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Scalping Beyond the Charts

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Scalping Beyond the Charts


Scalp the E-mini markets without looking at the charts

By

George Mahshigian

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Copyright 2013/all rights reserved by George Mahshigian No part of this book may be reproduced or transmitted in any form or by any electronic or mechanical process, including photocopy recording or any information storage and retrieval systems, without prior permission in writing from the author, except by a reviewer who may quote brief passages in a review.

Created by George Mahshigian in the United States of America.

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Disclosure
FUTURES TRADING INVOLVES SUBSTANTIAL RISK OF LOSS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE TRADING TECHNIQUES PRESENTED ARE THE THOUGHTS AND OPINIONS OF EMINISTRATEGIES.COM. THE TRADING TECHNIQUES PRESENTED ARE FOR EDUCATIONAL PURPOSES ONLY, AND ARE ONLY A FEW OF THE MANY CHOICES AVAILABLE TO TRADERS. THERE IS A TREMENDOUS AMOUNT OF RISK INVOLVED WITH TRADING FUTURES. THEREFORE ONLY RISK CAPITAL SHOULD BE USED TO TRADE IN THE FUTURES MARKET. RISK CAPITAL IS MONEY THAT WOULD NOT CHANGE YOUR FINANCIAL CONDITION IF LOST . TRADING FUTURES AND OPTIONS ON FUTURES TRANSACTIONS INVOLVES SUBSTANTIAL RISK OF LOSS, AND IS NOT SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE, AND FINANCIAL RESOURCES. YOU MAY LOSE ALL OR MORE OF YOUR INITIAL INVESTMENT. OPINIONS, MARKET DATA, AND RECOMMENDATIONS ARE SUBJECT TO CHANGE AT ANY TIME. ALL RESULTS SHOWN ARE HYPOTHETICAL, NOT ACTUAL RESULTS. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT . IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A
PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS . YOU AGREE TO INDEMNIFY AND HOLD EMINISTRATEGIES.COM, AND ITS DIRECTORS, OFFICERS, AGENTS, CO-BRANDERS OR OTHER PARTNERS, AFFILIATES, AND EMPLOYEES, HARMLESS FROM ANY CLAIM OR DEMAND MADE BY ANY PARTY DUE TO OR ARISING OUT OF CONTENT OR INFORMATION ON OR DISTRIBUTED FROM EMINISTRATEGIES.COM.

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I have been trading for over 35 years, I have position traded, swing traded, day traded and scalped. I have to say that scalping is what I enjoy the most.

For every type of trading looking at a chart is a great advantage, matter of fact it is almost mandatory, except for scalping, to scalp effectively you need to learn to look at the bids and offers (order book) more than charts, you might ask how is it possible to scalp without being glued to the charts, thats what this report is about, let me show you.

Scalping is defined as a legitimate method of trading based on quick momentum trades triggered by order flow reading setups.

If you are a day trader who has always approached the market from a technical analysis perspective, you might want to think about spending a little less time looking at the charts and little more time learning how to read the order book.

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Figure 1
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Major players tend to look at charts very infrequently. They're aware of major support the resistance, but once they're made a mental note of where these levels are, they stop looking at charts and start watching the bids and offers.

Contrary to popular belief, scalpers generally are not looking to capture the bid-ask spread. Although scalpers might take one tick if that's all they think they can get, they are typically shooting for anywhere from 3 to 8 ticks, depending on current volatility. If the market is moving fairly fast in one direction, there will certainly take 10 to 15 ticks, rather than simply getting out just to take a profit. However such moves are few and far in between. In general, scalpers are looking to exit as soon as they feel the momentum has stopped.

The scalper does not use a trailing stop. If he or she is fairly certain that a moves is over, he is out of the trade, he sees no reason to risk 3 more ticks to capture unlikely 5 ticks. She will move to the sidelines, and watch. If the move continues, he can always buy again. If it doesn't, he got out of his trade at the exact right price.

To scalp effectively, the first thing that you need is access to depth of market trading platform or DOM, see figure 1, the advantage of this platform is it displays multiple levels of bids and offers. If you are using an execution platform that only shows the inside bid and offer, or if you are trading from the charts, you are operating at a huge disadvantage and you will probably have a hard time making money as a day trader.

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The scalping plan consists of first finding out which way is the trend, and then look for price levels where the market pauses, this is the time to start looking at the DOM and make your scalping entries.

Here is an example from the morning of May 22, when the Fed chairman was speaking in front of Congress, he started speaking at seven o'clock in the morning Pacific time, the market quickly moved higher to 78.00 to 78.25 and it stopped there for a while, then started to retrace down to 77.00, this is where you would have noticed if you were looking at the DOM that every time the market moved down to 77.00 there was tremendous amount of bids at that price, and regardless of how much selling was taking place around 77.00, somehow the bids would not go away, even when the market moved down to 76.75 just for a fraction of a second, the bids at 77.00 resurfaced and kept on buying all orders that was being sold to them, see figure 2.

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Figure 2
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This is where the scalper notices what is going on and he will step in, what was happening here is that new buyers were buying and the nervous money was exiting, this combination is what causes sharp and fast moves in the upside, the very second that all the scared money exits, the market will continue on the upside. If you were only looking at the charts, lets say 1 minute or 5 minute charts, you would have missed what was going on here, the only way for you to see this set-up is if you were watching the DOM. As you see from figure 2, the market moved higher and did not stop till the 81.00 area.

In this scenario, the longs tipped their hand before the breakout, no matter how many contracts were sold into 77.00, the price would not change to ask, and when the bid did go down to 76.75, that lasted just a fraction of a second, and the buys came back with 77.00 bid. This indicates serious strength. When this type of action takes place just below a resistance level, it is probably a sign that the market going to run through that level.

The above scenario could only be explained by showing you the chart (figure 2), but when you are trading, you would get much better understanding as to what the market is doing, when you look at the DOM, and over time you would develop what professional scalpers refer to feel for the market.

This type of trading could not be taught by example, the only way for you to develop this feel is to keep looking at the DOM, and after some time you will
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have a Eureka moment, you will see pictures in the DOM as opposed to in the charts. The notion don't follow the crowd is nonsense. The saying should be follow the crowd and make a sharp turn just before you reach the edge of the cliff.

Following the crowd is a great way to make money. The crowd often includes major players who have access to millions of dollars and who buy and sell thousands of contracts or shares - traders who actually move the market - you have to anticipate what the herd is going to do and then do it with them.

Imagine a huge ocean liner in the middle of the ocean and you have a little surfboard, your job as a scalper is to ride the wakes the large ocean liner makes, regardless of the direction of the large vessel, it might be heading north, south, east or west, it is completely irrelevant, matter of fact most of the time you would not know which direction the vessel is heading, because your job as a surfer with a little surf board is twofold, one, you want to catch the wakes of the large vessel, and two, you want to make sure you dont run your surf board in front of the vessel, because if you do, you will be doomed. Let the vessel tell you which direction it is heading, all you do is look at the wakes and surf. In other words, dont be distracted by the charts, look at the bid-ask order book, and scalp. Happy Scalping.

George Mahshigian CEO Emini Strategies


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