Today is Thursday April 1st, and the market moved out of the consolidation zone today as mentioned in Tuesdays post.

We moved out side the inside range in the pre-market and continued that on the open for a couple of hours, only later to fall back inside the trading range. We had a gap on the major index’s as they jumped instantly up to the futures. Often times, we see the gap being filled and it happened today as well, but took a little while to come together. Around 10:45 am West Coast or 1:45 pm East Coast, the market came alive, with a move down for several points bringing the gap to a close.  We did see a nice rally at the end of the day bringing things back up to close positive on the session. The Dow was up 70 points + the S&P 7 points and the NASDAQ up only 4 points, clearly the laggard.

I have a video of the market action below. It is taken in my T-2 Trade Screen and shows the major turning points and add on trades for the day. I did the video before the market had closed and was just getting the last long signal which did end up much higher if you road it out. I took a few small losses inside the slow time of the day, kind of a bummer, but I knew what I was getting into. If I did not see or get what I was looking for, I got out. I could have waited for the afternoon session and would have made it easier for me, but it was still OK. I had a one point S&P loss, but did it on three trades. Then I came back with a three point gain on 1 additional contract.

I really liked the last trade. I thought it was coming earlier, but just as the market is about to make a big move, it usually gets a little tricky. That is a good point to remember because I see it happen all the time. It does not want to give you easy access to the big moves and will do what it has to in order to make you miss it. That is just how it is all to often. But if you know that ahead of time, you can keep an open mind as to what its intentions really are and be ready to take the appropriate action.

Today I am going to offer a way for traders to help there trading performance. That is by giving you something to first think about. Traders, especially scalp traders, need to have clear pictures of the trade setups in there minds. You need to know what makes up a good trade from a bad trade. What are the likely results of this setup vs another and which one is likely to outperform. The trade that you take will have an impact on your trading results. So, trade selection is going to be a very important part of being successful. How does a trader know which trade is better than others and what makes up a good trade? That is the 64,000 dollars question as it has been called. I won’t go into the details of that here, but will recommend that every trader clearly define what he is looking for and then to wait for just that. If you do, you will be rewarded.

One way to better help you train yourself is to get a clear picture of what you are looking for and try to identify it, again and again. I would say the more familiar you get with what a winning trade looks like, the easier it is going to be for you to identify it, when you are scalp trading the market. Seems simple enough, but that is not what usually happens.

Example: Fighter Pilots when engaged in battle do not have to think very much about what to do. It has become instinct for them to react as conditions change. A traders inability to change direction quickly enough will hold them back, because of fear and uncertainty. Those emotions only exist because the trader has not exposed himself to enough of those same conditions over time. If he has not seen that read before, how is he supposed to know how to handle the new developments. The result, under-performance. A fighter pilot has spend hundreds and hundreds, of hours in a simulator before he is taken up in the air for a real flight. Should learning traders to the same, that is for you to decide. If you have the risk capital, real money trading is the best. If you have a limited amount of resources, simulator trading is best until you have been exposed to the elements.

The same is true for a boxer. He does not have to think about how he is going to react when he is in ring. He knows, because of all the training, sparring and conditioning he has done to help get himself ready to fight. A professional boxer spends hundreds of hours in these various preparations to help him not have to waist time and think about what to do. He just knows. How is it that he just knows? Through the training.

Know we come to scalpers who day trade the market looking for price discrepancies where they can position themselves for profit. We need to have the same dedication to the cause. By first knowing what you are supposed to look for and how to position yourself so your risk is very limited and being able to do this hundreds of times, even thousands. That is a tall order, but ask yourself, how many successful day traders are able to take money out of the market virtually every day? Your answer, not many. It is the losses of the other 90% of traders that make up the profit for the 10% who can. How are you going to get on the side of the 10%. It is not easy, but is possible.

There are many factors, but getting to know for sure what you need to be looking for is the start and how to position yourself to take advantage of that is the key. I will continue with this line of reasoning in tomorrows post.