Prof. Tyler yamazaki

Chapter 6
Strategies
Scalping
Scalping is a trading strategy whose goal is to make a profit from small
changes in price. Those who use this strategy typically place as many as
100 or more trades in a given day. Scalping takes advantage of a
combination of large position size and small price gains in the shortest
market timeframes. The goal is to either buy or sell a number of shares at
either the bid or ask price and then sell once the price has only moved a few
cents.
Scalping is a fast-paced type of trade that nimble traders will excel in. The
ideal margin for this type of trading is 4 to 1 in order to make the most
profit in the shortest amount of time. Typically, scalpers focus on either the
1-minute or 5-minute candlestick charts. Commonly used indicators include
the MACD, RSI and stochastic. Price chart indicators like pivot points and
Bollinger bands are often used to determine levels of resistance and
support. It is recommended that you have at least $25,000 worth of trading
capital in order to utilize this strategy successfully.
Common mistakes to this strategy include choosing poor execution times,
not setting the correct stop losses, late exits, late entries and overtrading.
Scalping creates a high amount of commissions which means you are going
to want to look for a per-share commission price structure for the best
results.
Fade
A fade is an investment strategy based around taking a contrarian approach
to the current trend. This is a high-risk strategy that has the potential for
high short-term gains when it works out in your favor. The reasoning
behind this is that once the initial surge or spike in price has occurred then
the resulting retracement or pullback will be able to generate a profit. To

---

know you are on the right path when it comes to one of these strategies, you
will want to look for a gap between the price and the trend line, this means
the price is heading more in the direction of the trend and away from the
trend line.
The right time to fade a breakout is when you have reason to believe that
the breakout from either the resistance or support level is false which means
it is unlikely to continue for much longer. You would then want to put this
strategy into play when you have reason to believe that this breakout is
going to be substantial.
Most fade breakout trades tend to fail because the minority who chose to
fade the breakout is frequently compromised by the major players in the
market who want the current trend to continue. Remember, in order to sell
something, you need to have a buyer and if everyone is currently buying
above the resistance level or selling below the support level then the
number of buyers for what you are proposing is going to be relatively slim.
There is a reason that this is a high-risk strategy.