al-brooks-course
50A - Scalping
Raw transcript and slide notes for 50A - Scalping.
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Transcript 001
Time: 00:02
Bilingual Transcript
00:02 - 00:03
EN: This is Al Brooks.
00:03 - 00:05
EN: Thank you for watching the Brooks Trading Course.
00:05 - 00:08
EN: This is the first of five videos on scalping.
Slide 001
Time: 00:10
Bilingual Transcript
00:12 - 00:14
EN: I would like to begin by talking about the difference
00:14 - 00:18
EN: between a limit order market and a stop order market.
00:18 - 00:22
EN: A Trading Range, especially if it’s tight, is a limit order market,
00:22 - 00:24
EN: and traders should only be trading it
00:24 - 00:27
EN: if they’re scalpers and willing to enter with limit orders.
00:28 - 00:32
EN: Next, I want to talk about the personality that successful scalpers have.
00:32 - 00:37
EN: Most people do not have that personality – and don’t worry about it.
00:37 - 00:40
EN: Most profitable traders do not have scalpers’ personalities,
00:40 - 00:42
EN: yet they still can make a lot of money.
Slide 002
Time: 00:43
Bilingual Transcript
00:46 - 00:48
EN: These charts look fairly similar.
00:49 - 00:50
EN: They’re obviously in a Trading Range,
00:50 - 00:53
EN: but there are some differences between the two charts.
00:54 - 00:58
EN: For example, look at the open of this bar and the close of that bar.
00:59 - 01:01
EN: It’s above the close of this bar.
01:01 - 01:04
EN: That means that traders, as soon as this bar closed,
01:04 - 01:07
EN: hit “Buy the Market” and they got filled above the close.
01:08 - 01:11
EN: Look at the open of this bar and the close of that bar.
01:11 - 01:13
EN: Again, no overlap.
01:14 - 01:15
EN: Traders are eager to sell.
01:15 - 01:17
EN: There’s an urgency here.
01:17 - 01:20
EN: The bars are not overlapping very much on the way up or down.
01:20 - 01:23
EN: It entered much more of a tight range here.
01:23 - 01:27
EN: But overall, there are more legs with very little overlap
01:27 - 01:29
EN: and more of a sense of urgency.
01:29 - 01:32
EN: This market is a better market for entering with stop orders.
01:32 - 01:34
EN: On the other hand, look at this chart.
01:35 - 01:38
EN: The open of this bar is at that close, but the low of the bar
01:38 - 01:45
EN: fell below that close, and here, we closed here and the next bar opened lower.
01:45 - 01:47
EN: That means that traders sold the close.
01:47 - 01:50
EN: As soon as this bar closed, they hit “Sell the Market”
01:50 - 01:52
EN: and the market ended up going sideways.
01:52 - 01:56
EN: Lots of bars going sideways, lots of bars with prominent tails.
01:56 - 02:00
EN: I refer to this type of a market as a limit order market,
02:00 - 02:03
EN: and traders who are trading it in general are scalpers.
02:10 - 02:13
EN: We have several Micro Channels in this market.
02:13 - 02:16
EN: Even though it’s a Trading Range, most of the bodies are big,
02:16 - 02:19
EN: they do not overlap much, and we have several areas
02:19 - 02:22
EN: where we have consecutive, decent size trend bars.
02:22 - 02:24
EN: Traders in a market like this can enter
02:24 - 02:27
EN: with any kind of an order – stop orders or limit orders.
02:27 - 02:31
EN: You can scalp this market with limit orders, selling above bars,
02:31 - 02:35
EN: buying below bars, but you can also enter reversals with stop orders.
02:39 - 02:42
EN: When it’s low, you look to buy a reversal up.
02:42 - 02:44
EN: Here you have a Micro Double Bottom
02:44 - 02:47
EN: - down, up, down, up, a decent buy signal bar.
02:47 - 02:48
EN: You buy.
02:48 - 02:51
EN: Here we have 3 decent bull bars.
02:51 - 02:53
EN: Probably the first pullback will be bought.
02:53 - 02:57
EN: Some traders would buy with a limit order below the low of this bar.
02:57 - 02:58
EN: Others will simply sell with a stop
02:58 - 03:01
EN: above the high of this High 1 buy signal bar.
03:01 - 03:04
EN: Small bull trend, pullback, so it’s a small bull flag.
03:04 - 03:05
EN: Buy with a stop above its high.
03:10 - 03:14
EN: Experienced traders will buy with limit orders or market orders.
03:15 - 03:16
EN: A strong close of a bar, they’ll buy.
03:16 - 03:18
EN: Strong close of a bar, they’ll buy.
03:18 - 03:22
EN: Disappointment here, and you can see what took place here.
03:22 - 03:26
EN: The bulls did not like seeing a doji bar and then another doji bar,
03:26 - 03:30
EN: and a lot of them placed limit orders to try to get out breakeven at that close.
03:30 - 03:33
EN: Experienced traders did it.
03:33 - 03:35
EN: Others waited.
03:35 - 03:36
EN: They get out here or here.
03:39 - 03:42
EN: Reversal down, second reversal down.
03:42 - 03:44
EN: Tried to reverse down, could not.
03:44 - 03:45
EN: Tried to reverse down again.
03:46 - 03:48
EN: Reasonable to sell.
03:48 - 03:49
EN: Limit order traders.
03:49 - 03:52
EN: Here we have a Low 1 after a bear trend
03:52 - 03:55
EN: at the bottom of what is potentially a Trading Range.
03:55 - 03:59
EN: Big up, big down, big confusion, usually means sideways (a range).
03:59 - 04:03
EN: Traders will look to buy below bad sell signal bars.
04:03 - 04:07
EN: A bull body, a doji, a bad sell signal bar at the bottom of a range.
04:07 - 04:10
EN: So, traders will place a limit order to buy at the low of the bar.
04:10 - 04:14
EN: Strong bull bar closing on its high after a bull bar closing on its high.
04:14 - 04:17
EN: Scalpers will buy that close; they’ll buy that close.
04:17 - 04:20
EN: Is this going to be a Lower High leading to a reversal?
04:20 - 04:24
EN: Not likely after 3 consecutive bull bars, and therefore it’s a bad sell.
04:24 - 04:27
EN: Bull scalpers will place a limit order to buy
04:27 - 04:29
EN: at the low of the bar and they’ll get filled here.
04:29 - 04:33
EN: Reversal down from the top, a Parabolic Wedge, push up, and then a bear bar.
04:33 - 04:37
EN: 3 bars up and then a bear bar, 2 bars up and then a bear bar.
04:37 - 04:40
EN: Trading Range – up, down, up.
04:40 - 04:43
EN: Traders will sell with a stop below that bar.
04:43 - 04:46
EN: Here we have a Double Top Lower High, a Double Top bear flag
04:46 - 04:49
EN: after a very Tight Channel, almost a Micro Channel.
04:49 - 04:52
EN: Traders will sell the Double Top bear flag.
04:52 - 04:54
EN: We went up and then down.
04:54 - 04:55
EN: We went up.
04:55 - 04:56
EN: Maybe we’ll go down.
04:56 - 04:58
EN: We’re near the top of a potential Trading Range.
04:58 - 05:00
EN: We have a Parabolic Wedge.
05:00 - 05:03
EN: You expect two legs down – one, pullback, two.
05:03 - 05:05
EN: Here we have a Wedge bear flag.
05:05 - 05:08
EN: We went up and then down, and then up and then down.
05:08 - 05:11
EN: Up, and now we have a bear bar at the Moving Average.
05:11 - 05:14
EN: Strong, big bear trend bar.
05:14 - 05:17
EN: A breakout test of the bottom of this upper range.
05:17 - 05:19
EN: Traders will sell with a stop below the low of that bar,
05:19 - 05:21
EN: looking for at least a scalp down.
05:24 - 05:27
EN: Traders will sell with limit orders or market orders.
05:27 - 05:30
EN: A pair of strong bear bars, room to the bottom of the range – they’ll sell.
05:30 - 05:33
EN: We have 3 consecutive bear bars after a Parabolic Wedge.
05:33 - 05:38
EN: Traders expect at least a small second leg down – one, pullback, two
05:38 - 05:40
EN: - and they’ll sell with a limit order at the high.
05:40 - 05:45
EN: Here’s a High 2 buy – High 1, High 2, but 3 consecutive bear bars.
05:45 - 05:47
EN: Traders will sell above that bar,
05:47 - 05:49
EN: betting that even though this has two legs down
05:49 - 05:52
EN: - one, pullback, two – the channel is so tight,
05:52 - 05:56
EN: it’s probably the first of a more complex, bigger two legs down.
05:57 - 05:59
EN: One, pullback, and then two.
06:05 - 06:09
EN: On the chart on the right, look how prominent the tails are.
06:09 - 06:12
EN: That means the market tried to trend, it reversed.
06:12 - 06:14
EN: It tried to trend down, it reversed up.
06:14 - 06:16
EN: Tried to trend up, it reversed down.
06:16 - 06:18
EN: Very Tight Trading Range.
06:18 - 06:20
EN: Reversals coming every 1 to 3 bars.
06:20 - 06:24
EN: Most traders should not trade when they see the market looking like this.
06:24 - 06:26
EN: It’s too easy to lose money.
06:26 - 06:30
EN: However, a professional scalper feels very comfortable
06:30 - 06:31
EN: in this kind of a setting.
06:36 - 06:40
EN: If they make quick decisions and they can enter with limit orders,
06:40 - 06:44
EN: and especially if they can scale in and use fairly wide stops,
06:44 - 06:47
EN: they can make a lot of money even when the market looks like this.
06:47 - 06:51
EN: Most traders should not be trading that, but professional scalpers
06:51 - 06:55
EN: will look at it and say, “Eh, we get Tight Trading Ranges all the time.
06:55 - 06:56
EN: I’m here to make money.
06:56 - 06:57
EN: There’s opportunity here.
06:57 - 06:58
EN: I can do it.
07:02 - 07:05
EN: They’ll bet that every attempt to turn into a trend will fail.
07:05 - 07:08
EN: At one point this big doji bar was a big bull trend bar,
07:08 - 07:11
EN: and the scalper bet that after 2 bear bars,
07:11 - 07:16
EN: both with fairly prominent tails, the breakout will probably fail.
07:16 - 07:19
EN: We went down, we went up, we went down, we’re going up.
07:20 - 07:23
EN: Scalpers will bet that it’s a bad buy above a bear bar.
07:23 - 07:26
EN: They’ll place a limit order to sell at its high, looking for a scalp.
07:26 - 07:29
EN: They’ll also place a limit order to sell above this high,
07:29 - 07:30
EN: in case it kept going up.
07:30 - 07:33
EN: They’ll sell more here, expecting a scalp.
07:33 - 07:35
EN: They’ll sell more above this bar.
07:35 - 07:36
EN: They’d be selling over here.
07:36 - 07:38
EN: I don’t have it indicated, but they would.
07:38 - 07:41
EN: 3 bars down after a Buy Climax.
07:42 - 07:45
EN: Traders will sell above a bull bar, especially one with a big tail,
07:45 - 07:48
EN: betting that the best the bulls will get is a Trading Range
07:48 - 07:49
EN: - enough room for a scalp.
07:49 - 07:52
EN: They sell here, they buy back their shorts
07:52 - 07:56
EN: near the bottom of a potential Double Bottom at the Moving Average.
08:00 - 08:02
EN: They’ll also buy with limit orders.
08:03 - 08:07
EN: Fairly big bear bar, but also prominent tails top and bottom.
08:07 - 08:09
EN: They’ll look to buy at the bottom.
08:09 - 08:13
EN: Here we have an entry bar after this reversal – down and then up.
08:13 - 08:16
EN: Bulls will buy at the low of that bar,
08:16 - 08:18
EN: betting that the first breakout will fail.
08:18 - 08:20
EN: They’ll buy at the close of this bear bar,
08:20 - 08:22
EN: betting against consecutive big trend bars.
08:22 - 08:26
EN: They’ll bet that every time the bears try to get a trend, they’ll fail.
08:26 - 08:29
EN: They might get a couple bear bars, but they’re unlikely to get three.
08:29 - 08:34
EN: For example, 2 more bear bars – they’ll buy here, the close of this bar,
08:34 - 08:37
EN: betting that the bears will not be able to turn this into a trend.
08:37 - 08:39
EN: Consecutive bull bars – they’ll sell.
08:39 - 08:42
EN: Also, they’re selling at a prior high, looking for a scalp down.
08:43 - 08:47
EN: Here we’re trying to get a reversal down, but only a doji bar after 2 bull bars.
08:48 - 08:50
EN: You have to be very quick to understand what’s going on
08:50 - 08:52
EN: and to make the decisions and to place the orders,
08:52 - 08:55
EN: and you have to manage the trade quickly.
08:55 - 08:57
EN: You’ve got to make sure that your profit-taking order
08:57 - 09:00
EN: and your stops are in the right place.
09:04 - 09:06
EN: Traders will also scale in higher.
09:06 - 09:12
EN: For example, if a bear saw this pair of bear bars, prominent tails,
09:12 - 09:15
EN: Trading Range – they’ll place a limit order to sell at the high of this bar,
09:15 - 09:18
EN: but they’ll also be willing to sell more higher.
09:18 - 09:22
EN: The second entry has to be at least as big as a scalp
09:22 - 09:25
EN: because a lot of these scale-in traders are looking
09:25 - 09:27
EN: to take profits around their original entry,
09:27 - 09:31
EN: and they want to make at least a scalper’s profit on the second half.
09:31 - 09:33
EN: They get out breakeven on their first,
09:33 - 09:35
EN: and they get a scalper’s profit on the second.
09:36 - 09:37
EN: The same here.
09:37 - 09:39
EN: A pair of bear bars.
09:39 - 09:41
EN: It’s fairly low in the range to be selling,
09:41 - 09:45
EN: but traders might sell above its high, sell more higher
09:45 - 09:49
EN: - at least the size of a scalp above – expecting the market to pull back
09:49 - 09:52
EN: below the high of this bar, which it did right here.
09:52 - 09:56
EN: Then they get out breakeven on their first entry – they sold at this high
09:56 - 09:59
EN: - and then they get out with a scalper’s profit on the second entry.
09:59 - 10:04
EN: Part of the reason this reversed is bear scalpers were buying back their shorts.
Slide 003
Time: 10:10
Bilingual Transcript
10:16 - 10:18
EN: I talk about swing trades and scalping
10:18 - 10:21
EN: with stop orders in other videos, like Trading the Open.
10:22 - 10:24
EN: I’m not going to talk about that much here.
10:24 - 10:27
EN: I’m going to talk much more about limit order
10:27 - 10:31
EN: and market order trades in Trading Ranges and in Broad Channels.
10:31 - 10:37
EN: A Broad Channel is basically a Trading Range that’s tilted up or tilted down.
Slide 004
Time: 10:38
Bilingual Transcript
10:45 - 10:48
EN: When the market’s clearly trending fairly strongly,
10:48 - 10:53
EN: not much in terms of overlap, not much in terms of prominent tails,
10:54 - 10:58
EN: most traders will consistently make much more money if they swing trade.
10:58 - 11:00
EN: Look to enter early.
11:00 - 11:02
EN: A bear flag, a Low 1 bear flag – sell.
11:02 - 11:04
EN: Low 1 bear flag – sell.
11:04 - 11:06
EN: Up, down, up, down, up.
11:06 - 11:09
EN: A Wedge bear flag at the Moving Average – sell.
11:10 - 11:14
EN: We have a Higher Low Major Trend Reversal, 4 consecutive bull bars.
11:14 - 11:17
EN: Almost a bull bar here, 8 consecutive bull bars.
11:17 - 11:20
EN: Traders will look to buy either a High 1 or a High 2.
11:24 - 11:26
EN: Bear breakout with the bulls trying to have
11:26 - 11:28
EN: a bull flag here after this small rally.
11:28 - 11:32
EN: Instead we got a bear bar and a second consecutive bear bar,
11:32 - 11:33
EN: confirming the breakout.
11:33 - 11:35
EN: This is follow-through selling.
11:35 - 11:36
EN: Traders will sell.
11:37 - 11:39
EN: Here we have a Higher Low Major Trend Reversal
11:39 - 11:41
EN: and we have 3 consecutive bull bars.
11:41 - 11:42
EN: Bulls will start buying closes.
11:42 - 11:45
EN: They’ll buy the close of this bar, this bar, any of these bars,
11:45 - 11:48
EN: confident that the first reversal down will be minor,
11:48 - 11:51
EN: become a bull flag, and the market will resume up.
11:54 - 12:00
EN: If you take a sell for any reason, anywhere in here – even if you sell here,
12:00 - 12:04
EN: your stop is up here, the top of the most recent strong selloff.
12:04 - 12:07
EN: Every time you get a new breakout to a new low
12:07 - 12:11
EN: with a reasonably strong selloff, traders will tighten their stops.
12:11 - 12:16
EN: Once this bar closes, the bears who sold for any reason through here
12:16 - 12:18
EN: will lower their stop from here down to here.
12:19 - 12:20
EN: The same is true here.
12:20 - 12:24
EN: No matter where you sold – if you sold here, if you sold below that bar,
12:24 - 12:28
EN: if you sell below this bar – once you’ve seen 2 or more consecutive bear bars
12:28 - 12:31
EN: closing near their lows, breaking to a new low,
12:31 - 12:35
EN: traders will lower their stop to above the most recent major Lower High.
12:35 - 12:40
EN: It’s major because traders will consider the bear trend intact
12:40 - 12:42
EN: as long as it keeps making major Lower Highs.
12:42 - 12:45
EN: If it gets above a major Lower High,
12:45 - 12:49
EN: traders will assume the bear trend has ended and the market has evolved
12:49 - 12:52
EN: into either a Trading Range or possibly even a bull trend.
12:52 - 12:56
EN: Here’s a major Lower High, and the market rallied above it.
12:57 - 12:59
EN: We already knew that it probably was a bull trend
12:59 - 13:03
EN: before it got above that high, but once it does get above that high,
13:03 - 13:07
EN: the bears give up their premise that it’s still a bear trend.
13:07 - 13:10
EN: They assume it’s either a Trading Range or now a bull trend.
13:17 - 13:21
EN: If you are swing trading, you continue to hold your position
13:21 - 13:25
EN: until either your stop gets hit or until there’s a reasonable opposite signal.
13:26 - 13:29
EN: You could argue getting out at the bottom here makes sense.
13:29 - 13:33
EN: Three pushes down – one, two, three – a possible Wedge.
13:34 - 13:38
EN: A lot of traders will exit not above this bar, but above a bull bar here
13:38 - 13:42
EN: or after they believe the market is trying to convert into a Trading Range,
13:42 - 13:45
EN: forming a Higher Low Major Trend Reversal.
13:45 - 13:46
EN: A lot of the bears will exit here.
13:46 - 13:49
EN: Here, the bulls might exit here.
13:49 - 13:55
EN: Three pushes up – one, two, three or one, two, three, and a bear bar
13:55 - 13:59
EN: - knowing that a bear channel usually evolves into a big Trading Range.
14:00 - 14:01
EN: We have a spike, pullback, channel.
14:02 - 14:07
EN: We’re near the top of the channel and it’s a logical area for the bulls
14:07 - 14:11
EN: to take profits, and therefore if you have any kind of a Wedge Top
14:11 - 14:14
EN: and a decent sell bar, a decent bear body,
14:14 - 14:17
EN: bulls will take profits no matter where they bought.
14:18 - 14:22
EN: Just because bulls take profits, does not mean the signal
14:22 - 14:24
EN: is strong enough for the bears to sell.
14:24 - 14:26
EN: If the channel is tight like this,
14:27 - 14:29
EN: the bears will wait in general for a second signal.
14:29 - 14:31
EN: They won’t take the first signal.
14:31 - 14:35
EN: But the first signal, especially when the location is near the top
14:35 - 14:40
EN: of a possible developing Trading Range, is good enough for the bulls to exit.
14:40 - 14:42
EN: If the market resumes up, they’ll buy again.
14:46 - 14:50
EN: In the Emini, if a trader took this sell and sold the close
14:50 - 14:53
EN: of the follow-through bar after the bear break below the bull flag,
14:54 - 14:57
EN: it’s reasonable to exit on this reversal up.
14:57 - 15:00
EN: You have a small Double Bottom or a Wedge Bottom – one, two, three
15:00 - 15:03
EN: - and we’re starting to get Trading Range types of bars.
15:03 - 15:07
EN: Smaller bars, doji bars, prominent tails, and sideways.
15:07 - 15:09
EN: The strong trend might be ending.
15:13 - 15:16
EN: If a bull bought here – and as I said,
15:16 - 15:19
EN: a Wedge near the top of the channel, possible Trading Range
15:19 - 15:23
EN: - it’s reasonable for a bull to take profits here with 10 points.
15:28 - 15:30
EN: We’re starting to get smaller bodies.
15:30 - 15:31
EN: A lot of overlap among the bars.
15:31 - 15:33
EN: It’s entering a Tight Trading Range.
15:33 - 15:38
EN: In fact, you could call this whole 40 or 50 bars a Tight Trading Range.
15:40 - 15:43
EN: When there is no clear trend, many traders either scalp
15:44 - 15:47
EN: - experienced traders will do that – or they wait for the next trend.
15:47 - 15:49
EN: For example, a Higher Low Major Trend Reversal.
15:49 - 15:53
EN: Higher probability to buy after you see a series of bull bars,
15:53 - 15:55
EN: consecutive bull bars closing near their highs,
15:55 - 15:59
EN: but a reasonable buy here as well, a Wedge Higher Low.
15:59 - 16:01
EN: Bear bars, bull bars.
16:01 - 16:02
EN: Bear bar, bull bar.
16:02 - 16:03
EN: Bear bar, bull bar.
16:03 - 16:05
EN: Three pushes down to a Higher Low.
Slide 005
Time: 16:10
Bilingual Transcript
16:11 - 16:14
EN: I’ve been talking about a lot of scalps in Trading Ranges,
16:14 - 16:16
EN: in which you’re buying near the bottom,
16:16 - 16:19
EN: betting that the bear leg will fail and reverse up.
16:19 - 16:21
EN: You’re selling near the top, betting that the bull leg
16:21 - 16:23
EN: will fail and reverse down.
16:24 - 16:28
EN: Scalping in the direction of a strong trend is also a good strategy.
16:35 - 16:40
EN: One of the problems scalping in a strong trend is scalpers tend
16:40 - 16:44
EN: to take their profit and then take a break for a bar or two or three,
16:44 - 16:48
EN: and then they miss the next scalp, and they end up taking far fewer scalps
16:48 - 16:52
EN: than what you see on the screen, and they’ll end up making far less money
16:52 - 16:55
EN: than a swing trader when the trends are strong like this.
16:59 - 17:04
EN: When you’re scalping, you’re going for a small profit, and that means
17:04 - 17:08
EN: you need very high probability to offset the terrible risk/reward.
17:08 - 17:11
EN: For example, if you’re selling this close for a scalp,
17:11 - 17:14
EN: it doesn’t matter whether you’re selling for a scalp or a swing
17:14 - 17:15
EN: - your stop is still up here.
17:15 - 17:18
EN: A swing trader is going to hold for a big profit.
17:18 - 17:20
EN: The scalper is just looking for a little profit.
17:20 - 17:25
EN: A scalper taking that much risk for this profit in general is better off
17:25 - 17:30
EN: if he’s willing to scale in higher in case the market goes up near his stop.
17:32 - 17:36
EN: That’s one way to increase the probability to offset the bad risk/reward.
17:37 - 17:41
EN: Usually the risk is at least as big as the reward,
17:41 - 17:43
EN: and therefore you have to be winning 70% or 80%
17:43 - 17:46
EN: of the time for this to be a profitable strategy.
17:46 - 17:50
EN: That is very difficult for most traders to do,
17:50 - 17:52
EN: and therefore most traders should not scalp.
17:58 - 18:02
EN: A trader can consistently make a good profit scalping
18:02 - 18:04
EN: if he takes high probability scalps.
18:04 - 18:08
EN: There are not many that are high probability without proper management
18:08 - 18:11
EN: - for example, using wide stops and scaling in.
18:21 - 18:25
EN: For example, the bear who sold the close of this follow-through bar
18:25 - 18:29
EN: after the bear breakout has a stop up here – did not pull back very much,
18:29 - 18:32
EN: and here he can exit with 2 points profit.
18:32 - 18:35
EN: When you look at that, he sells here and buys back his shorts here.
18:35 - 18:38
EN: He made very little compared to the size of the trend.
18:39 - 18:41
EN: Also compared to the size of his risk.
18:42 - 18:45
EN: Not an ideal way to trade.
18:45 - 18:49
EN: Just because mathematically it might make sense to take profits here,
18:50 - 18:53
EN: does not mean that it’s the best solution.
18:53 - 18:57
EN: In general, going for the minimum for anything in life is a bad idea.
18:58 - 19:01
EN: Hoping to make minimum wage for your career is a bad idea.
19:04 - 19:08
EN: A bear who sells below here – a Wedge bear flag, a Low 3 short
19:08 - 19:13
EN: - Low 1, an attempt at a Low 2, and then Low 3 at the Moving Average
19:13 - 19:17
EN: - puts a stop above the top of the most recent major Lower High.
19:17 - 19:20
EN: We have a series of bear bars, 2 of them pretty good size,
19:20 - 19:22
EN: closing on their lows, and a new low.
19:22 - 19:26
EN: If this is still a bear trend, it should not get above a major Lower High.
19:26 - 19:28
EN: It certainly should not get above this Lower High.
19:30 - 19:32
EN: This is a reasonable location for a stop.
19:32 - 19:34
EN: This is a higher probability.
19:35 - 19:39
EN: In general, when you use a stop that’s further away, it’s not going to get hit
19:39 - 19:43
EN: as often, but when it does get hit you’re going to lose more money.
19:43 - 19:44
EN: Both are reasonable.
19:44 - 19:48
EN: Stop here at the top of the Wedge channel – one, two, three
19:48 - 19:52
EN: - or stop here, the top of this small major Lower High.
19:53 - 19:59
EN: If you take this trade 100 times using the tighter stop or using the wider stop,
20:00 - 20:02
EN: you’ll end up with about the same amount of money.
20:06 - 20:10
EN: A trader could buy this close, knowing it’s the third consecutive bull bar
20:10 - 20:14
EN: after a Higher Low Major Trend Reversal, and the market’s probably going higher.
20:14 - 20:17
EN: If he takes that buy, he has a high probability of making money,
20:17 - 20:19
EN: putting a stop down here.
20:19 - 20:23
EN: He could exit here – a 2 point profit, a small scalp
20:23 - 20:26
EN: - but when you look at the size of the swings on the screen,
20:26 - 20:31
EN: going for a 2 point scalp here and going for a 2 point scalp here
20:31 - 20:34
EN: just looks too small for the size of the risk
20:34 - 20:36
EN: and for the size of the profit potential.
20:36 - 20:38
EN: Most traders should not be doing that.
20:38 - 20:44
EN: Professional scalpers who do buy, exit, buy, exit, buy, exit, can do very well.
20:44 - 20:47
EN: Sell, exit, sell again, sell again, and then exit,
20:47 - 20:49
EN: and then just repeatedly sell.
20:49 - 20:51
EN: But that is very difficult to do.
20:52 - 20:55
EN: It’s very difficult to get out and then immediately get back in,
20:55 - 20:57
EN: or get back in a bar or two later.
20:57 - 21:02
EN: It sounds good, but it’s very difficult to do and very few people can do that.
21:02 - 21:07
EN: It’s much better, when you see a market having a reasonably good swing
21:07 - 21:12
EN: and a likelihood of having a swing, hold for a swing and rely on your stop.
21:13 - 21:14
EN: A bull scalper.
21:14 - 21:16
EN: We have a bull channel, a bear breakout.
21:16 - 21:18
EN: Probably will fail.
21:18 - 21:20
EN: High 1, High 2 with a bull bar.
21:20 - 21:23
EN: You buy above, exit with 2 points.
21:23 - 21:28
EN: That’s another example of a scalp in the direction of a trend.
Slide 006
Time: 21:30
Bilingual Transcript
21:35 - 21:38
EN: This video, I’m not going to be talking so much about the trends.
21:38 - 21:40
EN: I’m going to be talking about the Trading Ranges
21:41 - 21:45
EN: and scalping within those ranges, and during the transitions
21:45 - 21:47
EN: from a trend to a Trading Range.
21:54 - 21:57
EN: A lot of the time the environment is much better for scalpers,
21:57 - 21:59
EN: and most traders should not be trading.
22:01 - 22:04
EN: When the market looks like this, swing traders are not making money.
22:04 - 22:07
EN: They’re not making money here; they’re not making money here.
22:07 - 22:11
EN: They are if they’re holding, hoping for trend resumption – trend resumption up
22:11 - 22:16
EN: - but in general, these are areas where scalpers can make a lot of money.
22:20 - 22:25
EN: The tighter the Trading Range, the less likely swing traders will make money,
22:25 - 22:27
EN: and the more bars they have to hold
22:27 - 22:31
EN: while they wait for a trade to become profitable.
22:37 - 22:40
EN: For example, if you’re a bear holding short down here
22:40 - 22:45
EN: - let’s say you sold anywhere in here and you’re hoping for a profit
22:45 - 22:48
EN: - it’s still below the most recent major Lower High.
22:48 - 22:51
EN: We still do not have a credible buy signal,
22:51 - 22:54
EN: and therefore you end up holding for 10 bars, 20 bars,
22:54 - 22:57
EN: waiting for your premise to play out, waiting to make money.
22:58 - 23:00
EN: That’s just part of the game.
23:00 - 23:02
EN: If you’re a swing trader, that’s what you’re going to do.
Slide 007
Time: 23:05
Bilingual Transcript
23:06 - 23:09
EN: Scalpers look for Trading Range environments,
23:09 - 23:11
EN: and then they bet against breakouts.
23:16 - 23:18
EN: Here we have a strong bear breakout to a new low.
23:21 - 23:23
EN: Here’s the breakout point.
23:26 - 23:27
EN: Look at this.
23:27 - 23:30
EN: Look at the high of this bar and look at the low of that bar.
23:30 - 23:34
EN: Do you see what took place? The market went above the high of that bar.
23:35 - 23:39
EN: Therefore, pullbacks are going above breakout points.
23:39 - 23:44
EN: What does that tell you? It tells you that a bull who either bought this low
23:44 - 23:48
EN: and bought more lower could make money – he buys at this low,
23:48 - 23:51
EN: he buys more at least the size of a scalp lower,
23:51 - 23:54
EN: and then places a limit order to get out at his first entry.
23:54 - 23:58
EN: He gets out breakeven there and then with a profit on his lower entry.
23:58 - 24:02
EN: This is what I call a stairs pattern, whenever you’re in a channel
24:02 - 24:05
EN: - but the pullbacks are overlapping the breakout points.
24:05 - 24:09
EN: That tells you that traders buying below the bars are making money.
24:09 - 24:13
EN: It also tells you that the bears are taking profits below every new low.
24:14 - 24:16
EN: This is a good environment for scalpers.
Slide 008
Time: 24:20
Bilingual Transcript
No transcript segment aligned to this slide.
Slide 009
Time: 24:25
Bilingual Transcript
24:30 - 24:32
EN: As a trend goes on, remember the market cycle.
24:32 - 24:35
EN: Initially you have a breakout and then a channel,
24:35 - 24:37
EN: and then the channel gets flatter.
24:37 - 24:41
EN: It transitions into a Trading Range, and then either breaks
24:41 - 24:45
EN: in the opposite direction – here we have trend reversal – or it resumes down.
24:45 - 24:48
EN: You get another breakout and then another channel and another Trading Range.
24:50 - 24:54
EN: When you start getting stairs patterns, you know the bulls are making money
24:54 - 24:57
EN: in a bear trend, and therefore it’s the earliest sign
24:57 - 25:00
EN: that the market might be soon transitioning into a Trading Range.
25:05 - 25:07
EN: Some bulls will buy the low and buy more lower.
25:07 - 25:12
EN: Others, instead of buying the low, will simply buy lower,
25:12 - 25:15
EN: the size of a scalp or twice the size of a scalp,
25:15 - 25:17
EN: expecting the market to come back above the breakout point.
25:18 - 25:23
EN: A lot of scalpers do not do that until they see a stairs pattern.
25:24 - 25:27
EN: For example, would I buy below this bar or this bar?
25:27 - 25:30
EN: We don’t know if this pullback overlapped the breakout point,
25:30 - 25:31
EN: but let’s say it did not.
25:31 - 25:33
EN: Let’s say the prior low was here,
25:33 - 25:35
EN: and there’s a gap between this low and that bar.
25:36 - 25:38
EN: That is not a stairs pattern.
25:38 - 25:40
EN: We’re getting gaps, possible Measuring Gaps.
25:41 - 25:43
EN: Traders are much less willing to buy prior lows.
25:44 - 25:47
EN: However, once you see a pullback going above a breakout point,
25:48 - 25:50
EN: the scalpers start to trade.
25:50 - 25:54
EN: They start to buy at the prior low and lower, or they simply buy lower.
26:04 - 26:09
EN: If they bought that low and bought more lower, at least the size of a scalp,
26:09 - 26:12
EN: if it gets back just a little bit above that low,
26:13 - 26:16
EN: these scalpers will be able to get out with a limit order.
26:16 - 26:17
EN: They buy here.
26:17 - 26:20
EN: In case it just goes straight up, they’ll make a scalp and they’ll exit,
26:21 - 26:25
EN: and they’re willing to buy more lower in case it goes a little bit lower.
26:25 - 26:28
EN: It might go one times the size of a scalp;
26:28 - 26:30
EN: it might go two times the size of the scalp.
26:30 - 26:34
EN: They’ll buy more, betting that it’ll start overlapping breakout points.
26:34 - 26:36
EN: It overlapped a breakout point here.
26:36 - 26:40
EN: Trends tend to become weaker, and therefore you get more
26:40 - 26:43
EN: Trading Range price action, and the overlap tends to become greater.
26:45 - 26:48
EN: They want to make at least the size of a scalp.
26:48 - 26:52
EN: If they buy here and buy more here, they’ll place a limit order
26:52 - 26:54
EN: to get out breakeven at that low.
26:54 - 26:58
EN: They get out breakeven on this trade and with a profit on this lower entry.
26:59 - 27:03
EN: As I said, some bulls do not place a limit order to buy
27:03 - 27:05
EN: at that low and then more lower.
27:05 - 27:09
EN: They simply place the limit order to buy 1 point or 2 points or 3 points
27:09 - 27:13
EN: below that low, betting that we’re now in a stairs pattern
27:13 - 27:14
EN: and we’ll get above this low.
27:14 - 27:17
EN: They know that sometimes it’ll just go a tick below the low
27:17 - 27:19
EN: and rally strongly and they’ll be flat.
27:19 - 27:20
EN: They won’t be in the trade.
27:20 - 27:22
EN: But a lot of times they’ll take that chance.
27:22 - 27:26
EN: They see that it fell a couple points below this low here.
27:26 - 27:28
EN: It probably will fall a couple points below the low here,
27:28 - 27:32
EN: and therefore instead of buying at the low and adding on,
27:32 - 27:36
EN: just take the second entry down here and then scalp out with a profit.
Slide 010
Time: 27:40
Bilingual Transcript
27:46 - 27:48
EN: Here’s an example of what I was talking about.
27:48 - 27:51
EN: If a bull bought with a limit order at this low
27:51 - 27:55
EN: and he was willing to buy more lower – it never went lower.
27:55 - 27:58
EN: It immediately went up, so he did not have to scale in.
27:58 - 28:00
EN: He immediately got his profit.
28:03 - 28:06
EN: Exit with a scalp, betting that the market’s
28:06 - 28:08
EN: probably going to be in a Trading Range.
28:09 - 28:11
EN: He doesn’t know where the top of the range is.
28:11 - 28:12
EN: It might be simply here.
28:12 - 28:15
EN: However, he made his scalp and he’s happy to exit
28:15 - 28:17
EN: and then look for his next trade.
28:25 - 28:30
EN: I talk more about scaling into trades above prior highs and below prior lows
28:30 - 28:34
EN: for scalps in several of the videos: Trading in Tight Bull Channels,
28:34 - 28:37
EN: Tight Bear Channels, Broad Bull Channels, Broad Bear Channels,
28:37 - 28:41
EN: Trading Ranges, and in the video on Losing Because of Mistakes.
28:41 - 28:43
EN: I’m not going to talk too much about it here.
Slide 011
Time: 28:44
Bilingual Transcript
28:47 - 28:49
EN: Here’s a 5-minute chart of the Emini
28:49 - 28:52
EN: and then a 5-minute chart of the euro versus the dollar.
28:54 - 28:57
EN: Some traders scalp one of them, some traders scalp both.
28:57 - 29:01
EN: There’s a big difference between scalping in these two markets.
29:01 - 29:04
EN: Can you see what it is? It’s a very important difference.
29:08 - 29:12
EN: Most scalpers use charts that are 1 minute to 15 minutes long.
29:12 - 29:16
EN: Most scalpers – in general, most traders – should not be trading on any chart
29:16 - 29:20
EN: that has more than 20 bars per hour – in other words, a 3-minute chart.
29:20 - 29:22
EN: I use 5-minute charts.
29:27 - 29:30
EN: In the Emini, most days an average bar
29:30 - 29:33
EN: is 6 to 10 ticks tall on a 5-minute chart.
29:37 - 29:42
EN: The minimum scalp in the Emini is 1 point, and therefore the average bar
29:42 - 29:45
EN: is 50% to 100% bigger than the minimum scalp size.
29:50 - 29:53
EN: In a Forex market, the euro versus the dollar, 5-minute chart,
29:53 - 29:56
EN: most of the bars are 6 to 10 pips tall.
30:00 - 30:04
EN: But the smallest scalp traders should consider is 10 pips,
30:05 - 30:09
EN: and therefore most of the bars are smaller than the smallest scalp.
30:09 - 30:13
EN: Emini, most of the bars are bigger than the smallest scalp.
30:14 - 30:15
EN: That is critical,
30:18 - 30:22
EN: because in the Emini if every bar is bigger than a scalp,
30:22 - 30:24
EN: you can scalp on almost every bar.
30:25 - 30:28
EN: There are countless scalping opportunities in a chart
30:28 - 30:31
EN: where the bars are bigger than the smallest scalp.
30:38 - 30:41
EN: On the other hand, if you’re scalping on a 5-minute Forex chart,
30:41 - 30:42
EN: there are far fewer trades.
30:43 - 30:46
EN: A good trader can make money in any market.
Slide 012
Time: 30:50
Bilingual Transcript
30:51 - 30:54
EN: I want to talk a little bit about a scalper’s personality.
30:54 - 30:58
EN: Everyone is drawn to scalping when they start out because of two things.
30:58 - 31:00
EN: The risk is small.
31:00 - 31:04
EN: When traders start out, their greatest fear is losing their account.
31:04 - 31:08
EN: It’s their death of a dream as a trader, and therefore they’re drawn
31:08 - 31:12
EN: to trading styles that have smaller risk (in other words, scalping).
31:14 - 31:17
EN: However, to trade professionally as a scalper
31:17 - 31:21
EN: for year after year after year and to do it happily and profitably,
31:21 - 31:24
EN: you need a whole bunch of personality factors
31:24 - 31:27
EN: that most traders simply do not have.
31:27 - 31:28
EN: But don’t worry about it.
31:28 - 31:30
EN: You can make a lot of money as a swing trader,
31:31 - 31:34
EN: and most traders who make a lot of money are swing traders.
Slide 013
Time: 31:36
Bilingual Transcript
31:46 - 31:48
EN: This is a 5-minute chart of the Emini.
31:48 - 31:52
EN: The day session has 81 bars, and an average day has
31:52 - 31:57
EN: about 40 1-point scalps and about 20 2-point scalps.
31:57 - 32:01
EN: Scalpers will enter with stop orders, limit orders, at the market.
32:01 - 32:03
EN: They’ll use wide stops, they’ll scale in.
32:03 - 32:06
EN: An incredible number of opportunities to make money.
32:09 - 32:11
EN: These are all reasonable scalps.
32:11 - 32:14
EN: I’ll talk about the basis for most of these trades
32:14 - 32:16
EN: at some point over the next many videos.
32:17 - 32:21
EN: You can see the bears, lots of opportunity to sell.
32:21 - 32:23
EN: The bulls, lots of opportunity to buy.
32:25 - 32:28
EN: Nobody takes all of these trades, but a good scalper will take a lot of them.
32:33 - 32:37
EN: There are also many other scalps that I did not show.
32:37 - 32:39
EN: There are reasons to enter on every bar.
32:41 - 32:43
EN: If you look at the volume on a chart,
32:43 - 32:46
EN: every bar has a lot of contracts being traded.
32:46 - 32:49
EN: That means there’s a lot of trading taking place on every bar,
32:49 - 32:53
EN: and a good scalper understands the forces going on.
32:53 - 32:54
EN: They understand what the bulls are doing,
32:54 - 32:56
EN: they understand what the bears are doing,
32:56 - 32:59
EN: and they’re constantly trying to structure profitable trades.
32:59 - 33:02
EN: Where do I enter? Can I buy here, can I sell here?
33:02 - 33:06
EN: If I buy, where’s my stop? Can I scale in? Where do I get out?
33:11 - 33:13
EN: I said that a lot of beginners are drawn
33:13 - 33:15
EN: toward scalps because of the minimum profit.
33:15 - 33:18
EN: A lot of experienced traders are drawn to it
33:18 - 33:20
EN: because of the great profit potential.
33:20 - 33:24
EN: If you have 40 opportunities to scalp during the day,
33:24 - 33:28
EN: that’s 40 points, and if the range is 15 points tall,
33:28 - 33:31
EN: you’re making 40 points on a range that’s 15 points tall.
33:31 - 33:35
EN: You’re making more than twice as many points as there are in the range.
33:35 - 33:37
EN: Some traders can do that.
33:37 - 33:40
EN: Very few can, but those who can, can make a lot of money,
33:40 - 33:42
EN: and therefore they scalp.
Slide 014
Time: 33:45
Bilingual Transcript
33:47 - 33:54
EN: There are a few very good traders who scalp as their primary method of trading.
33:57 - 34:00
EN: Again, it takes a lot of experience to scalp profitably,
34:00 - 34:03
EN: and it also takes an unusual personality
34:03 - 34:05
EN: to be able to do it comfortably year after year.
34:10 - 34:12
EN: Trading has to be fun.
34:12 - 34:15
EN: If you’re going to be doing this forever, it has to be fun.
34:15 - 34:20
EN: Just because you can make money as a scalper, does not mean it’s right for you.
34:20 - 34:24
EN: If you feel stressed out and miserable doing it, don’t do it.
34:25 - 34:26
EN: Swing trade instead.
34:26 - 34:29
EN: Find a style of trading that suits your personality.
34:29 - 34:30
EN: You have to be happy.
34:30 - 34:32
EN: Life has to be fun.
Slide 015
Time: 34:35
Bilingual Transcript
34:38 - 34:42
EN: As I said, almost every bar has some kind of a setup for a scalp,
34:43 - 34:46
EN: and an extreme scalper might take 20 to 40 trades a day.
34:47 - 34:50
EN: Most experienced scalpers take about 10 trades a day.
34:50 - 34:52
EN: Some days they might take 20.
34:56 - 34:59
EN: If you are taking 20 to 40 trades a day,
34:59 - 35:04
EN: you’re doing manual high-frequency trading – again, extremely difficult to do.
35:04 - 35:06
EN: Extremely difficult to do profitably.
35:12 - 35:15
EN: In the Emini, the minimum scalp size is 1 point.
35:16 - 35:21
EN: Great traders can scalp for 1 to 2 points all day long and win 90% of the time.
35:21 - 35:24
EN: I’ve known many traders who have done that over the years.
35:27 - 35:29
EN: But very few can do it long-term.
35:29 - 35:32
EN: I had a friend who would look for swing trades every day,
35:32 - 35:34
EN: but he liked to scalp to show off.
35:34 - 35:37
EN: I traded with him online for years, and most of the days
35:37 - 35:40
EN: he would be going for 4 point trades, and then every now
35:40 - 35:42
EN: and then he’d say “Hey Al, I’m going to scalp today.”
35:42 - 35:46
EN: He would take a whole bunch of 1 point trades.
35:46 - 35:48
EN: He’d probably take 15 or 20 1-point trades,
35:48 - 35:52
EN: and I remember a lot of days in which he won on every trade.
35:52 - 35:56
EN: But he said it was too stressful, and it was not fun.
35:56 - 35:58
EN: He liked doing it to show off.
35:59 - 36:02
EN: There are fun things to do in life that you don’t want to do every day.
36:02 - 36:05
EN: You don’t want to climb the top of a tall mountain every day,
36:05 - 36:06
EN: but you do want to do it occasionally
36:06 - 36:08
EN: because it gives you a sense of accomplishment.
36:09 - 36:11
EN: Just because you can do something,
36:11 - 36:14
EN: doesn’t mean you should be doing it for your career.
36:14 - 36:16
EN: If you climb Mount Everest, you don’t want to be climbing it
36:16 - 36:18
EN: every two months for the rest of your life.
36:19 - 36:20
EN: It’s not fun.
36:20 - 36:24
EN: It’s fun the first time, but it’s not fun the fifth time or the twentieth time.
36:28 - 36:32
EN: In this video I talked about Trading Ranges as limit order markets
Slide 016
Time: 36:30
Bilingual Transcript
36:32 - 36:37
EN: - markets where scalpers take trades at the bottom, betting that it will go up.
36:37 - 36:38
EN: They buy at the bottom.
36:38 - 36:41
EN: They sell at the top, betting breakouts will fail
36:41 - 36:42
EN: and the Trading Range will continue.
36:43 - 36:46
EN: I then talked about the personality of scalpers.
36:46 - 36:48
EN: Most traders do not have the personality
36:48 - 36:51
EN: that would allow them to scalp profitably long-term.
36:52 - 36:54
EN: It’s simply not fun for most traders.
36:54 - 36:59
EN: However, if you are that rare person who can scalp profitably
36:59 - 37:02
EN: and you enjoy doing it, then it’s a good opportunity for you.
37:03 - 37:07
EN: Every trader, every swing trader, takes scalps some of the time.
37:07 - 37:10
EN: Not necessarily because they plan the scalp,
37:10 - 37:14
EN: but a lot of swing trades end up disappointing the trader
37:14 - 37:17
EN: as soon as he takes the trade, and he’ll scalp out with a small profit.
37:18 - 37:20
EN: Therefore, knowing how to scalp is valuable.
37:24 - 37:26
EN: I’m Al Brooks.
37:26 - 37:29
EN: This is the first of five videos on scalping.
37:29 - 37:31
EN: Thank you for watching the Brooks Trading Course.