What are the makings of a good scalp trade?

Hi folks, a fellow trader just emailed me with some serious questions about proper scalping methods and management. I thought I would just capture the charts and the potential trade and put it right in here for a good example. This is just one example of certain things I am looking for.  Take a look at the following chart of the GBP/USD on a one hour basis.  Things have turned bearish for this pair (short term) and this is the current hourly with 25 whopping minutes left for the candle to complete:

Click the chart to open and can you see why I would really like price to rise toward the 1.5350 area? its a psych level and a prior hourly pivot and take a look at this 15 min chart. It happens to be the 200 MA stop point on the 15 min chart.  A nice area to short indeed. PROVIDED that I get a sell signal in that neighborhood. Here is the 15 min chart:

So as I am writing this… I have a few moments before I potentially take this trade. SO, I would like to say number one… forgive the ‘sloppiness’ of this article, Casey has gone away for a bit, and I stink at wordpress.  (LOL)  Number 2 you must exercise some PATIENCE. and learn to WAIT.  You must also be careful to not let a scalp hurt you by going to far against you. If your just looking for a quick 10 to 20 pips, don’t let it run35 pips against you, OK.  Time is getting short here. I got 10 minutes to go. Doesn’t look like its going to make it to my level…. waiting for a sell bar on a one minute or a 5 min chart. Will capture the screenshot as soon as I take it.

Ok, Price hit the declining 40 ma on the 15 min and put in this one minute sell and I entered right here on this signal.   I am looking at the 15 min chart and analyzing the bars and the potential. Look at the 15 min chart and you can see the 20 Ma is right near the whole figure of 1.5300 so this area will be my target and I will close it there if I can. I will probably get a nano second to exit. This also happens to be the 200 ma on the one minute chart. so my target is about 11 pips or so should I get lucky on it but do not mind if I go out for just 7 or 9 pips. Its ok lets see what happens….

Ok, here we are a few minutes later and the price followed to where I wanted and I captured this shot:

Then I immediately hit the button. So, we have a picture of a scalp trade. The entire time for this was not that long. 25 minutes was the total to watch, wait, execute and get paid.  Do this 10 times a day is your mission. When you are really good, you will be able to do this 50 times a day.  It just takes you being relaxed, patient, focused and disciplined. Hope this was a help to some. Thanks for taking the time to read and until next time, Happy trading. Michael Storm.

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  • Robinhood777

    Hi Gerar, everyone is so very interested in stops, seems like as traders we love them, and just love to stop out. I hate stops. MOST of the pros I know, do NOT use stops at all. But if I have to select one, it would be close. would hate to be after 10 pips and loose 20, so, if it went against me, I would probably pull out immediately or build a position short if I felt strongly enough about it on the other time frames. One trader I know, puts stops an EXTRA 20 pips away and it increases his accuracy into HUGE percentages. I cannot tell you how many times I am stopped out and then it just turns and goes in my direction and even further than I would think. SO, many times I will put more on exactly where I figured is a good stop. Thanks for posting.

  • Robinhood777

    Hi, thanks for commenting. I don't use the nickB method, but if its good and works well for you, I would surely stick with that. The spread is irrelevant as it is a cost of doing business and there is nothing that can really be done with that, but if you look at the trade it was 11 pips of pure profit, or $110 for 9 minutes of “work” I seek to do this as many times a day as I can possibly find, and it is amazing how many I miss. Its not for everyone. But some people really like scalping and I have been doing it for 10 years straight. So, it does work for me. It takes time to get the right feeling for it though.

  • Gerarfx

    Thanks Michael, very helpfull…. you do it so easy…
    In a trade like this where you put your stop?? How much do you risk in each scalp with a target of 15-20 pips?

  • Heasymo

    Your target is only 11 pips of profit?? what about the spread? It would make up 20-30 percent of your profit if your spread is only 2-3 pips.Not to mention if you lose a couple of trades..totally Against the NickB method!

  • 4x2profits

    Most analytical personalities find it difficult to become scalp traders.

    With the time it may take to solidify in your mind the right time to pull the trigger you may want to entertain the thought of position trades or swing trades.

    just my 2 cents

  • Darryl

    Nice description. I'm watching the GU now as it languishes @ 1.5282, which is support. I took a 5min buy with a stop 5 pips below the daily low for a risk (including spread) of 18 pips & a 1st target of 1.5315 (last 2 15min swings are 5218 & 19) and 2nd target is 1.5344. Of course the second target is the psych level you mentioned. It is also the 38% fib level (1.5349) of the complete move up to 1.5471 & the 50% level of the 15min swings from 1.5398 to 1.5277. But it is a Sunday(Monday depending on where on earth you are) so I did just bank 5 pips and shorten my stop significantly. Now up 12 and stop is BE. You can track the remainder. 6:08 PM PDT (GMT 2:08am)

  • Fritzmoench

    Thanks Michael. I have been watching you on the morning session, but I am frequently confused since there is so much happening at once. This post is extremely helpful to someone like me who is very analytical and needs to go through your logic step by step. I don't know if I can become a scalp trader, but this kind of presentation allows me the opportunity to work through some of the detailed questions my mind goes through when considering a trade.