You have to wonder about what people say and do with their “scalp” trades. It is as if people don’t understand the difference between a swing and a scalp. There are differences, but truthfully it can be a fine line. The problem comes when people see and understand a move in the short time frames and then make their decision to act or not because they are looking at the 4hr chart for confirmation. Really?!
You’ve seen me mention this 4hr chart scalpers on this blog before. Those are the extreme versions of people not making sensible trades. Because of this huge error of perception. People either get stopped out hard or take in huge draws before they see their profit. It also happens in the shorter time frames. Some people see the action but don’t understand the mechanics or execution properly enough that they might as well be trading off the 4hr just like those whacked out people. There is a proper way to trade off the 4hr and an improper way to do it. But these people will suffer a lot of pain and losses because of perception issues and time to profit.
What does time to profit mean? Basically, if you are trading off of the 4hr, you should understand that your trade will be on for a long time. Because it is a 4hr chart. This is more of a swing. The time it takes for the 4hr to go through its course takes time. Well Dawg, that is what I know and understand. What is really happening is these people are looking at the 4hr for confirmation for a trade that is around 2pt or less, that will complete long long before the 4hr candle actually finishes. Well doh that is common sense. There was this guy in chat early this morning talking about a short at 1.461 on eur/usd or 6e, and he didn’t want to short it because the 4hr was not saying it was a short. I was twitching when I saw that. One thing for sure, that guy has no clue.
Yes I know this is the one hour chart. The point is, how can you make such a call if you know how to read charts? Do you see how .461 has already been tested? The basic fact is this, change happens in the lower time frames before the higher. This is the kind of details that people don’t see when utilizing higher time frame charts. This is the kind of detail that can cause these higher time frame scalpers eat or endure a lot of pain for their short term trades.
Well what is the proper way of scalping and utilizing the higher time frames? This problem is not uncommon. Part of the problem is that people are into candle to candle analysis. Meaning they are waiting for confirmation of their Japanese candlestick analysis. You don’t use a ratchet for a hammer do you? Even more critical, they don’t know how to stitch their time frames together to make sensible trades. Can they get lucky? Yes. But more than likely they will blow out if they weren’t born under a lucky star.
When you use the higher time frames to help you with your scalp or swing, understand that you are only interested in 2 things.
1. If the higher time frame has been setting up for a large move, (its been accu’ing or dist’ing), then you want to be in the position to ride that large move.
2. if you are scalping for a point or a few, and the move is within 1 or those high time frame candles, you will look for the level of significance that you are coming up on or coming down to. This is for 2 reasons again.
i. If you are coming up to a level, then you may look at that as a point of exit for a long and or a point of entry for a short.
ii. If you are coming down to a level, then you may look at that as a point of exit for your short and or a point of entry for your long.
Common sense? Yes. But you wont believe how many people don’t do it that way. It is so annoying to see these people with their pretentious calls.
Epilogue:
LOL Epilogue. But a mental midget asked why the hell would you choose to short at .461 anyways? I’d like to know that too. Long at Resistance and Short at Support. It worked out but…seriously sensible? The guy who made the 4hr statement would not know what to do anyways.