Q: What’s your definition of scalping?
Or, what is scalping that you describe?
A: By scalping I mean taking profits
equal or slightly higher than the initial risk –
size of a stop you define for particular trade. Ideally,
profit is taken in a single “leg” –
price movement in your favor without pullback. This isn’t
always possible but overall, scalping is not about enduring
Q: It has been said that scalping
is about “playing” the spread – buying
the bid, selling the offer. Do you include this approach
in your trading?
A: No. I do not trade for 1-2 cents.
Q: If you had to characterize
scalping in three words, what would those be?
A: Consistency. Universality. Safety.
Q: Isn’t scalping the
most risky trading style out there?
A: Quite opposite. Scalping allows
you to decrease your exposure to the market. Investor
is subjected to adversary news events while he is in position.
Swing trader is subjected to overnight gaps. Even the
day trader can be affected by a sudden market turn. Scalper
is engaged in a trade in such brief period of time and
controls his risk so tightly that probability of being
hit hard is extremely low. This is why I call scalping
“defensive style of trading”.
Q: Almost everyone, however,
labels scalping as an extremely risky proposition.
A: Does “almost everyone”
make money? Opinion of majority is not a good indicator
of a truth in trading. Most have no clue about the style
of scalping I talk about in this book.
Q: Maybe the danger is coming
from too frequent trading?
A: Don’t trade more frequent than the market
allows. Trade when there is opportunity. Rapid-fire trading
1000 times a day was never mainstream even among scalpers
of 1999, let alone now.
Q: Still, doesn’t a scalper
trade more often than a trader using longer time frame
A: Generally, yes – simply because
there are more opportunities in a smaller time frame.
30 minutes chart with no trend can and often will reveal
a trend when you go to 5 min or 1 min. It doesn’t
mean you have to jump on everything that moves though.
Q: So, what defines a tradable
opportunity for a scalper?
A: His trading system, whatever it
is. It’s just applied in a shorter time frame.
Q: Doesn’t scalping generate
too much commission fees?
A: Use a broker that offers fast and
reliable executions (direct access) and flexible pricing.
You want to have a choice between flat fee per trade and
per share fee. At the end of the day, it comes down to
whether you made money or not.
Q: Is scalping the only trading
style you employ?
A: No. It’s a supplementary style
for me. I use it when the market is difficult. I also
use it when I hit a losing streak and need to restore
Q: How does scalping help you
A: There is no better way to regain
faith and confidence than winning. By not allowing trades
to go against you and taking small profits you increase
your winning ratio. Sizes of your wins become smaller
but win after win is exactly what you need to get back
that necessary confidence of being able to gain from the
Q: Does your book suggest a
certain trading system for scalping? Should I abandon
mine in order to scalp?
A: I do show you what I do. It doesn’t
mean you have to change your entry and exit criteria in
order to scalp. I show you how scalping can be applied
within any trading system you prefer.
Q: Can you combine scalping
with another trading style on single day?
A: Even on single trade. Concept of
“Umbrella trade” that is shown in this book
allows a trader to extract additional profits from his
usual trade, which provides extra-padding to it.
Q: What markets do you utilize
A: NASDAQ stocks and e-mini NASDAQ
Q: How do you define stocks
suitable for scalping?
A: By volume and by Level 2 appearance. Entry and
exit are provided by looking at charts.
Q: Will you show us how to
utilize Level 2?
A: Certainly. Not being a directional
tool per se, it’s still extremely useful for a scalper.
That’s where you can see what kind of risks your
particular stock carries. It allows you to size your trade
properly. Without Level 2, you risk to trade too big a
size for a given stock. There are also some directional
clues Level 2 provides and some tricks market participants
employ. I will describe these tricks to the extent they
can be read.
Q: Are the trades shown in
your book hypothetical?
A: No. I cite many examples of real
trades, together with screenshots of actual executions
of orders. I am a trader first and foremost. I stand behind
the concept that I teach, and I feel obliged to show that
these concepts are practical. I have been coaching trading
students in my trading room since 2000. Check
Q: Can a trader really learn
how to scalp and trade defensively by reading your book?
A: In this book, I will demonstrate
techniques and setups that I use. In many instances, after
going over a certain idea or setup I will show a plain
chart without any remarks so a reader can try and practice
his own entries and exit. I will then show the same chart
with my entries and exits marked. This allows a reader
to have a hands-on learning experience.
Q: Do you consider scalping
to be the “Holy Grail” of trading?
A: No. There is no such thing. However,
I do consider scalping to be a necessary weapon in arsenal
for any trader.
Q: How does your scalping method work on S&P
A: Scalping is rather different approach
ro risk and trade management than specific trading system.
It's universal method that can be applied with any system.
In this sense it is applicable to any market. Examples
and some specific tricks discussed in the book are
stocks and NASDAQ E-minis related. I can't imagine what
could be so different with S&P E-minis, but some markets
can have their specifics and particularities. I personally
do not trade S&P so I wouldn'r risk to say "Of
course!" (call me bad marketer :)) From my daily
conversation with our traders that do trade those I never
heard from them about any major differencies.