bar

Natural pullback

Natural pullback


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Price Action can only be described as: The interpretation of the daily price movement as to

the continuation of the trend or lack thereof.

In other words watch how the price moves and you can deduce where price will go. This is

very simple to understand and implement in day-trading. Price behaves in only a few certain ways.

It can go in an uptrend, downtrend or consolidate sideways.

If Price action behaves in a way that is an uptrend, then we can make decisions based on

that analysis.

If price action is trading in a range then we can deduce certain factors from this behavior.

If we can learn to trade the price and its action without relying on indicators, then we as

traders are on the leading side of the trades, and not the lagging.


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REWARD

REWARD

RISK

RISK

STOP

ENTRY

TARGET

TARGET

ENTRY

STOP

LONG Entry

Up trend

Higher Highs & Higher Lows

Short Entry

Down trend

Lower Highs & Lower Lows

PriceAction


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Price action can show us where price will be in the very near future by looking at a test or

re-test of the highs and lows.

Indicators for the most part do not provide this info.

What about demonstrating false breakouts? What indicator can predict a trade based on a false breakout that has just occurred?

Indicators can get you into a position on the wrong side because it has no way of predicting

false breakouts.

How do we know the parameters of any indicator or correct? How about the moving

average? Are the 20 period and 200 periods the correct parameters to use?


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How do we know the parameters of any indicator or correct? How about the moving

average? Are the 20 period and 200 periods the correct parameters to use?

We dont, and we will never be right because of the changing nature of the markets.

But if we took a look at price action and recognized a pattern of 2 or 3 consecutive higherhighs and higher lows, wouldnt that demonstrate strength in the market regardless of

where that technical indicator was plotted?

Hence, regardless of market volatility, or economic conditions, price action will outperform

technical analysis indicators.


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Scaling

In

Scaling

Out

All-In-At-

Once

All-Out-At-

Once

Scaling

In

Scaling

Out

All-In-At-

Once

All-Out-At-

Once

Multiple entries and One Exit Multiple Entries and Multiple Exits


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MinorPhases

MinorPhases

2

2

2

1

4

4

3

3

1

Minor

Phases

MinorPhases2

24

1 4

43

3

1

Down Trend

Up Trend


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Up Trend

Down Trend

Sideways Price Action

Expansion of movements

Up Trendbreakdown

Down Trendbreakout

Breakout Breakdown


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Up Trend and Price Movements

Associated with Higher Lows and Higher Highs

Focus on relationship of price action and rate of increase in price (i.e., slope of trend line)

The more price action tests the trend line and continues higher, the more traders perceive

this trend line as support.

Down Trend and Price Movements

Associated with Lower Highs and Lower Lows

Focus on relationship of price action and rate of decrease in price (i.e., slope of trend line)

The more price action tests the trend line and continues lower, the more traders are

recognizing the trend line and using it as resistance.


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Sideways Price Movements

Focus on relationship of price action and rate of increase in price (i.e., slope of trend line)

Focus on relationship of price action and rate of decrease in price (i.e., slope of trend line)

The more price action tests the trend line and continues higher, the more traders perceive

this trend line as support.

Range bound

Associated with relatively equal Lows and Highs

Consolidation

On lower timeframes; can find relatively equal Lows and Highs

Congestion

NO clear patterns of price action on lower time frames

SIDEWAYS TRADING PATTERNS

RANGE CONSOLIDATION CONGESTION


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1 2 3 4

1 2 3 4


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ENTRY

PriceAction

2

2

2

2

2

2 Bullish moves on lowertime frames

Higher highs and higher lows

provide evidence of bullish price

action/uptrend

Major Up Trend

Higher Highs

Higher Lows

1

2 3


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1

2 3

1

32

Use technical analysis forBUY signals

Use technical analysis forfor SHORT signals

Trading with the trending price action.


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Review the average daily trading range to determine ifprice action is increasing/decreasing.

Conduct volume analysis to determine whether volumeis diverging with price action.

Lack of volume to support potential breakoutshould reduce position size or wait for breakout

confirmation

Review price action on multiple time frames todetermine the macro trend.

Trade on the side of the major trend to avoid low oddstrades.

Review support and resistance to find risk and rewardparameters for setups & entries at support orresistance.

Look for congruency with E-mini futures for tradingopportunities and setups.

Add filters plus additional weight-of-evidence to

time trades better.

Filter example: Break support/resistance by x %

Filter example: Break support/resistance by x

points

Filter example: Multiple closes above/below

support/resistance area

Determine whether price action is extended: Oversold

or Overbought.

Countertrend breakouts perform extremely well.

Flags, pennants, broadening patterns

Trend line breakouts can be very good scalp trading

opportunities


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BuyingSignal

ShortSignal

1

2 3

Buy Signals

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Short signals


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B

A

C

Flags

Parallel

12

3

Can also include the category of chart patterns pennants

Very common chart pattern found in existing trending price

action

Represent a pause or consolidation of price action to

determine whether to continue or reverse movement

Always proceed a dramatic or sharp price action move Among the most reliable of continuation patterns

Rarely produce a trend reversal

Easily identifiable by parallel lower and upper boundary of

support and resistance; respectively

Relatively short term countertrend movement in price

action

Technical analysis measurements can be applied to project

future price action continuations

More rapid development in downtrends


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200 MA

20 MA

HigherTimeframeDowntrend

SHORT

B

A

C

Flags

Parallel

12

3


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Fibonacci Retracement used to measure the magnitude and strength / weakness

of counter moves to the original trend.

Use retracement levels starting with beginning of move to end of move.

Pivots are helpful in determining each point of reference to construct Fibonacci grid.

Combine Price movements with Fibonacci Retracements

Look for support and resistance areas, at retracement levels, to assess the

ability of moves continuing.

Retracements provide valuable information for how significant the potential

reversal pattern is.

Bigger retracements lend to weakening price action,

Smaller retracements lend to strong price action moves.

1 advanced scalp trading tactics

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