Page 335 - THE MARKET WHISPERER

THE MARKET WHISPERER 33 1

This is a classic scalp, executed on May 4, 2010 in our trading room,
during the last half hour of trading. DOW, a leading chemicals firm, crashed
with the entire market as a result of rumors publicized on that date that

Spain would be the next European country reaching insolvency. Whereas
the market indicator dropped by 2.5%, DOW dropped some 8%. We
estimated that shorters, who enjoyed a field day with the stock for almost

all the trading hours (note the perfect downtrend), would close some of
the shorts towards the end of the day: i.e. they would buy. At [1], for the
first time that day, the stock changed trend in five-minute candles. We
anticipated this change several seconds beforehand, and entered a long
at $28.95. At [1] the trend change showed as strengthening, and at [2] we
realized a profit of 40 cents. Also note the high trading volume just before

the stock changed its trend. A large amount of shares changed hands

during those minutes, which considerably reinforced our assessment that

a pullback can be expected.

The Scalping Technique

The first condition: you need to keep your finger on the mouse, and your

eyes glued to the screen. You need to give your full attention to the stock.
You must buy and sell with precise LIMIT orders. You must absolutely NOT

chase the stock, because with scalping, profit or loss is measured in just a
few cents. In many cases, I place an exit order in advance. For example: if I
buy 3000 shares at $20 and anticipate an increase of 30 cents, I will set a

sell limit order in my trading platform of:
o 1000 shares at 20.15
o 1000 shares at 20.25

o And wait with my finger on the mouse for the first sign of weakness
in order to sell the remaining 1000 shares

SMART Scalps are meant to be short term, and are therefore not
MONEY executed in small quantities. Trading in small quantities of
shares causes the “small-money syndrome” and leads to
failure.

Scalping is not executed in small quantities of shares. New traders
scalping in small quantities, such as 300 shares, find themselves caught in
the trap of negligible profits, or as the phenomenon is known, the “small-
money syndrome.” Selling 100 shares for a profit of 15 cents seems like too