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Al said a reason for beginners losing is confusing and therefore mixing scalps with swings.
when al says turning a swing trade into a scalp is a losing strategy, he's saying taking a scalp profit when the premise of the swing is still valid is what's wrong. But on the other hand, exiting a swing trade with a scalpers profit is Ok if the premise of the swing becomes invalid as the trade unfolds.
and taking a scalp setup and converting it to a swing stop as the market goes below your scalp stop is incorrect management. But taking a scalp setup and converting at least some of your profit taking to a swing profit if the trade unfolds to where that is reasonable to do, is Ok to do?
- basically, converting scalp entry stop losses to swing stop losses and also converting a swing trade profit target that is still valid at the point of reaching a scalp profit, exiting early at the scalp profit is the incorrect way to manage a swing trade.
Am I understanding this correctly?
I'm sorry, video 31D, not 31A.
What is missing from this discussion is probability and inserting it into the "mix" clarifies many points.
1. Turning a swing trade into a scalp. A swing trade has a lower probability of winning (in most cases). Additionally the stop, with the exception of existing at the beginning of a move, will be larger. The position sizing then will often be smaller to account for where the stop loss has to go, and an amount of time is allotted for the trade to attempt to work. As the probability is lower, many of a swing trade is a small win or loss, which is offset by the fewer larger wins. However, if the profit target is taken as a scalp, the traders equation is never satisfied because the larger winners will not happen.
2. The other side is turning a scalp into a swing trade. This is a problem because a scalp will have a closer stop, as it doesn't allow for retraces, and the position sizing then is often larger. Because of this, if a trade doesn't work, if one moves the stop to be a swing stop, the position size is too large resulting in large losses.
Now, at price "turning points" in price, both swing and scalp trades may overlap where higher probability may briefly exist. This is where both swing and scalp trades briefly exist, and some traders will scalp out a portion and allow for the swing trade portion to have a longer period of time to work for larger targets. In the older PA slides which Al marked up, these were given "blue boxes" and named - Best Trades (for beginners). Really, "for beginners" means, "all you need are these to become profitable", which puts you in the top 5% of all traders :).
Hopefully helpful and good trades to you!
thank you, Eric, definitely helpful. Good trades to you as well mate!
