Scalping Was Hard, Until I Used This Strategy (In-Depth Guide)

how many of you ever entered a position for you to stop out for a loss and then a few minutes later if you did not stop out that trade would have worked and you would have made profits on it now scalping was very difficult until I started using this strategy and started to see the market from a different lens and in this video I want to break down how I view the market using this strategy and how I'm able to successfully scalp because of it I see a lot of Traders scalping with the the wrong approach and they are simply entering the market on a position that they should not be entering based on the trade they are looking to open so we must look at the market differently especially if we're day trading or scalping using the strategy and without further Ado I want to break down the first point which is looking at the market as an auction if you view the market as an auction understanding that the stock market is relatable to like real estate car cars watches and buyers and sellers are focusing and buying and selling based on whatever price they are comfortable paying so start looking at the stock market as an auction place and understanding that its main objective and the main function of the market is simply to advertise price to what participants and facilitate trade to know if buyers or sellers are willing to pay that price of whatever the market is advertising if we can read the market Market auction and understand how strong buyers are how strong sellers are this is where an edge formulates for example if we are looking to Long the market above a key level and there is weak action from buyers meaning buyers are not willing to pay as the market goes up and buyers are getting weaker and weaker as the market moves up that may be a sign of weakness in the market where us as Traders looking to open up a long position would not be the best option so now looking at this on the left side we have a standard Candlestick chart where the market made a high around 4370 and in this example made a low around 4353 that is a normal Candlestick chart and why candles develop or how they form is simply by understanding volume being transacted at that price because we have upper Wicks on a candle that means the market came to those prices and closed much lower because we have a very large red dropping candle to the downside that means selling brought the market aggressively lower now this is important because the candlesticks essentially is the picture that the market is painted but if we were able to read the Market's auction we can know what type of material the market is painting with what color paint is it painting on the canvas is it going to last for a while is it going to be short term is it going to disappear is it permanent and understanding how the market Works via its auction will give us the clues about the market that will provide high quality opportunities to buy and sell so on the right side of this screen here we have a tool called a depth of market and what this shows is enough information alone to put a valid trade on or a valid reason why I should buy and sell now briefly getting into this the the market simply moves up because there are more aggressive participants than passive participants the market moves down because there are more aggressive sellers than passive buyers now reading a depth of Market we can understand this information because a depth of Market will show us passive orders and it will show us completed transactions and the data that gets portrayed on the depth of the market or a normal level two or time and sales will also be shown by what the candles are doing on the charts there are no such thing as more buyers than sellers more sellers than buyers but there is a such thing as more aggressive buyers than passive sellers at that price because that's what makes the market move up so think about it for a second if the market is moving lower wouldn't we want to know what's going on in the auction to understand if sellers are truly strong or buyers are just simply looking to buy at lower prices understanding that simple concept will help us take better trades if we are looking for breakdowns or reversals especially short-term scalping so looking at this chart we could see the market putting in lower highs and also putting in sort of a double bottom wedge pattern and if the market is breaking below our pattern and we are looking to play the market short or be a bear and sell the market wouldn't it make sense to see how strong the sellers were as the market was moving lower before entering that trade remember what I said earlier the market moves down if there are more aggressive sellers than passive buyers and the market moves up if there are more aggressive buyers than passive sellers the first way we can gauge this is simply by looking at volume by time this shows interest in the Market at that specific spefic level by time strong volume at a specific time shows the Market's auctioning lower or higher and the high volume shows there is an increase of interest in the market and a lack of volume shows there is a lack of interest at that price so if the Market's breaking out the Market's breaking up or down ideally you'd want to see high volume by time confirming your breakout that's why you hear a lot of people say I want to wait for volume confirmation and I will say volume by time in this example right here is not as important as volume by price will be volume by price will be the most leading indication there is in the market and my favorite tool to do this is a conventional level two and time and sales and a tool such as a depth of Market will show us this information but in a Consolidated way now briefly trades that get facilitated or trades which hit the bid are aggressive sellers aggressively selling into passive buyers trades that hit the ask or the offer aggressively are aggressive buyers buying from a passive seller when buyers and sellers come to an agreement that's when we get a completed transaction so on this depth of Market here a majority of platforms off for this tool we're going to see very key and important information for me that completely changes the way you will view the market if you view the market as an auction and not view the market simply by just candles moving up and down on a depth of Market we are going to see volume by price so this First Column you see here VPS is a volume profile to the sell side everything in red shows aggressive completed transactions at the bid so if we were to look at this price at 435150 there was 24 Lots or contracts traded on the bid which represents 24 aggressive sell orders getting transacted to 24 passive buyers at 4351 so it shows us volume by price structurally on a profile VPD is a volume profile buy column which is essentially aggressive participants buying on the ask to someone who is passively selling on the ask remember aggressive hits a passive for a completed transaction so now we're going to be able to see at what specific price are there more aggressive sellers are there more aggressive buyers are they about equal and how the market is advertising price and how it's facilitating trade based off of that price it's advertising we're also going to be able to see liquidity at Price which are these dark shaded columns the dark blue column is the level two of passive buyers and the red column that's fully shaded in is passive sell orders on the ask or offer that's our level two data the numbers the two columns in between the Shaded ones are recent trades down at the bid recent trades at thees those essentially are like your uh time and sales which is Consolidated and it's going to show recent trades we obviously have price we have a SVP which is a volume profile combining all the ask combining all the bid into a Consolidated profile that's going to give us one numeric number showing the structure of volume for the day or the structure of volume by that price and then the most important aspect to this scalping strategy is the speed the tape you are not necessarily going to be able to see how fast the tape is moving how much volume how much interest is coming in solely looking off of a chart however looking at a Consolidated level two time in sales we're going to be able to see how fast the tape is moving think about this if the tape is moving fast that must mean there's a lot of volume coming into the market if there's a lot of volume coming into the market that means there's a lot of interest at that time where at that price so a fast moving tape indicates high volume which indicates High interest a slow moving tape means a lack of interest and a lack of volume now the next column we're going to see here is a VPD column and this is the most important aspect to this scalping strategy because Delta is very important for how I trade so what I like to look for is a Delta and essentially what you do to find this is you subtract ask volume minus bid volume it's the difference between ask and bid a positive Delta means there is more aggressive buying and a negative Delta indicates there is more aggressive selling as you all know the market moves up if there's more aggressive and the market moves down if there is more aggressive sellers so this VPD column will show a Consolidated Delta by that price so looking down at the lower column at 43515 we saw earlier there were 24 contracts which hit the bid meaning 24 aggressive sellers hit the bid to 24 passive buyers because this transaction was aggressive and hit the bid indicating aggressive Sellers and there were zero transactions on the offer we have a negative Delta of minus 24 at 43515 now looking one above that 43517 322 contracts hit the big while 235 hit the offer if we subtract ask volume minus bid volume 235 - 322 is going to give us- 87 so that means at that specific price for that day there was a negative Delta of minus 87 contracts VPD volume profile Delta is the most leading indication for me and this scalping strategy now also we're going to have what's called a a Delta footprint and this is a custom indicator that I made on Sierra charts other platforms also will offer very similar footprint charts but I like using a footprint that coordinates Delta because it gives me a better visual what we're going to see here is the middle column is the total volume so you can look at that almost as a volume profile by that price the left column is a Delta profile and it's going to coordinate or color coordinate blue meaning positive Delta and red being negative Delta and this is going to give you a better visual other than standard depth of Market this is now going to coordinate the footprint by a range or by a Time whereas ad depth of Market is more cumulatively so how I use this Delta footprint similarly to how I use Delta on ad depth of Market is I am looking for where there are aggressive participants putting pressure on on the market or where there are aggressive participants being trapped where there is absorption because that's where majority of reversals come from now the first trade example is what I call trap Traders or absorption it's the best setup that I love to look out for it works very well for short-term momentum scalps and I am essentially looking for where there is a lot of aggressive participants entering the market at a specific price but there is no follow through because that's an indication of a possible reversal if there's a lot of participants trying to buy the market at a higher price but the market is not moving higher that tells me that somebody is quietly selling the market to all those buyers and if there is no upside follow through with tons of aggressiveness that's an indication the market may move lower to advertise price that's the main objective to advertise price lower to facilitate trade to those buyers with proper contact next those buyers can become trapped if the market moves lower and this is where we gain our Edge and it's very very powerful with the proper context because that's a key aspect to this strategy as well in this example off of a Candlestick chart we see the market in the first minute of the opening bell had an aggressive sell-off lower and after that we put in lower lows and lower highs I highlighted this opening candle because it was very strong drop with strong volume by time and the market in that range moved about seven points lower now I want to know what's going on behind the scenes remember what I mentioned earlier the market simply on a Candlestick chart is the market painting its picture on a blank canvas now we don't know what type of paint it used we don't know the color we don't know the material and that's where orderflow comes into the picture because I want to be able to read what's going on behind the scenes of those candles looking at this Delta footprint chart as we could tell by the first bar here where I'm hovering my cursor over the market opened up and had a very aggressive selloff with high volume near these highs around 4369 to about 4371 high volume at the high and then the market aggressively sold off on lower volume with continuation of lower lows and lower highs now this became an important level of Interest because about 20 30 minutes after the market rallies back into this general area where we see this high volume positive Delta of 400 Lots 370 minus 340 just a general area of high volume however the key point to this is the market rallies back into this level with tons of aggressive buying and there was a lack of follow through how do I know there is aggressive buying well looking at this Delta footprint chart you can tell in my highlighted area there were all positive Delta there and the market tried to move higher and failed to continue moving higher that's a sign of a passive seller active in the market that's a sign if the market starts moving lower these buyers will become trapped and that's a sign that the market may want to move lower to facilitate trade at lower prices to see if that advertisement is valid or not looking what it looks like on a Candlestick chart here's the market reversing back into this and simply looking off of a Candlestick chart I do not see a valid indication for me to take the market short here now obviously the market moves down and people in the comments are going to say yeah this happened or this happened but in real time strictly looking off of a Candlestick chart I don't see much off of this chart indicating the market will move lower until you're able to read what's going on behind the scenes now this is a trade that I took took we were seeing selling at 4369 I am putting risk on short at 4368 targeting our key level below and the beauty of this is the risk for these types of Trades especially understanding the volume will be very very tight making you not have to have a high win rate with this strategy so I was risking three points to make a potential 10 to 15 points looking here to the left we have the footprint chart and here is that rally up into 4369 4371 a lot of aggressive buying and the key aspect to this was the market aggressively sold off thereafter moving much lower and then looking at the Candlestick chart you could see that rally up the rejection here and the selloff lower now the beauty of this as well is this will get us in before the move actually occurs because we can see signs of where big participants are or where trapped participants are sitting at and and this was a trade it was a $3600 profit and it lasted about 20 minutes very excellent trade spotting the Trap buyers spotting the absorption taking it short managing my risk and capitalizing on a sell off with the order flow for a scalp now the next setup I look for is stop runs or trap Traders this works very well for short-term scalp momentum type of moves knowing where a majority of Traders will place their stop loss at is an edge in itself also knowing where majority of retail Traders will enter is a serious Edge in itself reading the price action at those levels where people are stopping out where people are entering in combination with Market context is a very key aspect to this where there is pain there will be gain for others when somebody is losing somebody else is winning when somebody is in pain there is gain for the other participants think about it for a buyer and seller to come for a completed transaction one has to be winning one has to be losing so if we can find out who is losing or who is in the most pain that's where the most gain is going to come in for us complete that transaction and have a valid edge and a valid trade on our hands in this example we could see the market bouncing at these green highlighted points about four or five different times now I marked a pre-market low because a lot of Traders like marking lows or highs and this is an area where a lot of liquidity could sit where a lot of stops are and where a lot of people are looking to enter if they are looking to long a breakout or short a breakdown and this is why volume confirmation is so key A lot of people will see a break down below a level and simply enter the market short just because it broke below its level using the order flow will not only help you get into high quality trades it will also help you avoid getting faked out so in this example we can see the market breaking below the low and again the market bounced at this general area about four or five other times and it didn't happen until we broke the low now looking at the depth of Market you can see as we broke this low of day or this pre-market low there were tons of aggressive sellers below that low so this could be either Longs stopping out of their position this could be new breakdown shorts entering the market expecting it to go lower or this can be somebody passively buying this move understanding where these trap participants can possibly be or where the stop hunt or stop run could be because on this order flow and again you can look at this chart but you really want to know what's going on behind the scenes yes you can rely solely off of candle data but using confirmation with the order flow will help you avoid fake outs and understand if the move is going to continue or reverse because in this example we break below the low there's a lot of aggressive selling and then the market moves up higher lacking activity below that low of day a lack of Interest below a level indicates the market may want to test on the opposite side of the market for other participants looking at the Delta footprint chart here you can see this very large red negative cumulative Delta range bar down here there were tons of aggressive Sellers and this green line represents that low where majority of Traders are going to be trapped shorting the breakdown not understanding how weak those sellers were below that level and then the market comes up with aggressive buying hence these green bars and hence the blue positive Delta as the market moves higher context is key just because we see positive Delta or negative Delta does not mean the market will move up or down context is important and location is important now this is a reason why I took this trade we broke the lows I am putting risk on at 4305 as soon as I spot that order flow targeting 10 to 20 points higher simply waiting for that level to break seeing how weak the sellers are how strong those buyers are and capitalizing on a very short-term reversal in the market because as you could see as we broke this red line broke under it recaned back above came back down put in a higher low above the level and then aggressive buying thereafter looking at the footprint you could see aggressive selling and then strong buying stepping into the market with all this positive blue and all that positive Delta now also what I look for are areas of imbalance supply and demand imbalances form when the market is balanced essentially buyers and sellers agreeing on price and then we move away from that balanced range aggressively and violently forming an imbalance because of the market being balanced before that violent or aggressive move the market moves way too fast for its legs and then when the market comes back and retests that origin location that's when I'm looking for a high quality location that I could spot the interest in the market and then read its order flow at that specific level of Interest where the market left that imbalance to begin with and you want to use the order flow there because it shows how the auction is responding to that is it strong is it weak is it going to reverse is it going to bounce what is the volume doing at your level of interest cuz that will give you a clue of to not get faked out or trade on the right side of the market in this example the market sold off into the demand Zone put in a higher low and then began to Rally up higher in this example we could see the market come into our supply zone or area of Sellers and the market sold off because of that as well so these are little tools and tips that I use to scalp the market efficiently and I am trading this in the short term it's very very powerful because my risk will be super small and it puts me in a position that I'm taking high quality setups where large interest is factored into the market because there is pain there will be gain and it's a serious Edge in itself being able to read the volume in correspondence to how the market is reacting to that price I'm going to leave you all off on that note if you learned something from this video I would appreciate it if you could subscribe to the channel drop a like on it and definitely check out the links in the description below but on that note [Music] [Music] peace

Channel: Carmine Rosato

Views: 22,683

Keywords: carmine rosato, supply and demand, ricky gutierrez, learn plan profit, ross cameron, warrior trading, tim sykes, day trading, stocks, stock market, day trading recap, trading recap, thinkorswim, tdameritrade

Id: e4hTcxjE3ug

Length: 25min 16sec (1516 seconds)

Published: Mon Oct 09 2023