Regional Stock Reports

The indices all pressed higher last week as they continued their march towards the 2010 highs. There were some signs of fatigue, however, as the Nasdaq sprinted higher on Friday, the Dow Jones closed lower on the day. GOOG and techs soared as GE and banks sagged so we have a divergence which the market will have to sort out. What we do know is that the market is in an uptrend until it tells us otherwise.

One caution flag for the market is the Dollar Index ($DXY). You can see that we have stayed under a monthly downtrend line going back to 2004 but we have also successfully held an uptrend line from 2008 and are currently bouncing from that line. It is too soon to call a direction change in the dollar but a move higher would put pressure on the market.

Crude oil (USO) also has some downside potential at the moment. You can see on the daily chart that we have put in a daily 2x top under the 200 day ma, and under the daily pivot high from early August. Although we are at daily support, we could easily move down to the 20 day ma (around $34.50) or the lows of the range (around $32.50). A drop in crude would directly affect energy stocks, and probably pull down metals and other commodities as well. So take advantage of the market uptrend while it lasts, but keep an eye on some of these divergences that could give warning of a change.

If crude follows through on the double top mentioned above, one way to take advantage of it is the Ultra Short Crude ETF (SCO). A long entry could be taken over Friday’s high ($13.05) with a stop under Thursday’s low ($12.13) and targets of $13.90 and $15. For a more favorable reward/risk, look for an entry and stop on the 60min chart.

While most banks were getting hammered on Friday, State Street (STT) managed to hold its daily range and close up from Thursday. If banks get a bounce, STT should break out over its weekly resistance shown at the top of the chart. A long entry could be taken over Friday’s high ($40.51) with a stop under Friday’s low ($39.47) with a target of $41.90 and a second target of $43 to $44. If trading intraday, watch for resistance at the 200 day ma at $41.

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If you read my previous article, you will have a good idea what scalp trading is. You will also have your direct access platform set-up like a scalp trader. Now it is time to start to cover the strategy. Before you start to look at stocks and decide whether it’s a good short or long trade, you need to know the methods of entering a position. From my last article I described the level 2 and the definition of adding or taking liquidity, which you will need to understand in order to get this next part. To simplify the methods of entry I am only going to cover 2 at this stage. They are called the momentum entry and the average-in.

Scalp Trading Momentum Entry Method

When using this entry method you will be taking liquidity. You use an inside limit order. This means for example if you are going long (buying shares with the intent of selling them higher) you send a buy limit order at the inside “Ask”. Why use a limit order rather than a market order? This is because you will be using this method of entry when you see momentum building in the Level 2 and Time & Sales. Often when this happens the fills achieved from the market order end up different from the price you saw on your screen (this is referred to as slippage). An inside limit order stops slippage at the expense of not getting filled or perhaps only getting a partial fill.

Scalp Trading Average-in Method

When using this entry method you will be adding liquidity. This is where you plan multiple entries to achieve a position that suites your risk tolerance for this stock and trade. So say for example you want to be long 1000 shares. With the momentum method, described above, you would take the entry with the full 1000 shares on the start of a momentum move. This is not the case with the average-in method. You would “Bid” 300 shares at a price level almost certain to get hit. You then “Bid” another 300 shares at a lower price level which has a good chance of getting hit. Finally you “Bid” the remaining 400 shares at the lowest price level you realistically think you could get hit at. Each time you get filled your average position price gets improved.

It is worth noting this is not averaging down! Averaging down would be “bidding” the full 1000 shares on the first order and then when the price moves against you “Bid” another 1000 shares to improve your average position price but at the expense of your risk tolerance. You have exceeded you risk tolerance because you planed on a 1000 shares position but now, of course you have 2000 shares. Trades become much harder to manage when you trade outside your planed risk tolerance (I will cover risk tolerance and planning in future articles)

Exit Method

There will be only one method of exit for now. It is the average-out. This is like the average-in but in reverse. Continuing with the long example above, once you have your 1000 shares you “offer” 300 at a price very likely to get taken. Then another 300 slightly higher. Finally the last 400 at a realistic level in line with Technical Analysis (which I will cover in future scalp trading articles).

For New Scalp Traders

It is important to master the scalp trading average-in entry method before using the momentum method. In my next article I will cover a Strategy where these entry and exit methods can be used.

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There are a lot of various styles and types of foreign exchange traders who actively trade on the foreign currency market. In order to draw out as much as feasible in income, they incorporate and regularly produce a an assortment of strategies, procedures and styles. Whilst a big percent of fx traders struggle to make a profit or living from fx investing, without a question, there are people who are a lot more effective as well as flourishing when it comes to the revenue in which they generate. In fact, many of these traders have been able to leave their normal careers to invest full-time because they are able to create consistently successful Fx Signals. Is there any one fx trading tactic that a forex investor uses that ensures constant earnings and long-term prosperity?

Of course there are just a number of distinct trading methods which profitable forex investors use and share so that other folks can benefit as well yet in fact there are a number of quite excellent currency investing methods available to us, we simply need to come across them. You do not need to waste significant quantities of money to discover or obtain the so called computerized trading bots that are marketed by so many foreign currency trading internet sites. If you do a rapid search for them on the well-known forex forums, you will come across quite a few Forex Signals vendors and also individuals in general offering free of charge details on the methods in which they are now utilizing or are in development. These fx communities could end up being a superb source for the struggling investor as well as the advanced trader.

What is getting reiterated as well as confirmed by those investors which are lucrative in the currency market is the key to achieving success is not really about the technique or style of investing that you involve but more importantly it’s concerning how you deal with your money such as lot sizing, risk management and discipline. It additionally has to do with your mental mind-set. Psychology plays a large part in whether a investor has what it takes to be profitable when trading the currency exchange markets. If your trading contains the previously mentioned, then the only approaches you truly need are those which have got a marginally above average win to loss ratio.

Two different traders utilizing the exact same tactic but one will be a loser and the other a winner. Why? Because their selections are really based upon emotions and everyone’s emotions are distinct. Without having self-control, you would be not capable to manage your emotions which causes you to veer off the risk and discipline element of your forex trading strategy. This goes to show you that despite the fact that the trading approach you utilize is important, it is nothing more than a tool for investing and that the true secret to trading is dependent on precisely how you hold fast to your trading plan guidelines of risk and discipline.

The most vital factor is the way in which the fx investor takes advantage and places to use the various methods that are available to him. The discipline to adhere to your trading plan and not trade upon emotions is extremely essential and is what helps maintain consistency in fx trading. That is the only approach to go about being a successful fx investor in the not so easy, extremely dangerous business of forex trading. However, for many men and women, this just isn’t probable and for that reason they turn to Buy Forex Signals via a services company.

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Your trading computer is a crucial tool for any trader; especially if you are scalp trading and relying on fast executions. Keeping in mind the cost of trading computers when compared to the cost of a few bad trades or even the cost of a day trading course, despite your style of trading, you should have the very best computer for the job.

Buying a trading computer that is specific to your trading needs is not as easy as going to a local office depot and grabbing the best system off the shelf, much like choosing a day trading course is not about looking for the most expensive one. They have to fit a certain criteria. For starters, you need reliability. Buying a system that is full of cheap generic parts, much like what the major brand names use, is the wrong way to go. Now most of these manufacturers provide a good warranty but what good is a warranty when your system fails in the middles of a big trade? Secondly, it has to allow multiple screens.

Many traders at proprietary trading companies are equipped with four screens which means you need a SLI motherboard which will support 2 PCIex16 ports. If you are not computer savvy, you need two graphic cards slots. Each graphics card has two screen slots on the back so with 2 graphic cards you can have a four screen setup. And finally, you need speed. This does not always have to be the most recent RAM or Graphic cards, as a lot of the cutting edge technology is very expensive and sometimes unreliable. Your average hardware is many times sufficient enough without adding extra expense and not sacrificing a lot in extra performance.

Trading Computers must maintain a balance of the above items. It is imerative that you work with a business that is always putting together trading computers for its clients because this makes sure that they don’t fall behind the latest versions and needs for traders.

As you may realize, online day trading education, courses are plentiful online but they rarely go into too much detail about where to locate a good trading computer or what one should consist of. When possible, select a company that not only offers the best education for trading but one that also pays attention to and hopefully is able to supply the all important day trading tool, trading computers.

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Scalp Trading is a word that is tossed around a great deal whenever you hear day traders talk but really scalp trading is a particular technique of day trading. It is a type that consists of a large frequency of order tickets using a profit target of just a couple of cents. The return occurs from the size of the orders. A average scalp investor at a lot of of the Proprietary Trading Firms employs between five and fifteen thousand shares for each position with the more prominent traders going upwards to 200,000 shares for each trade. This form of trading is not necessarily typically carried out by retail investors on retail accounts for a couple of key good reasons, great cost structure and exclusive order routes.

The fees arrangement in which the normal retail broker offers you is too expensive for this particular style to be sensible. Most retail brokers may offer $6 to $7 for each 1000 share trade with the best deals around $5. A scalp trader wants to be capable to generate money from simply a one penny move. So even with the best retail deal of five dollars, a one cent move would make you ten dollars but would cost you $10 ($5 to acquire and $5 to sell) in commissions which would leave you $0 net profit. At a Proprietary Trading Firm, traders can obtain a commission structure anywhere from 30 cents to $1 per one thousand shares. Now if you do perform the sum: a 1 cent move with one thousand shares grosses $10 but will simply cost you sixty cents to two dollars which of course supplies a a lot more appealing net profit margin.

This takes us to ECNs and who you need to be routing your orders thru. If you add liquidity to the order book also known as the level 2 then normally the ECN you sent to will provide you a rebate. However, if you take liquidity from level 2, the ECN will charge you. One might be pondering exactly what does it mean to take or add liquidity? Well as an analogy; imagine you intend to shop for a auto. You open a car trader magazine. In the front part of the magazine are ads from people who want to obtain vehicles. These people are detailing the mileage and worth they are able to pay. Now in the back section of the magazine are individuals advertising vehicles for sale. Well you might be questioning why don’t the folks in the front part of the magazine phone the individuals in the back part of the magazine? This is because there is a difference in price between what the buyers desire to purchase at and the sellers prefer to sell at. Now these folks whom have placed these ads in this car magazine are all adding liquidity. The individuals whom read the magazine and at some point either sell their car to 1 of the buyers or acquire a auto from one of the sellers are removing liquidity. This is actually how the stock market functions and the left portion of the level 2 screen is like the front section of the auto magazine and is referred to as the “BID”. The right part of the level 2 screen is similar to the back part of the auto journal and is referred to as the “ASK” or “OFFER”.

I pointed out prior the ECN routing. So what is an ECN? ECN is an abbreviation for for Electronic Communication Network. Whenever you look at the level 2 display you will witness distinct ECNs, Exchanges and Market Makers at each price levels and it is your decision which one you provide your orders to. Your selection will be dependent on how fast the route will fill your order along with how much it will cost you or how much your rebate will be dependent on whether or not you are adding or removing liquidity.

Special routes: A few routes will fill you quite speedily but will still charge you even though you are adding liquidity. It is these types of routes that retail investors trading with retail accounts don’t possess access to. Traders at Prop Trading Firms will have access to these routes allowing them an edge over the competition. These specialized routes are not crucial to become prosperous in scalp trading nevertheless they do make the job substantially less difficult.

Now that you realize what scalp trading is, you will need to learn the needed tools. The most critical tool is your system. You will need a Level 2 Direct Access Trading Platform which there are a lot of to pick from.

You will likewise need a media service such as Briefing or Trade-The-News. When scalping, you need to be observing a handful of stocks. They should be lower priced and have very good volume on the Bid and Ask.

Regarding each one of the stocks you study you must have a level 2 screen along with time and sales. Equally, you need to have a daily chart for each and every one of the stocks you view. Believe it or not, the daily graph is the most critical chart for intra day traders, which furthermore includes us scalp traders. And finally, you ought to have a 5- and 15-minute chart of the overall market. To see the market, the Standard and Poor is preferred. You can follow this by watching the ES futures or the SPY. There are additional items you may need to add to this set-up which I will cover in my subsequent article, but the earlier mentioned are the most recommended.

Focusing on both the forex and stock markets, Affinity provides day trading education with a niche focus on scalp trading. Stop by the Affinity website today and learn how you can take your stock trading to new highs.