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8/3/2010Today the market opened weak and went down to the bigger support pattern on the 60 minute chart. The chart in this post is the NQ 3 minute chart. The NQ is a great contract to trade especially if you are learning how to trade for the bigger moves. Yes, it is only $20 a point , but the Range of the NQ is much bigger than the ES and you can build good trading habits when you can give the trade more room and learn how to hold the winning trades longer.
In trading there are many different mindsets you can have. Maybe you are a scalper or maybe you can hold trades longer. It is interesting when we ask a group of traders what is scalping? there are many different answers. One person told us he is a position trader going for the bigger move. We asked what is the bigger move? He replied that he is always going for the bigger move, you know like 4 ticks on the ES. WHAT! 4Ticks!
Trading for ticks is nowhere near position trading. Position day trading is trading for 6-10 points on 1 trade. Anything under 1.5 points is scalping in our opinion. Having a trading goal of 3 ticks is more like gambling because not only do you have to be right on price but more importantly if your timing is off even for 4 seconds you can lose money and still be right on the direction.
It is important to know if you are scalping for 1 point per trade that it is so important to know how to read the bigger charts and know where you are at in the bigger pattern. Scalping for ticks is actually harder than position trading but most traders will skip to scalping because the "risk is lower". In reality the risk is not lower because scalper take more trades than a position trader. For every trade that is entered you must go through the emotional risk and the money risk.
Think of it this way: If you take 10 trades for the day and you risk 1 point per trade your overall risk for the day is 10 points. If you took 2 trades with a 3 point stop but you were going for 7 points your risk for the day would actually be only 6 points which is less going for 4 more points of profit. Of course this is just an example but we want to point out that even though scalping seems less risky in reality it is not and the cost of commissions are more when you are a scalper.
We are not saying scalping is bad. We have our scalper system but the difference is when we talk about scalping we are still going for minimum 2-3 points on the ES.
It is also important to know scalping the ES over the TF or NQ is much harder to do meaning; it is much harder to scalp the ES. I know everyone especially new traders get sucked into only trading the ES but scalping the TF an NQ is much easier because the movement is faster and the range is bigger. Trade what moves!
Looking at the chart in this post, would you scalp long when our bars are red?
Only scalp in the bigger direction, you will be glad you did!
Happy Trading,
www.eMiniSchool.com
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