Equities Scalping

Discussion in 'Trading' started by baggerlord, Oct 6, 2008.

  1. Hi everybody! I am done trading today, so I though I would do my part to combat the ratio of crap to useful info on here. I'm hoping this thread can be a place to share ideas with other scalpers.

    Disclaimers: I don't clame to be an expert, but I am making money trading this way, and am gradually shifting my time to make this my primary income. You might lose your shirt if you follow my advice blah blah blah

    1. What stocks to scalp? I prefer high volume 10 mil shares a day + stocks that move a lot, to minimize slippage and commission cost. Examples: AAPL POT are obvious ones, and then constantly scanning for stocks that are hot and moving a ton right now IE today WFT DUG were on my radar.

    2. Setup, 5 minute charts of the indexes. Gotta know what the market is doing.

    3. Individual stocks, i like to have a 15, 5, 1 minute chart running. 5 sec chart for entry.

    15 minute chart is used to identify if there is a big trend or not. If there is a big trend only trade in that direction.

    5 and 1 minute charts are used to find trade ideas. I base most of my trades on candlesticks. I look for tails to show up in an area where i expect support or resistance. Hammers are cool.

    I also look to fade moves on the 1 min when the rsi is +70/-30, provided there is no strong trend in action.

    Entry: I use rsi on the 5 sec chart a lot to find entry. I like it to be over 70 for shorting and under 30 for buying. The big exception to this is in a really fast trend, then I just look for a pullback to 50.

    Basically I want to see price failing to continue, and then try and passively enter to capture a rebate and minimize trading cost.

    Examples to come, that will hopefully make all this simple.
  2. Here is MOS action today. It opened under yesterdays low, and the market is tanking. Obviously we want to short.
  3. Now here is the MOS action on 5 sec. See how around 633 RSI exceeds 70. Now we watch the tape and wait for some price rejection and then put in an offer to sell, maybe around 38.63. If the initial failure were missed you could put in an offer a few minutes later when RSI returns to 50, or again at 643 when RSI is back up to 70.

    So basically, scalp in the direction of the bigger picture, by fading very short term fluctuations.
  4. Now lets go to later in the day on MOS. The big move down has faded and we are chopping around. This is an ideal condition to look for RSI extremes on the 1 min. IN this case MOS didn't present any of those opportunities. So we can look for long tails on the 1 min.

    Here is MOS 1 min. 2 examples of what I look for are around 9:25 and 9:50. Not that this is still on the right side of the overall move although it turned into choppy conditions. When in doubt, take the trade on the side of the market move, no matter how slow.

    9:25 and 9:50 we see those long tails which is resistance around 33.80 ish.
  5. Here is the MOS 5 sec of the 9:25 action.

    Possible entries:

    RSI returns to 50 at 9:27 and 9:35, and RSI exceeds 70 at 9:42. A point to make here is that when RSI first returned to 50 at 9:32, you don't just blindly go short. Rather you watch the T+S and level 2 for it to slow down first.

    Cleary there is no shortage of entries, so work hard to pick really good scenarios on slower charts before even looking at the 5 sec. I keep the 5 sec minimized until I am ready to make a trade.
  6. Stop losses, depends on the market. If a stock is shooting straight down and you nail a great short entry right after volume blowoff on a quick upmove, use a hard stop above the recent high. However if the market is drifty, be a little more flexible.

    Either ways using such a fast chart yields small relative losers.

    For profit, it depends again on the market. If you got short this morning with everything tanking. Hold on as long as possible. If markets are drifty bid out when RSI is oversold.

    There isn't a formula, just put in screen time.
  7. This is how I have been scalping. I would love to see some other styles and feedback. I'll do some more charts periodically.
  8. Thanks for posting this, I'm just starting out but I will study this and hopefully learn something.