We are in the office watching tape on this Saturday.   We just ended Part I one of our review session.  An interesting trading topic emerged: when to forgo a scalp.  Let’s discuss.

There is this notion that day traders just scalp.  Wrong.  But there is also this elitist belief that scalping is somehow beneath some traders.  Not me.   When I take my check to the bank at the end of the month they do not ask,”Hey did any of that money come from scalping?”  They cash my check.

As a trader I ask- Can I find a trade that offers me an edge?  And sometimes a scalp offers me an edge.  So I scalp.

However as day traders we cannot fall victim to over-scalping.  Scalping should just be one trade of many in our quiver.  And scalping should not be our focus, especially in this market.  If GMan catches you doing this on desk he will call you out.  I can hear him lecturing,”Stop trading like a piker day trader.  That is not what we do here.”

Most importantly, we cannot let a scalp trade interfere with our main objective.  And that is to find the next 50c trade.  If a scalp will alter our focus such that we can make a quick 7c, but miss the next 50c trade then this is a poor trade.

Also, scalping against the trend with really strong or weak stocks is not advisable.  Scalps are for stocks that are not clearly directional.  When a stock is really trending, we want to focus on where to load up with the direction of the trend.  We want to focus on a big trade.  Wasting mental energy on 7c is not a good use of our time with a clearly trending stock.

But as we poke around with a stock sometimes, especially on the open, a scalp can be the proper trade.  Sometimes we must scalp a stock on the open on the short side and long side to get a feel for the stock.  Often this scalping helps us identify the stock’s important intraday levels.  Often by trading in and out we spot the next excellent 50c trade.

Today during our review session we were watching GES from this week.  Our trader made a scalp trade at 52c to 64c.  I barked, “Stop the tape.”  I was concerned that this trader was not focusing on the big picture, the next 50c trade.  He was.  My bad.  He recognized that the short at 64c was the trade that offered the most likely next 50c trade.  So he got short.  He scalped the 52c to 64c trade and then had the mental agility to start a short position.

This is excellent trading.  But not everyone has this superior mental agility.  And if you don’t then you can’t make that 52c-64c scalp trade.  All you can do is make the short at 64c trade.  Because you should be focusing on that next 50c trade.  This is the trade that you can’t miss.

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