(scalping - part 1)
what is scalping - to me it is basically trying to predict the next one candle on a small TF on the basis of data at your disposal or riding the candle ie joining the candle after formation and exiting before it is nearing completion. lol, best way to explain that i could think of now.
(as a day trader one usually enters at the start of the candle so scalping requires a different mindset from the day trader)
i see scalping as two types -
1) scalping the chart - which is easier comparatively and high risk
2) scalping the news - which is tough and Very high risk
now when scalping the chart you may or may not feed in limit data for buy or sell but in a news scalp you are only on market buy and sell. i hope i am making sense, wish i could explain more clearly. but you do get the drift, right
now, it is better, sensible and more so the right approach to first scalp the charts and once you attain a decent degree of competence to upgrade to the second ie scalping the news.
in scalping the chart you have an idea of where the trend is so you scalp strictly in the direction of the trend initially and trade pullbacks only after you have reached a decent level of confidence and capability.
in scalping news you ignore the chart and just watch the spikes so to say and get in and out in a matter of seconds. no way i can really explain how in words. my news scalps last no more than 10-30 seconds on an average, rarely over a minute unless i can see the spike growing in my direction.
a) i keep a win/loss ratio of 1:1 but you have to be flexible. scalpers rely on their ability to win more than they lose. that is your strength and requisite as a scalper. you cannot increase the win loss ratio as a scalper - very tough to do so. 1:1 is the basic, ideal and best scenario target. a few points here and there will happen - both on winners and losers. but generally speaking you should try and be happy with this ratio.
now you may wonder - why i choose 4 points? - why not 10? why not 20?
scalper generally wait for just 1 or max two candles in favor and boom - get out - win or loss.
so, therefore the answer to that is this - ATR of the time frame you trade - if like me, you trade the 1 min chart then the ATR is close to 5 for crude. so i choose 4 points.
you can scalp for 10 points on the 1 min chart too - but with the noise and whipsaws you will not get clean moves of 3 candles easily unless there is a trend and rarely even in times of a trend - too much noise in this 1 min TF.
if you want to go higher say 10 points then it is more sensible to trade the 15 min chart as that way it is safer. so there is the answer to why 4 points. (if you move up the time-frame beyond 3 min - to me that is short time intra-day day trading and not scalping)
so few things are clear now i guess -
win/loss to be 1:1
win ratio to be at least 60 percent to cover charity, lol. else you are break-even.
trade the 1 min or max 3 min TF
scalp charts before scalping news
that ATR decides the win/loss points ie target (in favor or against)
(i am tired now so i will try to post the rest as i can think of this tomorrow or the weekend)
