Scalping: An Effective And Highly Profitable Trading Strategy (part II)

in this video we continue with part two of our highly popular series to introduce an effective and highly profitable trading strategy scalping hi I'm Mike bellifiore co-founder of SMB capital and we're a proprietary trading firm located in midtown Manhattan and I'm also the author of the trading classic one good trade and the playbook in this lesson for the trading community we teach in step-by-step detail with video of recorded entries and exits 3 scalp trades in Roku and Bhabha to help you grow your trading account [Music] last week we did a introduction introduction to scalping video and really what we were doing in that video showing you guys charts I was showing you guys the specific setups that I like to use in the high beta stocks I'm showing you how you know trend following with the mas showing you how to take those momentum drives in price you know and really how to execute the idea of scalping the most important thing about the previous video was how you know you really need to still have that context that can help you drive price when you're developing a trade idea you always want to make sure there's some wind at your back that'll help some real volume come into the stock and drive the price away from a key technical level for example so just to quickly review what we covered in that video you know we established that a scalp as a short term momentum trade with a very tight stop we want to make these trades ideally around a key technical level provides a clear movement of price when it's broken or held this works best in the high volume periods of the day you know first hour last hour this isn't really kind of strategy that you want to get locked into in the middle of the day and there's not really any volume nothing really driving price you know we can scalp along a trend if we have a develop system for doing so I mentioned in the last video some people use RSI trend lines I personally use exponential moving averages we want to see volume in the direction of our scalp that access confirmation we want this to happen quickly and if it doesn't happen quickly you know we get out of the position reading the tape is a vital skill in performing scalps and in this video we're actually going to go through and and look at some some tape so quickly to go over some of the tips you know things that we're going to be looking for in the box we're looking for acceleration at the speed of which the tape is changing bids and offers we're looking for a flurry of prints in the time and sales window in the direction of our trade we're looking for a rapid movement and price away from the area we're interested in and then you could also make trades based off of large size at a technical level there aren't going to be any examples of that in this video maybe we'll do that another time okay so you know going off of that these are going to be real trades that I took last week I'm going to set up the arts for show you how the trade worked out how its set up and then we'll dive into the real-time tape okay so the first trade actually two of the trades are gonna be in Roku the daily charts gonna set up the same way for both of them in recent days you know past month two months three months this is the daily rope who's been kind of in this down trending channel had an explosive day up you know has earnings today after the close so this week they're having some drives in price setting it up for its earnings you know we don't know how they were gonna report yet but we had this big explosive day we'll see a trade from that day and then a second day gap and go here's the hourly chart and how that set up big explosive day from the bottom of the channel breaks out from the channel gap and go another really strong day so the first one we're gonna do is a trend follow scalp I wanted to start out with this one because I feel like this is kind of easier for traders when they're first starting out you know a lot of the trades I make in scoffs or really quick momentum drives in the morning and often times as a new trader you can hit in really quick and get spooked by how quick the tape is moving and not really be calm and let the trade work out for you so this is gonna be a nice example of you know I put and put a bid in I was trading against the 55 EMA I like to use that as my confidence level you know put my bid in tags 255 EMA drives away from price and I take it to new highs alright so quick pause here just to go over some things that you know people watching might not really understand I talked about my color gradient in the last video so obviously bid-ask have it layered down in colors I like the brightest to be the current bid and ask you know time and sales anything done on the bid is gonna be in red anything done on the offer is gonna be in green anything between it's gonna be pink and obviously my chart here just has vu app on it I don't have the EMAs on this chart I'll kind of talk you through where they are I use thinkorswim they're on a different screen so right away at this point the 55 EMA is at 130 206 so I'm throwing a bit in looking to get filled around that area once I get filled there you know my stop is essentially if 132 drops in any type of way you know if the way I get a clothes underneath that 55 EMA I'm gonna get out but at this point you know put my bid in if I get filled I get filled and then I'll look to try and see how it develops look to see if I can take this to new highs so I got filled for to tears right there you know this isn't going to be a really quick moving tape right away later in the day it's about 1:30 it's not doing a ton of volume it just kind of tag that area they're not really hitting the bids there's not really any selling it's kind of just hanging out if you want to learn three real-world setups that our traders use including the simple setup that we teach all of our new traders and the setup that turned one of our traders into a seven-figure big money earner check out the free webinar that we're currently running just go ahead and click the link that should be appearing right now at the top right hand corner of your screen that's gonna open up this free registration page in the new window so don't worry you're not gonna lose this video you're gonna learn more in a couple of hours from this trading workshop then from years of online education so why do I see a little bit of movement away in price back up one thirty to twenty you know now I'm you know twenty thirty cents and the money now I'm looking to get an idea in my head if this happens quickly and we get a big extension up from the 55 maybe dish a little bit out see if we can hold the nine in the 21 and then start to get a little bit more sophisticated with how I'm managing my position with the overall idea that I think this is going to go to 133 minimum so I'm layering some offers up you know taking some tears out again I'm gonna hold a smaller core you know I just got 40 50 cents additionally so I'm out generating cash flow around the 9 and 21 EMA if it pulls back in I'll put some more size back on and then keep in mind that I'm playing - at least take my core of one tear up to 133 it's a nice little reaction there 50 cents a little bit of size not really anything I'm too interested in you know it's not like it's been really developed as that hard as a technical level yet I'm more interested in the highs 75 cents perhaps so I'm back down to just a core so at this point you know it's spending a little bit of time here you can see a lot of prints start coming in now it's skipping above 50 cents it's into the 60s the high of the day is 77 cents so now in my head I'm hitting quickly here I added another tear you know we're breaking above the high that we just made before we pulled into the 55 I'm up to two tears again looking to see what happens in 133 already you can see the volume coming in here is very nice highest volume we've seen since the previous drive up I have in my head this is definitely gonna probably extend this move a little bit we're making high of day so now just for my own sake this is getting a little bit of an extended candle now I'll dish some out ahead of 133 see if we can break so oftentimes what you'll see happen is you'll see a stock come up to a whole number there'll be a ton of size on the offer there and it'll need to retrace sometimes it could be like a 50 60 cent retracement maybe it retraces this whole move and fails but considering we tagged 90 cents then pulled in a little bit you know let the buyers reload in the low 80s I took those offers out ahead of 90 cents now I'm thinking that we're gonna break it was kind of overthinking it you know what are the odds we'd make a 13-cent new high or 23-inch cent new high and fail from 133 markets strong just doesn't really make any sense so instead I actually added another lot for momentum as soon as I could kind of tell that they're about to break it so you can see it's stalling at 90 cents a lot of green prints coming in you know no red prints on the side they're 96 cents I add another lot you could see the size at 133 but given the context of the move I'm not really thinking that 133 is gonna hold maybe it has like a 10 cent pull in 15 cent pollen you know I'm not trying to overthink it too much you know I'm essentially long from quite a bit away you know this is what you call being in the driver's seat you know when stocks trending nicely and and things are going well there's not really too much to think about here and I have a momentum lot on I'm not kicking the momentum lot on unless the high of day drops this gets back underneath 70 cents just looks like buyers need to reload real quick so a little bit of a pull back to underneath eighty three bids instantly still not trying to overthink this too much making sure this 70 cent area is holding bidding it back up you can see there's no volume on any of these Poland's no so I'm still not trying to overthink it too hard now we're back up into this 90 cent area you know I want to see some good bids I want to see the tape speed up see it flurry into this move and see if we can get a nice break about 133 you know I'm still I'm still holding I'm up to the maximum amount of Tears I don't want to be in for this trade at this point so I'm putting some offers up above 133 you know sometimes you flurry above the whole number and then they trace it back down considering I'm scalping at this point I want to be pretty quick you know another quick note to mention while we wait for this to break see a lot of guys scalping on like you know two or three-minute time frames and that's possible too it needs to be around a technical level just so we get the nice break through 133 if you think about I've only been in this trade for 10 minutes you know that's is still a scalp you know I'm not holding this all day my average trade here is probably gonna be less than 15 minutes so I think I layer some offers up here get taken for to tears there on the spike up to 130 320 you know layered them out all the way up through the thrust now I'm looking to see if you get another drive forward took out a half a tear up there now I just have a half a tear trailer on sometimes you walk into you know a little bit better betrayed than you expected for the scalp for me I like to leave on maybe a quarter or like a sixth of my size basically what ends up being like half a tear depending on how big I got and just let that go especially if the trends moving really nicely and then just put a stop underneath the 55 EMA and go and do other things any questions about this one before I move on cool yes you know these examples are gonna be super self-explanatory you know you want to buy bit you want to set your set your bids in you know be really diligent about your prices now this next one is gonna be you know a great example of what I like to call dip and rip so we've gone over there's so many times in the morning meetings you know I'm looking for a stock that has a relatively tight pre market range you know it's just so happens to be the next day in Roku so think about it the day before very strong stock gapped up any type of you know kind of spooky moving them in the early morning to get anybody bought in the pre-market out as soon as that gets back into this pre market range breaks the pre-market hi you know I'm gonna hit in for momentum so essentially what ends up happening is see it dip gets back up breaks into this area I hit in one lot then I hit in two lots and I take those Lots up into for a nice quick moment to move and then again I just leave on a trailer that ends up trending nicely for me later on so this one would be a little quicker keep everyone on their toes so right away Roku has already done the dip it's gotten back above 136 and right away I'm seeing it come in the pre-market highs 13650 I'm already in before then giving a kind of a second here you know it's really fast as soon as it breaks above 13650 you know this story it's working you know I mean the money I don't really have to worry about anything breaks 50 cents you know not really any size they're already 60 70 cents and the money so at this point I'm in the driver seat you know puts in that a quick initial high at one thirty seven thirty not really thinking too hard about it you know maybe I'll take a tear-off ahead of there just to kind of lock some in then let a full tier kind of trend a little bit further you know this is happening in less than you know a minute very quick trade that's how these will set up on the open so I'm still in my two tiers it's coming up towards 138 you know I want to move this quick like to dish some out around a whole number so I'm putting some offers up so get filled on some up there still holding a tear see if it can break that one 3770 seeing some size come in at the 50 cent area you know not really thinking too hard about that it's so easy to think you see things on the tape but when you have momentum like that like this thing just went what a dollar and a half above the pre-market high instantly you can see that candle right there's what two points so there's a lot of wind at my back here I'm not really too worried about you know where my stop is or do I have a trailer on like do I leave some on I'm just letting the trade work sitting back riding the momentum until it stops so at this point I'm down to one tear I got some out ahead of 138 luring some offers up for another half tear nice little thrust up here you know again I'm putting an offer out ahead of 139 really nice drive there and ask the extra dough should happen now in diamonds cells if you should start thinking about the whole position so what are you asking what do I need to see in the time and sales that would get me to hold everything I have I'm not really gonna go off the time in sales anymore the time in sales is what I'm looking to see on the original break of the technical level the time and sales are a lot more important later on in the day if I'm looking to see new momentum come in so for that first example I'm putting bids in you know I'm looking for two for there to be a kind of curl and a drive away in price that's what I want to see the time and sales speed up see how much green there is there's only one two three four five red prints there like that's what I want to see in that example but for this example considering the price is what's guiding me and the speed of the tape you could see how the bids and the offers are just scooting up really fast it's not staying anywhere for too long at that point it's probably gonna be kind of impossible to read the time in sales you know if we went back really quickly you know and you look at the time in sales here like I you know I'm seeing a lot of green but I can't see what prices those are at you know I'm also watching the tape you know I just know you know out of my peripheral vision that there's a lot of green getting printed and I'm not too interested not too worried about this move slowing down and I also have a feel for the stock of a pretty good idea that there's gonna be strong momentum here you know the tape is skipping prices all over the place the spreads always tightening up towards the offers so you know I'm not really too worried about what the time in sales is doing and I have a plan so my plan is like around every whole number I'll take a half tear off I know the ATR the stock I know what to expect in this type of a move you know it's ripping up into I think there's not really resistance at this time until maybe like 142 so I have in the back of my head a price target that I want to at least bring my trailer to but as far as scalping goes for momentum as soon as I see the tape start to slow down around any type of offers or something like that I have to be out because in this particular instance you know if you look at this stock here this stock could pull all the way down to 130 650 and then bounce but that's going to be a new trade for me I want to be out of most of my size up there so if it pulls back into 13650 I can put on a new trade with a new stop targeting a much higher price later on but considering this happened these are two minute candles actually this is one minute candles one two three four five it's been five minutes and I've already gotten you know almost five points out of the trade you know I'm good on that you know I don't really need to be a hero here there's other things moving you know I have an entire rest of the day left I'm okay with taking my chops there and maybe letting it set up when he's great right right exactly exactly once you are in the trade you're just yep yep going by my plan putting out offers where I expect the price to to go to and then you know not overthinking too much of what happened what's happening on the tape at that point yeah so you know that's essentially the end of this trade I get back down to a trailer lot like you saw in the in the chart it spends a lot of time hanging out up here you know I ended up building into another position here you know that's I started position trading off of the feeler so you know you always got to have two different plans my scalping plan is for momentum I'm gonna take big size I'm gonna be out of it quick and then depending on whether or not it holds up maybe it Flags maybe it makes some type of wedge up here then I could start a new trade put on more size have tighter risk and it's not so much of a I need to react quickly okay so the last trade is gonna be kind of a similar idea and that I'm looking for momentum early but what happens here is Baba had you know this is the hourly on Baba was kind of pulling in a little bit on the hourly and then was gapping up after you know closing in the middle of its range the previous day comes up in the morning it was kind of opening towards the top of its pre market range big selling comes in early you know big volume pukes it all the way down to the bottom of the pre-market range Spike's up a little bit comes making some marginal new low and then starts to really tighten up here under view app so this is a pattern I like for a potential squeeze play you know on higher time frames I was expecting Baba to kind of have a stronger move you know if we really dived into it what was it selling off on the market wasn't really necessarily weak you know I'm thinking that anyone who's looking to short you know short the bounce short the bounce they think it's gonna trend down today they think it's really gonna have a super weak day the opening drive lower you know fail from vu app now it's pressing against vo these are such great prices for me to get short get short you can kind of see the volume just really die off as it doesn't hold this new low first warning sign if you're trying to trade this short you know they couldn't push it down with more volume they couldn't hold it down and it instantly is retracing back up here so in my head I'm thinking all right as it wedges you can kind of see this nice trend line it puts in it tightens and tightens and tightens and tightens if it breaks up above this level I think it ends up being like 40 or 50 cents on the whole number when that breaks through that's going to be my trade to get in I'm going to look to see if it has a strong driving price I'm gonna look to kind of take my size let it sit in and see if there's any type of big drive in price so you can see what ends up happening is takes it out small little retest no volume on the down move and then that rips all the way up to 220 so the first two camels right like it hits baby no I'm gonna beginning that right at yoga mmm playing so it also hits like the pre-market though no yep so why we not buying this yeah the reason for that for me in this particular instance I don't like when the pre-market range is really wide so you can kind of see the pre-market range here I think ends up being like you know almost three or four points that's kind of too wide for me I'd like it to be you know less than a quarter of an ATR so if this was like a let's say just this was the range and it peaked underneath here and then started to go that would get me interested in that type of idea but we have to think about is this just had a really solid down move you know three and a half points in a minute that type of down move is a little bit too much for me to think it's gonna reverse the whole thing right away I'm thinking it's gonna need to spend a little bit more time I might not even be trying to take it to new highs I might just be thinking you know I can get to squeeze above view app maybe it takes out this candle and fails up here somewhere or maybe consolidates up here after it bounces but it's a little bit of a different trade just because the selling pressure early is a lot more aggressive than what you saw in Roku Brookwood kind of dip down a little bit and then instantly got back up sat there for a second and just ripped you know way less of a down move no volume to the downside this is a completely different situation it ran the entire pre-market range in one minute and the pre-market range itself was almost an ATR so that kind of has to get you prepared for it might need a little bit more time so you can see Baba has this down move you know dips all the way down you know big move there takes out the entire pre-market range the pre-market range is relatively wide it looks like there was some buying swipes the whole thing but never really shows severe weakness so in that instance you know I'm looking to buy this break and I'm really targeting just for it to you know quick scalp up to here and because I have a smaller target range and a tighter stop I'm gonna get bigger in this particular trade you know then I did in Roku where I don't really have time to see where exactly my prices I'm just paying for because there's so much wind at my back then I'm gonna be one two three points on the money right away and if I have enough sighs where maybe I lose a point if I'm wrong if it you know collapses if I lose a point I can get out quickly it's not gonna damage my day too much if I'm right you know risk a point to make five yeah that's that's why we're in the business that's what you're looking for mm-hmm okay so for this bah-bah trade you know kind of see that you know this forty cent high forty cent area you know we like to call any type of like sticky offers we like to call that being heavy on the tape you know that means that every time the price moves up to that area on the offer they just hit it back down you can't really get the price to go above you know you get a quick 30 cent down move back to the low to 18s now you can tell that you know they're pushing this down they're not letting this thing get above to 1850 you know again gets to the mid forward mid 40s you know wicks back down 20 cents so right away I'm starting to think okay you know picture a balloon underwater if you take a balloon you hold it underwater as soon as you let go it flies right through so anytime you have a lot of upward pressure stocks really worked the same way anytime the selling pressure keeps selling keep selling but the buyers are holding it you know eventually you get this equilibrium as soon as one side gives up you're gonna get explosion in price to either direction so in this instance given the fact that it never really you know took out the pre-market low in any meaningful way you know not really seeing any volume continuing to the downside I'm thinking that you know this might be that type of situation so obviously if I'm thinking that it's gonna break to 1850 I want to try and get in you know towards 2:18 be a little bit anticipate Ori you know I have a general feel for how Bob is gonna trade you know I want to be in from the bottom of this wedge that way I have a little bit more room to add another lot above to 1850 keep my price is going correctly you know I don't want to be the guy buying the top of the range then we quicks back down and I have to hit out that's like you're losing the spread so I'm trying to be patient with the way that I'm doing it you know really trying to make it so I'm in a great position if it breaks about to 1850 and doesn't really explode away from price considering you know we still have all this downside momentum that started a day you know I'm not expecting this to break and instantly be above 219 you know maybe it gets back up consolidates has a little bit of a pull in back to this 50 cent area and then goes so I'm in I'm in like two tiers at this point oops you know being anticipate Ori you can see it's sitting at 50 cent evenly you know we're really tightening up here at this point if it breaks 50 cents you know this trade is now really in play got great prices I'm already in the money I can hit another lot so I'm preparing myself to hit another one I'm still kind of holding it right there you could see they gave up 50 cents and let it go 51 52 53 now I'm thinking all right that offer at 50 cents isn't sticky anymore you know there's not a real seller there next time this goes through it's probably gonna skip 15 cents right away boom right away we're in the 60s I had another lot through there so at this point not really seeing the volume I wanted to see to take any out or think that I'm gonna get a big trade so right away you know dishes back underneath 50 Cent's no volume yet so I'm not really too worried if I had hit that lot above 50 cents which I did and that was my only trade I probably would have puked this right away and not been in but since I established the core from a little bit lower all I did was just take out that momentum lot but I'm still in the original trade really on that break of fifty cents I wanted to see it get to 219 quickly and since it didn't do that I got back down to two tears instead of three tears you know so now I'm in a decent position still this point don't need to overthink it too hard gets back above that area take a little bit off ahead of the whole number you get a nice move two to nineteen breaks through to nineteen not really any size there but you can see it's kind of struggling to really expand and you're not seeing any big volume come in so at that point I want to be diligent you know trim all the way back down to one tear and if it pulls back into to 1842 1850 get all the way back up to three tears if it drops this you know twenty-five thirty cent area I'm out of the trade maybe this is just an opportunity to reach short so it's acting nicely has a really shallow pull in you know they can't even get this back to fifty cents as soon as you see it rebate back about two nineteen I put a momentum lot on so now I'm back up to two tears didn't have an ability to get back to three tears because it didn't go all the way back down here really shallow pull in oops you know that you know general rule of thumb if you have a break in price and they're not really showing the expansive candle yet and has a little bit of down move that retraces instantly you're probably about to see that balloon underwater effect happened a little later but you know at this point I'm already a dollar plus and the money so that momentum lattice is kind of like a freebie definitely thinking it's gonna break this area you know thinking in my head it's probably gonna go to 220 try to get at least a tear and a half up there I think I dish out a tear or half a tear somewhere around this 50 cent area you know some nice candle to the upside took off half a tear now I'm gonna tear and a half see what it does at 220 you know big failure happen they're thinking it might need to consolidate ahead of it if it spikes up they're right on this candle the big size on the offer I'll probably get all the way back down to a half tear as you can see we're coming up to it you know decent size there never really gets up there yet you know kind of seeing how it does right at 220 see all these green prints coming in and they can't even get it to to 2001 so you know right away I'm thinking okay maybe it's actually there's legit sellers here they actually might be able to hold this down see still big green prints coming in can't get above can't get above really holding it this would have been a great round number scalp this time so one example I've seen where it works and recent times yeah I got smoked in that bobble yes so I will say that Baba likes to be a sticky sock it likes to go to these whole numbers especially big psych levels you know the corridors to 25 to 20 to 10 200 it likes to you know have these crazy like 40 50 cent rejections from those areas so I know that ahead of time so as soon as I see it fail right here all the way back down to half a tear you know if we go and look at the chart stalls at their stalls it there and then we got in big 50-cent pull in they try and spike it back up and it just gets smoked again so I actually got out of that last half a tear that I left on to see if it would break once this candle kind of broke down from to 1950 you know out of the position maybe it needs some time maybe it needs to consolidate somewhere it becomes a different trade it's no longer the scallop as soon as you see if slowing momentum you know against the direction you're in the trade you know you don't have to overstay you don't have to be a hero buys this buys this buy into view app try and get bigger try and get bigger you know the trade has changed you have to have your plan stick to your plan that's a great example of what can go wrong if you don't do that all right those were all three examples any other questions yeah I'm just gonna I'm just gonna hit the bids yeah especially in a stock like Baba where you know if it's not having a big momentum driving price you're probably only gonna have like a two three four cents bread not too worried about a about taking that just trying to get out just a scalp you know already made point a half on the trade I'm good now it's your turn do you use a scalping strategy in your trading if so please share the type of scalp trades that you make let us know by leaving a comment below right now

Channel: SMB Capital

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Keywords: scalping trading strategy, scalping trading strategy crypto, scalping trading strategy stocks, scalping trading, scalping trading live, scalping day trading strategy, scalping day trading, scalping day trading swing trading, scalping stocks day trading, scalping techniques day trading, scalping thinkorswim, scalping vs day trading, day trader scalping, day trading scalping live

Id: Hnq8-iSHuL0

Length: 34min 35sec (2075 seconds)

Published: Fri Feb 14 2020