A random guide for scalping - Part I - Plan and mindset
Beginning a new series about price action analysis , focused for intraday trading. Starting today with some general rules to generate a certain mindset.
***A trading plan and a mindset***
It all comes back to this. This is where we start, and where we must come back every day, no matter if we are doing good or not. We need a plan, a set of goals and a set of tools to achieve these goals. If we face the markets each week not knowing what we are looking for or how are we going to achieve it, then we will get nothing. Not having a plan results on emotion driven results. Having a detailed organized plan leads to have objective end results.
**1 - Define the number of pips you’d like to get each week.** A few pips that we look to achieve with consistency each week. We are not looking to hit home runs each time we get into a trade. We look for low risk trades that gives a good chance of collecting those pips in a way that we consistently slowly increase our equity with the lowest drawdown that is possible.
So be honest with yourself. Set a comfortable target that is not easy to get, but also not impossible. Don’t aim for 200, but neither for 20. Me, personally, I try to scalp 75-100 pips each week on GBPUSD. 20 pips each day. It’s cool if I can get more, but if I start to get into losses I will stop immediately if I could lose that floor of 75. This is not about hitting home runs, it is about building equity with consistency. Compounding while maintaining risk low is everything in this business.
**2 - Pips matters. Equity doesn’t. Don’t focus on the money.** You have no guarantee of making any in any trade. No matter how good the trade looks, there is always a possibility that our analysis is flawed. That’s how the market works. The market is impartial. It does not care about your opinion nor your hopes or fears. It gives you information, an information that you as a trader analyze and use based on your unique perspective. With that vision, you enter your trades. And the market will show you if your guess was correct or not. It is not personal, folks. You must take ownership of each decision you take in this field.
You will feel the pressure of wanting to get it right every single time, and chances are that you will let a losing trade take a good chunk of your equity. Protect your equity at all costs. Put a hard stop loss, and do not move it.
That’s why you focus on the number of pips that you are extracting out of the market. Aim to do so consistently. The same process should apply regardless of the account equity. 20 pips may seem too little when you are trying to build equity with a 1k dollar account. But how do 20 pips look like when you are handling a 500k account? And the way, the process, to obtain such 20 pips differ? Hell no. Do not try to overleverage nor get greedy, trying to aim above your targets because you feel that you are not getting anywhere with 30$ of profit per trade. Close that damn trade when target gets hit. If you get greedy, you are being emotional, and then a chain of self-destruction will be unleashed on that trade. It will reverse, you will be in the red, you will remove you stop loss while desperately looking for something, anything, in the current market structure that says to you “it’s going to reverse”. Soon you will lose any hope of getting it back on the green, and all you want now is to at least hit Breakeven, so you don’t make a loss. And guess what? It won’t ever happen. All because you let your emotions drive the results and your expectations on the market. This process of self-destruction can and will destroy your equity if not handled carefully. On each losing trade, analyze if anything remotely close has happen to you. If you recognize it, move aggressively to not let it happen again. Actively prevent it from becoming an habit.
**3- Don’t worry about the losses**. Everyone has losses, but the important thing here is to focus on the process that made you lose or win the trade. Don’t assume you won’t get into a losing streak. You will. Focus on the process, trust the process. If your process is good, money will come as a result of it. You lose a trade? Good. You can analyze what went wrong , how you failed to see something, and how can you prevent making such mistake again. Each failed trade should be reviewed carefully.
**4 – Don’t worry about missed trades.** The market is open 24/5. Who cares if you did not see a specific set-up on Monday? You will have your chance within the next 4 days. There is no need to rush, you need to pick your battle, fight under your terms. Don’t revenge trade. Don’t shoot too early because you missed a trade, or because of FOMO. Keep calm, and future set-ups will appear. Memorize this, read and remember it each day you are going to trade: We react slowly when trying to get money, and we act fast to preserve it once we have it.
**5 - You need to know what you are doing.** Why are you entering a trade? Could you take a fellow trader and explain to him what do you look for in the market to enter a trade, and what are the current conditions that makes you now, at this moment, enter a trade? If not, you either don’t have a clear system with rules to enter, or either you have one, but you are rushing into a trade. Think twice, do not feel rushed to enter any trade.
