Premises Of Scalping

There are a few main premises of scalping that are useful to keep in mind to understand the logic behind these techniques.

Smaller moves are easier to gain - In my previous eBooks I mentioned that the larger your target pip gain the higher the possibility that the target won't be reached. I have been known to say that it is easier to catch 20 pips than 200 simply because in the time that it would take to reach that goal the market sentiment could change due to unforeseen circumstances. As a scalper it is reasonably easy to determine a small movement in a particular direction and to capitalize on a few pips before the market will likely reverse.

Smaller moves happen more frequently than larger ones - Even during relatively quite market conditions there are numerous smaller movements that can adequately be traded. Thus you can easily trade within what appears to be a stagnant consolidation or range as seen on larger perspectives.

Limit risk due to limited exposure - An active scalp trade typically lasts for a very brief duration. This reduces the likelihood that unforeseen news or a Fundamental Announcement will negatively affect the trade.

Profit from trending sentiment - Currency pairs tend to trend or bounce around in the absence of any news or relevant events. Currency virtually never remains at a constant price but fluctuates and trends to market sentiment. These small movements create opportunities to scalp trade.

Cumulative small gains equals large rewards - Scalpers often engage in numerous trades in a single day. Most trades will only yield a small profit, but cumulatively they add up to significant gains.

PICKING TOPS & BOTTOMS (PART A)

Read this section carefully as the skill presented here is crucial for most of the

scalping techniques that will be presented later

Take a few moments looking at the following chart. Look at the characteristics of the tops & bottoms of the waves.

When you will finish reading this section you'll have the understanding needed to be able to "pick" the tops and bottoms of waves like you see above. What this means is that on the chart example above you would have been able to capitalize on virtually all the pips that the market went up. You could have entered at about 1.2130 and rode most (if not all) of the moves having a final exit at about 1.2185 (55 pips). Even more amazing is that you could have captured even more pips than that because you would have sold near the tops and re-entered near the bottoms thus gaining twice through some of the same prices.

Would knowing how to do what was stated above be of any interest to you??? It is not magical, but simply a skill that you can cultivate!

I've spent some time pondering how I can teach this subject to you. I've come to the conclusion that this is a difficult subject to convey to you but I'll do the best that I can. I have also realized that there are two specific challenges in being able to teach this to you but have also come up with a solution to each.

The first challenge is that I can't convey to you all the nuances to be watching for, so in this section I'll teach you the general concepts of "picking" at the tops/bottoms but will point out variations to watch out for as I present examples throughout the rest of this eBook.

The second challenge is that there is no real way for me to show you what to look for in live moving charts without having live moving charts. See, in real time the candle keeps changing shape as the live price continuously moves up & down during the period of the candle's formation. In the pictures I show you of the charts the candles are fixed (frozen). I can talk about what the candles do but can't really show you too much. For example, on the chart pictures you see there may be a rather long candle (a tall one that moved quite a few pips). Realize that that candle took a full 60 seconds to develop and so a long candle doesn't necessarily mean that it shot up (or down) all those pips in one instant (although it might have). Usually you'll see it moving up, down, up some more, down some, etc... until the 60 seconds is over then the candle is frozen. So looking at the chart pictures I present only shows a shallow dimension of what happened; you need to be able to see what the market is actually doing during the 60 seconds that a candle is being formed as your decision making process also needs to happen in real time.

I've found two solutions to this second challenge.

The first solution is that I can record videos of the live charts so that you can see what I am talking about. This however turned out to not be a good solution because the movies are soooooo long (because each candle represents one minute, and the whole thing takes many minutes to complete a complete market move) and the resulting file size of the movie is huge. The fact that the file size becomes huge makes it impractical to include in the eBook (as it is many megabytes in size).

The second solution is what I consider to be the best overall. I'll discuss the things to watch for and then expect for you to got watch some live charts yourself. Sorry if I sound like a broken record about this but watching charts yourself is not only "the best way" but in fact "the only way" for you to learn these skills for yourself.

I'll discuss the things to watch for but it is your duty to go watch some live charts to see these principles in action. Only by spending some time studying your charts will any of this actually sink into your mind. Once you've spent the time studying the charts you'll cultivate an almost "intuitive" ability to read your charts.

Well, let's get back onto the topic of "picking" the tops & bottoms. (Actually, after continuing to write I realized that I started talking about getting into specifics that are best categorized as separate chapters. I've renamed this chapter to be part "A ", and am ending it here with the intention to continue on with part "B " later that brings all these smaller concepts that follow together into a cohesive umbrella.)

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