Full transcript
0:0025% of the way back up. Look what
0:03happens. Boom.
0:07So, look. 20. If you go after 25% of the
0:12way back up, you're right. Nine times
0:15out of every 10 tries, now you're super
0:21profitable as a trader.
0:24So, where do you think
0:29a scalper wants to live his life to grab
0:32a quick pop in the markets? You're going
0:35after 25%
0:37of this is 100% all the way back up. So,
0:40if your stop had the ability to come all
0:43the way back up, that's one time out of
0:4510 or two times out of 10 or halfway six
0:50times out of 10. But 25% you're going to
0:53get that nine times out of 10 tries. And
0:57we utilize this tactic all day long
1:02every single day. 50% 25% 50% 25% and I
1:07want you to do that as well. Welcome to
1:08another presentation. Of course, as
1:10mentioned, my name is Oliver. What I'd
1:12like to share with you today is a very
1:14interesting topic. It's the topic of
1:16scalping. Now, the definition of
1:19scalping has basically changed over the
1:22years. What scalping used to be very
1:24much in vogue back in the early 1990s to
1:27mid90s is completely different from what
1:29I'm going to call scalping today. And
1:31I'll explain this as we develop more
1:34throughout the presentation. But
1:36scalping is a form of short-term
1:39trading. So, listen, there are several
1:41forms of trading, right? There's
1:42investing or what I call wealth trading.
1:45Wealth trading and investing. Same
1:47thing. Wealth trading. Then there's core
1:49trading. That's not quite as long as
1:52investing, not quite as long as wealth
1:55trading. Core trading several months
1:58down the line. Okay. Then there's what I
2:01would call swing trading. Swing trading
2:03is actually is a style of trading that I
2:06helped coin ear in the early 1990s.
2:09Right? So the term swing trading came
2:12from an interview of mine back in the
2:14early 1990s and it caught on and people
2:16began to call this shorter term style of
2:19market play swing trading. Okay. Then
2:23there's day trading. Now day trading or
2:26short-term oriented micro trading is
2:29really divided into two parts, right? So
2:32the two parts of day trading are is
2:37actually day trading and then scalping
2:39is a subset of day trading. So scalping
2:43is very very micro. If day trading is
2:47micro, scalping is the little brother of
2:50day trading. It's even smaller than the
2:54day trading space. And that's what I
2:55want to talk to you about today because
2:57a lot of traders, professional traders
3:00actually make their living in the
3:04scalping world. And there's a tremendous
3:06number of professional traders, guys. A
3:09tremendous number, not a tremendous
3:12number of people in the industry that
3:14don't understand the differences between
3:16a trade and a scalp or a day trade in
3:19the scout. and you're going to know the
3:21difference and how to do each one by the
3:25end of this presentation. Okay. All
3:26right, guys. Let's talk about the tools
3:28we need to do scalping properly. Okay,
3:31let's talk about this. First thing we
3:33need, we need a two-minute chart. Yes, a
3:36two-minute chart. You can alternatively
3:39use a five-minute chart, but I prefer
3:41that you use a two-minute chart for
3:42this. Okay, two minute, five minute,
3:45your choice. But I lean more a little
3:47bit toward the two-minut chart. Let's
3:48take a look at a two-minute chart. This
3:50is Microsoft's twominut history looks
3:55like for up until midday. So, this is a
3:58two-minute chart of Microsoft where
4:00every single bar represents two minutes
4:01of trading. Obviously, the red bars
4:04represent the two-minut periods that
4:06were down. All right? So, it started
4:08higher, ended lower, and the green bars
4:11represent two-minute periods where the
4:13stock ended, started lower, ended
4:15higher. Simple. The next thing we need,
4:18we need to overlay a 20 period simple
4:20moving average. Now, I have been trading
4:24for a very long time, studying markets
4:26for a very long time, and I will tell
4:28you that I have experimented with all
4:30types of moving averages. And in my
4:31experience, the sexier varieties of
4:34moving averages have no real distinct
4:37advantage over the simple. Now, if you
4:40want to go to, you know, the 20 period
4:43exponential, the 20 period weighted,
4:45knock yourself out. It's not that
4:47different anyway, right? Moving averages
4:49are areas. They're not specific little
4:51skinny lines as your trading platforms
4:53would have you believe. But I use simple
4:56and I use those simple moving averages
4:58on the closing prices of the bars. Okay.
5:01Um here's a two-minute chart of Baba. I
5:03am overlaying a 20 period moving average
5:06on the chart. This is averaging the last
5:0920 closing bars. So now guys, just so
5:13you know, and I know many of you know
5:15this, what a moving average does is help
5:17you to iron out the wrinkles in a
5:19stock's trend. So in the old days, they
5:22they actually used to call moving
5:23averages trend lines because their
5:26purpose is to really keep you focused on
5:30the prevailing trend. So if that 20 per
5:32moving average is declining, it doesn't
5:34matter if there's a green bar or two in
5:38the midst of the stock's performance.
5:41the trend overall is down. It doesn't
5:44matter if there's a green bar here. See
5:47these green bars? That the overall trend
5:51of the moving average
5:53keeps you honest. Keeps you honest in
5:56your overall assessment. I don't care if
5:59there's green. That trend is down. The
6:02green is not going to affect me. The
6:05green is not going to trick me. As long
6:08as that 20 period moving average is
6:10down, I'm thinking down. I'm thinking
6:14negative. You understand? So that's the
6:16purpose of a 20 period moving average.
6:18Here it here's the 20 per moving average
6:20started to rise, right? So it says I
6:22don't care right now if there's some red
6:26here. The overall prevailing trend is
6:28up. So that's the overall purpose of
6:31moving averages to keep you honest in
6:34your assessment of what the overall
6:36prevailing trend is. Is it a perfect
6:39indicator? No. There's no such thing as
6:41a perfect indicator. But as a general
6:43guide to trend analysis, you can't beat
6:46moving averages. And the 20 period
6:47moving average in my opinion is amongst
6:50the most important. There are two really
6:52key moving averages. The next thing we
6:54need, we need to overlay a 200 period
6:56simple moving average. So, whenever
6:58you're using moving averages, guys, you
7:00want to always have a short one and a
7:03long one. You should never really look
7:06at just a one moving average chart. You
7:10need a longer term view, the 200, and
7:13you need a shorterterm view, the 20
7:15period moving average. And that's what
7:16we have here. Moving averages are best
7:19utilized in ter in the form of a buddy
7:22system. You understand? A buddy system.
7:24So short, long, 20, 200 or 13 200 or
7:31820. We use a variety of them, but 20
7:34and 200 are the basic two. And I would
7:37say I would go as far as saying you
7:39don't really have a viable chart that
7:41you're looking at unless you have these
7:43two moving averages on the chart. So
7:45let's take a look at the 20 period
7:47moving average on BABA overlaid. So now
7:49we have a two-minute chart, each bar
7:51representing two minutes of trading. and
7:53you've got a 20 period moving average
7:55overlaid and you've got a 200 period
7:58moving average overlaid. And these two
8:00moving averages are operating in a buddy
8:04like system. So whenever your stock,
8:07your 20 and your 200 are spaced apart,
8:11you are looking for a reversal. Okay?
8:15And this can happen on the downside as
8:17well. You can have the stock way down
8:20here, separated from the 20, separated
8:22from the 200, and you'd be looking for a
8:24reversal back to the upside. But notice
8:27how Baba opens
8:30separated from its 20. And the 20 itself
8:34is separated from the 200, leaving
8:37behind what we call a dual space
8:41reversal event. My traders would be
8:44taught to actually go bet to the
8:46downside on a play like this, but they
8:49would first have to see green get
8:52eliminated by red. And so here's the
8:54last green bar. Red eliminates green.
8:58They would short here betting on the
9:00downside, stop above the green, protect
9:03themselves above the green, and
9:06benefit all the way back to the 20
9:09period moving average where now the
9:12stock guys is closing the gap between
9:18itself and the 20 period moving average.
9:20Clo gap closed. Done. Trade over. But
9:24that's actually a different topic. We're
9:26going to talk about scalping. We got a
9:29two-minute chart. We got a 20 period
9:31moving average on the two-minute chart.
9:33We got a 200 period moving average on
9:34that chart. Now, we need a strong move.
9:36What do I mean by a strong move? I have
9:38to demonstrate this for you. Let's do it
9:40red. So, a strong move down. Boom. In
9:44this strong move, guys, if you're going
9:47to play against this strong move, what
9:49do I mean by play against this strong
9:51move? What I mean is that if you're
9:54going to
9:56look to buy
9:59somewhere after this decline, buy, if
10:02you're looking to buy, your odds are not
10:07very great because of the power of the
10:11down move to the left. So, think about
10:13this, guys. Think about this. This move
10:16to the downside is very powerful. All
10:20right? This move to the downside is
10:22powerful. So it means that any up move
10:25that you make, right? Any up move after
10:29this is going to have to fight what's to
10:33the left of it, which is red. All right.
10:36So now
10:38some moves
10:40will actually make it all the way back
10:43to the beginning of the drop, the
10:47decline. But how many out of 10 tries
10:51will the bounce after a strong drop? How
10:55many times will a move come all the way
10:58back? I'm going to tell you one time
11:02out of 10
11:04will go all the way back to the top of
11:08the move. This is very important to
11:09understand. Then we're going to go to
11:11chart so I can show you this. Right? So
11:13strong drop rally all the way back
11:17recuperating the decline 100% one out of
11:2110. Let's say 75. Let's do this
11:2675. So this is the 100% level, right?
11:3175% instead of 100% how many? Two
11:37out of 10. Let's do it like this. So
11:41100%
11:42all the way back you're going to get one
11:45out of 10. All right, one out of 10. So
11:49one out of 10 goes 100%. 75% two out of
11:5210. Now check this out.
11:55Something interesting happens here at
11:5850%.
12:00Now your numbers go big. At 50%
12:06your numbers go six out of 10. Wow. So,
12:11six times out of every 10 tries, the
12:14bounce back up after a decline will
12:18retrace 50% of the decline. So, now
12:23you're a profitable trader if you
12:24control your downside. Just going for
12:2650%.
12:28Wow. You're not a profitable trader
12:30going for 75% of the way back up. You're
12:33not a profitable trader going 100% of
12:35the way back up. You're a profitable
12:37trader if you control the downside.
12:39You're a profitable trader at 50% only
12:43going for 50% retracement. A stock
12:46drops, buy it, 50% back up out six times
12:51out of every 10. But check this out.
12:54This is the most interesting. This is
12:56the most interesting traders, right? So
12:58now let's go to 33%. No, let's go to
13:0225%.
13:03Now 25%, right?
13:0625% of the way back up. Look what
13:09happens.
13:12Boom.
13:15So, look, 20, if you go after 25% of the
13:20way back up, you're right. Nine times
13:24out of every 10 tries,
13:27now you're super profitable as a trader.
13:32So, where do you think
13:37a scalper wants to live his life? Where
13:41do you think he wants to dedicate
13:44himself to? 100% going after the one out
13:48of 10, going after the 75%, going after
13:5050. No, he lives in that 25%
13:55move back up. 25% move back up. 25% move
13:59back up. 25% move back up. Boom. Boom.
14:01Boom. Boom. Boom, boom, boom. Nine times
14:03out of every 10, you're going to get
14:05that 25% move back up. And so that's
14:08what scalping is. It is sacrificing,
14:12right, the possibility of a 100, which
14:15is going to come every now and then if
14:17you're lucky. Living in that world where
14:19I get this time, Ted, I just got to
14:22control that one time that it doesn't
14:24work. Nine times out of every 10, nine
14:27times out of 10, this is scalping. Same
14:29thing on the downside. Same concept on
14:31the downside. But let's go to charts
14:33now. My trading platform here. Right.
14:35So, what I need to do, guys, I need to
14:37put I I told you I need to put the 20
14:41period. We're going to put a 20 period
14:43simple moving average on there. I'm
14:44going to make that blue. Let's make that
14:47blue. Do it right in front of your
14:48faces. All right. 20 period moving
14:51average on Microsoft right there. Right.
14:53Then I'm going to put the 200 period
14:55moving average on there. Let's do that.
14:58It doesn't. It's not really relevant to
15:01us today, but let's just do it anyway.
15:03All right, we'll do that. I'm going to
15:04put that 200 on there. Keep that red.
15:08Boom. Okay, good. Now, look,
15:11I want you to know, remember that?
15:13Remember what I told you, right, about
15:15space? That was a different talk that I
15:18did on my concept with space. But I just
15:21want to bring your attention to that
15:22real fast, right? Like look at how look
15:24at Microsoft opens
15:27where it opens in relationship to the 20
15:30and how 20 is separated from the 200. So
15:34you see that that th those layers of
15:37space right that space dual layers of
15:40space space one and space two.
15:46And whenever we get these dual layers of
15:48space, we bet the other way because the
15:51market doesn't like space. It narrows
15:54space. So now, see, there's no space. So
15:58once there's no see, we started off with
16:00space. Now we go to no space. Look at
16:04all three items. Look at your stock.
16:06Look at your 20 period moving average.
16:08And look at your 200. There's zero space
16:10now. Now we go back the other way. But
16:13that's a different topic. We're talking
16:14about scalping. Now, I want you to take
16:16a look at this drop. This is one fluid
16:20drop. It's interrupted by a a a certain
16:23number of green bars, but the fluid move
16:26to the downside is down. If you want to
16:30try to buy the bottom of that, you can't
16:35expect more. If you want high accuracy,
16:38you can't expect more than remember
16:42those levels, right? 25%. If you want
16:46your accuracy, so scalping is a counter
16:50trend approach to grab a quick pop in
16:53the markets. You're going after 25%
16:57of this is 100% all the way back up. So,
17:00if your stop had the ability to come all
17:04the way back up, that's one time out of
17:0510 or two times out of 10 or halfway six
17:10times out of 10, but 25% you're going to
17:14get that nine times out of 10 tries. And
17:18so the scalper goes against that flow,
17:22but just for 25% out and can literally
17:27make his entire living on a scalp. All
17:31scalpers do is look for a drop. All
17:34right, a sharp drop. Boom. So boom. Look
17:38at the bounce. You see? Not all the way
17:41up here. You're not going to get that.
17:44That's the sucker's play. Bounce. Drop
17:47back. Now look, drop, bounce, 25%. Look
17:51at this. Look at the next one. Look at
17:53the next one. Let me show you. All
17:54right, drop. Here's one fluid drop,
17:58bounce. There's your 25%.
18:01You're not getting 100%. You're not
18:04getting 75%. You're not getting half.
18:06Boom. Now, here's something really
18:09interesting. When you get a drop that
18:12goes way past the 50% level, now this is
18:17way past, not 100, but it gets really
18:22high past 50%. The next drop usually
18:26will not be a new low down here. This
18:30drop will turn and that's when you
18:34trade. You don't scalp this bottom here.
18:38You see the scalp play if you want is
18:41there. The trade is here where you want
18:44to hold on to that one longer than the
18:47scalp. This is going to go further than
18:4925%. This is going to likely go bigger
18:52than 50% of the way back up. You
18:54understand? So, let me demonstrate this
18:56again. This is important to understand.
18:58Drop 25% new low but drop
19:0465
19:0570% no new low and this becomes a trade
19:11not a scalp. Okay, very different. You
19:15got to know what's a trade and you got
19:17to know what's a scalp opportunity. And
19:20knowing the difference between these
19:21plays does increase your accuracy, guys.
19:23Does increase your accuracy. So look, we
19:26drop.
19:27Boom. That does not get past that 50%
19:31level of this drop, right? It doesn't.
19:35So, we're going to new lows. Now, look,
19:38drop. Here's now an up movement. Up move
19:41up. That up movement does not get past
19:4550%. We're going to new lows. But wait a
19:48minute. Check out this last one. Check
19:50out this last one. Look at this drop.
19:54Now, take this drop. split it in half.
19:58It goes way past the 50% level. You see,
20:04we break through the 50% level. Right
20:08now, this drop does not make a new low.
20:13Now, we want to think about a trade. All
20:16right. We want to buy green when it
20:18takes out red. We want to buy green
20:22red. We want to buy green. Boom.
20:27very different. So, here's a scenario,
20:31guys. Here's a scenario that I need you
20:33to understand.
20:35When you have declines, right, you got
20:38to watch how they bounce, right? Because
20:41if they bounce marginally, that's a new
20:44law scenario. But if your drop bounces
20:48way past 50%,
20:50this down here becomes a potential buy
20:55opportunity for a trade. Now, this is
20:58your scalp trade for a quick 25%
21:02if you if you want to try that or this
21:06becomes your real longerterm trade
21:11intraday longer than a scalp more than
21:1425% when your rallies break
21:18significantly past that 50% level. And
21:22so you need to keep these percentages in
21:26mind. I can show you this on another
21:28chart. Check this out. Let's go to I
21:31don't know, Baba. You've got separation,
21:34separation, separation. We're betting
21:37this way. But check this out, guys. This
21:39is amazing. We drop. Look at the bounce.
21:44Not this is the halfway mark, right?
21:48Here's your halfway mark. Here's your
21:5125% mark. Boom. New lows. Now, check
21:55this out, though. This is interesting.
21:57Now, let's take this drop. Now, let's
22:01split that in half. You go past the 50%
22:05level. So, now there's no new low. This
22:09green taking out red can be a quick buy
22:14if you like. So I I I just want you to
22:18be able to understand the probabilities
22:21are very important traders. After a
22:24drop, all right, if it's a sharp drop,
22:29there can be a buy opportunity there,
22:32but you can't expect more than 25% if
22:35you want to be consistent and accurate.
22:37If that bounce is less than 50%, odds
22:42are huge that the next decline goes to a
22:45new low. If that rally goes further than
22:4950% by a lot, then that pullback sets up
22:53a nice trading opportunity for you. And
22:57we utilize this tactic all day long,
23:01every single day. 50% 25% 50% 25%. And I
23:06want you to do that as