Today is April 26th, 2012. I would like to post the days chart first here today and then talk a little about the markets after.
Today we saw moves in both directions but the stronger positions were long (up). This is the smaller chart within what I call my T-2 trade screen. There is a larger chart that acts the same but is easier to see it from a bigger perspective. The signals it shows are still yet the same. This T-2 screen is the middle screen, as there is one screen smaller, for very small scalp trades, called my T-1 trade screen and there is one screen larger called my T-3 trade screen. All the charts act the same within the method, but give off different sized moves within there class. The risk and reward is adjusted for each and is always no worst than a 1:1 trade ratio and most often higher.
I say all of that to share the idea that every trading day is different and not likely the same as the previous session. Some days the market is really moving and other days it is range bound and going nowhere. Being ready for what ever the market decides to through out at you is something we need to be prepared for but how is that done?
With the T-3 screen, and or a larger view, a trader could see that there is still upside momentum within the markets. Many of the short trades may be short lived with this stronger upward bias and one would do better looking for long trade setups and leave the smaller short opportunities. Doing this gives you are greater reward when compared to your risk and something most traders actively search for during the session.
Being a scalp trader is a skill that can be learned, but also being able to spot the larger picture is still a big key to ones success. Weeding out the smaller moves or understanding what you can expect out of a trade is important to best and accurately access trade risk before you put on that trade. Not knowing how to do this or when its right to go long and or short will keep you guessing and there is no room for that. Unless you have an edge, you will just be gambling, something traders do all the time.
But how can traders know and put something to work that can be trusted? You either have to do your own research and work on back testing your idea’s until you see it consistently come through in various market conditions to know it is of value. That process takes a long long time and for some their trading carreer will be over before they get to that point.
Seeing and believing in something that is proven to work for years, not weeks is what traders need. It can be anything that gives you that trading edge, combined with low risk and that is a huge key, low trade risk.
When you might be in doubt about direction and its not really that clear, you can always default to a pure scalp approach. Taking 1 point out of the market with a 1 point trade risk, is a 1:1 trade ratio and acceptable. The reasoning is your trade percentage will be higher than 50% and thus the edge. In fact hitting something like 65-70 % is pretty good and what we should be shooting for at a minimum. When you combine the fact that you could be getting double the return with the same risk, now you have something very good. You don’t need to get that all the time, but as the market reveals itself to you, take what is offered.
Again, this is done by “reading the market“. Traders pick up the trading edge by reading the market first, then any trading indicators or confirmation method is nice to see kick in. Without the knowledge of knowing what you are doing in a field of professionals, we run the risk again of gambling and no one wants that.
It is a fine line, because if you don’t experience it, how will you ever get to the other side and that is where getting informed and trained first is the key. I know it is and can be hard to hold back and wait, but to many traders graduate themselves prematurely and find out later that they did not know all that they should have known. I might be stepping on toes and ego’s, not my intention, but its just the truth we seek. As I mentioned before, its the truth that will set up free.
Part of that truth can be found in consistent price structure. Something that we can come to count on again and again in its simplest form at a minimum to have that trading edge talked about. Acting on consistent price structure will offer us many things, one being that low trade risk talked about above. It will also offer, what I call opportunities to act on trade to targets, where you see the likely and probable spots on the chart that price will move to.
This all goes back to the opening paragraph where I talk about the three models for different conditions. If you choose to trade out of a bigger model, you will have to commit more time to following the markets for sure. A no trade is a trade while you wait for things to come together and that is work, even when you are doing nothing. It is not easy, but for those committed to the process and the rewards, it is often worth it.
Reading the market can be achieved with some level of consistency while holding the trading edge and being able to access trade risk all at the same time. That is a trading method that works.
There is more than one way to trade, that is for sure, find what works for you and look to higher time frames or tick counts to help lend insight for your smaller entry views.
I wish you all the best, Vince
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