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My timeless trading advice for new traders is….scalp.\u00a0 Okay, let me explain why.<\/p>\n
What I heard too often\u00a0<\/strong><\/p>\n During a recent team monthly trader meeting, I heard too often something that I wasn’t crazy about.\u00a0 I was particularly not so thrilled hearing it from the younger traders.\u00a0 While I wasn’t so thrilled, this did offer an opportunity to set expectations for most traders at this monthly meeting and particularly the newer guys.\u00a0 I suspect many in the trading community, and perhaps you, can learn from this as well.\u00a0 It may help you set better expectations and focus more appropriately on the best trading strategies, as you build your trading career.<\/p>\n (The Quickest Way to Profitable Trading: “Easy Money Trades”<\/a>)<\/p>\n During this monthly meeting, I heard too much of “there were not a lot of big opportunities this month so I was essentially flat for the month.”\u00a0 Now this was said by a hugely successful trader, one who has cleared 8-figures in trading profits during his career, and then was repeated to often by other traders on the team.\u00a0 The younger traders were attributing being flat for the month, not losing or making money, to there NOT being any huge opportunities.<\/p>\n Relying on 6-figure trades<\/strong><\/p>\n Now by huge opportunities we mean 6-figure trade opportunities.\u00a0 Said better, the ability to make over 100k in one trade.\u00a0 This hugely successful trader was not expressing that there were no 6-figure trade opportunities.\u00a0 There were a few and they didn’t work out for him.\u00a0 And for sake of clarity this star trader was expressing that there were not many 6-figure trade opportunities for how he trades.\u00a0 And we trade as a team, with traders stationed on various teams at the firm.\u00a0 So the younger traders are likely to share the opinion of the more senior traders, particularly a trader as successful as this trader, about these 6-figure trade opportunities.<\/p>\n I was listening and listening and listening to all of this and sensing something was just not right with this narrative.\u00a0 And this narrative was particularly off for the younger traders.<\/p>\n Now look a hugely successful trader who has made more than 8-figures in a trading career may not be interested in smaller trades.\u00a0 They may have graduated to the level of waiting for the big trading opportunities to visit and then focusing on them.\u00a0 This can be particularly true as veteran traders seek more life balance as they have reached financial freedom.\u00a0 This is not true for all or even many veteran traders, but it can be true for some.\u00a0 And that is fine.\u00a0 That is where they are in their trading careers.\u00a0 That is what is most important to them.\u00a0 We get it.<\/p>\n And these widely successful traders are still engaged daily in markets.\u00a0 They are still researching to build out new strategies.\u00a0 They are still communicating with younger traders about trades to help them develop.\u00a0 They are still making an important contribution to the firm.\u00a0 But they are preserving their financial, emotional, and monetary capital for the big opportunities.\u00a0 They have earned the right to do so.<\/p>\n Flat is not flat<\/strong><\/p>\n And maybe for some veteran traders like this, February ends up flat when only a few big trades visit and they do not work out for them.\u00a0 But but but this should not be the mindset of a developing trader.\u00a0 Flat is not flat for a developing trader.\u00a0 Let me say that again, flat is not flat for a newer trader.\u00a0 Flat is negative.<\/p>\n Here’s why.<\/p>\n A developing trader, a new trader, should NOT be focusing exclusively on big money trades.\u00a0 They should be focusing on EZ Money Trades and then also big money trades.\u00a0 EZ Money trades for active traders are made up mostly of scalping strategies<\/a>.\u00a0 Scalps where the price action is not sustainable and likely to revert to the mean.\u00a0 Scalps where a stock is ready to break important technical levels and move quickly in one direction.\u00a0 And these trades visit every day.\u00a0 These trades help you bank consistent daily, weekly, monthly profits.\u00a0 And as a developing trader, you should be building a profitable business with these trades.\u00a0 So that your floor for the month is not flat.\u00a0 Your floor for the trading month is above that.\u00a0 Well above that.\u00a0 Your trading floor is 10k or 20k or 30k or much better depending on your skill level.<\/p>\n And then from your floor, you add these big money trades.<\/p>\n Let me say it again, flat is not flat.<\/p>\n Scalping made easier<\/strong><\/p>\n (Scalping Was Hard, Until He Discovered This Little Trick<\/a>)<\/p>\n One of the most promising developments I see on the desk is traders gathering on Saturday to review EZ Money Trades.\u00a0 This is giving traders more reps for these most high quality scalps.\u00a0 This helps the traders internalize profitable scalp trades<\/a>.\u00a0 This allows them to learn from others.\u00a0 This allows them to raise their floor.\u00a0 Flat is not flat.<\/p>\n We have found traders are much more effective with their scalping when they build technology to spot their favorite scalps.\u00a0 Jeff Holden has led the effort to build alerts for the desk’s favorite scalps, with the newer traders.\u00a0 When these alerts fire newer traders have more confidence to take their favorite scalps.\u00a0 This can help with overtrading as well.\u00a0 If a new trader is considering a scalp, but an alert for their favorite scalps is not also present, this may inform the trader to pass on the trade.<\/p>\n Flat is not flat.<\/p>\n Objections to Scalping<\/strong><\/p>\n Let me address 3 common objections traders express about scalping.\u00a0 Unfortunately, there is still way too much misinformation spewed to the trading community about scalping.\u00a0 This misinformation can negatively affect your trading career.<\/p>\n There are some who will conclude that they can’t scalp.\u00a0 They can’t do it.\u00a0 Perhaps they have tried this in the past with poor results.\u00a0 Perhaps they have heard it is not possible in today’s market to scalp because lightening fast algos- HFTs.\u00a0 \u00a0Perhaps they have been led to believe they can’t make enough to make this strategy worthwhile.<\/p>\n Wrong!\u00a0 Wrong!\u00a0 Wrong!<\/p>\n For those who have tried and failed, did you have a very clear and specific PlayBook for your favorite scalps?\u00a0 Did you archive EZ Money scalps and study them?\u00a0 Did you overtrade on low quality scalps?\u00a0 Did you have technology that alerted you to your favorite scalps?\u00a0 Come on, why not give scalping a try the right way?<\/p>\n For those who were brainwashed you can’t make enough money scalping, I will just say this….there are traders who make six-figures a month consistently on this strategy.\u00a0 I do not know where you’re from, but where I’m from that is still pretty good money.<\/p>\n For those who insist HFTs preclude active traders from banking consistent profits, I say…we are not competing against the HFTs.\u00a0 We find scalps that co-exist with HFTs.\u00a0 We find scalps that do not compete with HFTs.\u00a0 We find targeted spots in the markets where we can execute excellent risk\/reward scalps, while letting the HFTs play their game.\u00a0 We do not play their game.\u00a0 We play our game.<\/p>\n Okay now as the great trading coach Dr. Steenbarger tells our traders, after going on a rant like the one above debunking a market myth, “I am gonna go take my meds.”<\/p>\n Solutions to raise your trading floor<\/strong><\/p>\n Scalping is a day trading strategy<\/a> that has worked since the beginning of markets.\u00a0 It works now.\u00a0 It will work in the future.\u00a0 The game changes.\u00a0 The players change.\u00a0 Sure scalping strategies need adaptation.\u00a0 But scalping has worked, works now, and will always work, as long as there are markets.<\/p>\n From all of us at SMB, train and trade well.<\/p>\n Important disclosures<\/a><\/strong><\/p>\n Mike Bellafiore is the Co-Founder of SMB Capital, a proprietary trading desk, and SMB Training, which provides\u00a0trading education<\/a>\u00a0in stocks, options, and futures. Bella, @MikeBellafiore, is the author of\u00a0One Good Trade<\/em>\u00a0and\u00a0The PlayBook<\/em>. He welcomes your trading questions at\u00a0mbellafiore@smbcap.com.<\/p>\n <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":"\n