Алексей Боровков
Scalping: The Art of Microscopic Profits. A Complete Guide for Traders

Chapter 1: Scalper's Philosophy: A Fly on an Elephant's Skin

1.1. What is this game really about?

Imagine two people watching the ocean. The first person is standing on a cliff and sees the huge waves, their size, rhythm, and direction. They say, "Today is a strong tide from the northwest." The second person is lying on a surfboard a meter away from the shore. Their world is the foam of a specific wave, its local curvature, speed, and strength. They see not the ocean, but a single wave that is about to break. His question is not "where is the ocean going," but "where is this particular crest going in the next three seconds?"

A scalper is a surfer on a board, not an observer on a cliff.

A long-term investor looks at weekly charts, fundamentals, and macroeconomics. Their horizon is months and years. A swing trader works on daily and hourly intervals, capturing movements of a few percent. His horizon is days.

A scalper's horizon is measured in minutes, or more often, in seconds. His universe is a 5-minute or even a 1-minute chart, the price cup (Level II), and the tape of all trades (Time & Sales). For him, there is no such thing as Tesla; there is only the ticker "TSLA," which currently displays a cluster of buy orders at $245.67 and resistance in the form of a large limit sell order at $245.70.

1.2. The essence in numbers: the arithmetic of a scalper

Let's decompose the philosophy into cold numbers. This is a business of statistics and probabilities, not predictions.

· The goal per trade: Take from 0.01% to 0.1% of the instrument value. On a $200 stock, this is 2-20 cents. On a futures contract for the RTS index, this is 50-500 rubles. · Number of trades: From 30 to 500 per day. An active scalper on a liquid futures can open and close a position every few tens of seconds.

· Success rate (Win Rate): The goal is 60% to 80% of profitable trades. Not 100%. Even 55% can be profitable with the right risk-reward ratio.

· Risk per trade: Clearly less than the potential profit ideally, but often equal or slightly more (risk 1 point, profit 0.7 points). Compensated by a high winning percentage.

· The main enemy: Broker commission and spread (the difference between the buy and sell price). They are the walls of your prison. If the spread + commission "eat" 2 ticks, and your average profit is 3 ticks, then your real earnings are only 1 tick. The whole strategy is built around this equation.

Conclusion: Scalping is not about being right in your prediction. It is about being statistically right enough times with strict loss control.

1.3. Metaphors of a scalper

1. A fly on the elephant's skin (as in the epigraph): It doesn't matter to you whether the elephant is going to the watering hole or to battle. What matters is whether you feel the tension of the muscles under you right now, so that you can jump into the hollow in time and not be crushed, and then onto the crest of the fold, so that you can catch the movement.

2. A bee in a blooming field: The flowers (profitable situations) are everywhere, but they are small. You need to work constantly, make hundreds of "flights" (deals) to collect honey (profit for the day). It's dangerous to fly far from the hive (from your proven strategy). Each flight must be effective and predictable.

3. The harvester (glider) after the harvest: The big players (harvesters) have collected the main wave of harvest (trend). You follow them and pick up the remaining individual ears of grain (micro-movements) that they didn't find it worthwhile to collect.

1.3. Metaphors of a scalper

1. A fly on the elephant's skin (as in the epigraph): It doesn't matter to you whether the elephant is going to the watering hole or to battle. What matters is whether you feel the tension of the muscles under you right now, so that you can jump into the hollow in time and not be crushed, and then onto the crest of the fold, so that you can catch the movement.

2. A bee in a blooming field: The flowers (profitable situations) are everywhere, but they are small. You need to work constantly, make hundreds of "flights" (deals) to collect honey (profit for the day). It's dangerous to fly far from the hive (from your proven strategy). Each flight must be effective and predictable.

3. The harvester (glider) after the harvest: The big players (harvesters) have collected the main wave of harvest (trend). You follow them and pick up the remaining individual ears of grain (micro-movements) that they didn't find it worthwhile to collect.

1.4. Psychological code

The philosophy dictates a special mental state:

· No ego: Your opinion about the market doesn't matter. Only what the glass and tape tell you matters. If the market goes against your "genius" idea – you close on a stop instantly, without discussion.

· Accepting losses as a business fee: Loss-making trades are not mistakes, they are the cost of doing business, like renting an office for a businessman. They should be planned, small and painless.

· Readiness for monotonous work: This is a conveyor. The same operation repeated dozens of times. The excitement of one successful trade and the bitterness of one loss-making one should be reduced to zero. Only the result of the day is important.

· Hyperfocus and exhaustion: 2-3 hours of pure scalping are more exhausting than 8 hours of swing trading. It's like a sprint versus a marathon. Recovery and regimen are part of the strategy.

1.5. Who is this philosophy NOT suitable for?

· Those who are looking for a "grail" and easy money.

· Those who emotionally attach to a position ("he should finally grow!").

· Those who do not have the means for professional equipment (fast computer, stable Internet) and low commissions.

· Those who like to "think", "analyze" and "make an informed decision". A scalper simply does not have time for this.

1.6. Summary of the chapter: The cornerstone

The scalper's philosophy is based on three pillars:

1. Microscopicity: The goal is a small but frequent profit.

2. Probability: Edge (advantage) is in statistical advantage, not in individual feats.

3. Discipline: Unquestioning adherence to the system and risk management is more important than any, even the most obvious, market opportunity.

You are not a hunter of big game. You are a master of continuous microscopic collection. Your strength is not in the power of your blow, but in the incredible precision, speed, and tirelessness. If this picture of the world resonates with you, then welcome to the most demanding and technical craft in the financial markets.

In the next chapter: We will look in the mirror and create a psychological portrait of a person who can not only understand, but also survive in this philosophy.

Chapter 2: Psychological Profile: Who Is It For and Who Is It Not For?

2.1. Why do we need this portrait?

Before you study the order book and hotkeys, study yourself. Scalping is not just a trading method; it is an extreme psychological and physiological challenge that requires a unique personality. Choosing the wrong trading style can lead not only to financial losses, but also to emotional burnout, neurosis, and a loss of self-confidence. This chapter is a mirror. Look at it honestly.

2.2. Traits of the IDEAL scalper

1. Discipline as a second nature.

· Manifestation: The ability to do the same thing 200 times a day: see a signal, enter, set a stop, take profit, exit, forget. And so on again. Without variations, without "what if", without "today is a special day".

· Control question: Can you go to bed and wake up at the same time for a week in a row, with an accuracy of 5 minutes?

2. Sapper's composure.

· Manifestation: A losing trade does not cause either anger or a desire to “get even”. It is just a figure in the log, a statistical error. The signal to the input appears 10 seconds after the stop – you take it as coolly as the previous one.

· Control question: If you accidentally break your favorite cup, would your first reaction be to clean up the pieces and buy a new one, or to express your frustration by saying, "I'm so clumsy!"?

3. Determination and speed.

· Manifestation: You have 2-3 seconds to make a decision. Thinking and weighing the pros and cons is a missed opportunity or turning a profit into a loss. Your thinking should be binary: "Is there a signal? Enter. Has the signal disappeared? Exit."

· Control question: In a fast chess blitz (3 minutes per game), do you feel excited and engaged, or do you feel panicked and unable to think?

4. A penchant for analysis rather than narrative.

· Manifestation: You think in numbers, probabilities, graphs. You don't create "stories" ("The company is good, so it will grow"). You see: "The price is testing VWAP, the buy volume is 1.5 times higher than the sell volume, enter."

· Control question: Do you prefer mathematics/programming/physics or literature/philosophy/history?

5. High stress resistance and the ability to recover.

· Manifestation: The market is noise, pressure, and chaos. Your psyche must be “anti-fragile” – not just withstand blows, but also become more stable from them. After 3 hours of trading, you are exhausted, but not irritated, and can rest.

· Control question: How do you behave in a multi-kilometer traffic jam or in a queue that moves slower than you would like?

6. Perfectionism in execution, but not in results.

· Manifestation: You are obsessed with a perfectly executed movement: the entry key, the stop key, and the exit key. However, you are okay with the fact that 40% of your trades will be losing ones. The process is important, not each individual trade.

· Control question: In sports or games, do you prioritize executing technical elements flawlessly or winning at any cost?

2.3. Portraits of those who should NOT engage in scalping.

1. "The dreamer poet".

· Traits: Believes in a "big idea", seeks deep meaning, is prone to procrastination, and lives in a world of global forecasts. A romantic of the market.

· Why it is not suitable: He will be crushed and devalued by routine. He will think about the fate of the world when he needs to press a button.

2. " Gambler ".

· Traits: Looking for thrills, adrenaline from "winning". For him, a deal is a bet, and the market is a casino. After a loss, he has a burning need to win back.

· Why it is not suitable: This is the fastest way to a margin call. His discipline will collapse at the first series of losses. He will increase the volume, ignore stops. Scalping is suicide for him.

3. "Perfectionist-Result-Maker".

· Traits: Every failure is a personal insult. Needs 100% success. Cannot accept a series of 5 consecutive losses, even if it is statistically normal.

· Why it is not suitable: He will break mentally after the first drawdown. He will start avoiding trades, fearing a loss, or, on the contrary, fall into a neurosis due to excessive control.

4. "Slow strategist".

· Traits: Takes hours to make a decision, likes to collect a lot of data, and consult. Makes a decision once a day or once a week.

· Why it's not suitable: He simply won't be able to keep up with the speed of things. While he's analyzing a 5-minute candle, a scalper can make 10 trades on it.

5. "Tired and burned out".

· Traits: Comes to the market after hard work, with low energy levels, looking for a free meal. No resource for concentration.

· Why it is not suitable: Scalping requires peak concentration. Lack of energy will lead to fatal execution errors.

2.4. Minimum test: Are you ready to try?

Answer "yes" or "no" to the following questions:

1. I am comfortable working under strict regulations and many rules.

2. I am not prone to giving in to immediate emotions (rage, euphoria).

3. I am able to quickly switch between tasks without losing efficiency.

4. I understand and accept that even with the right actions, I will often (30-50% of the time) suffer small losses.

5. I have the opportunity to allocate 2-4 hours a day when I will not be distracted by ANYONE or ANYTHING (neither family, nor phone, nor colleagues).

6. I am not afraid of monotonous, routine work if it leads to the goal.

If you have 5-6 “YES” answers – you have psychological potential. 3-4 “YES” – you need to seriously work on developing the missing qualities. 0-2 “YES” – scalping is most likely not your way. Take a closer look at swing trading or investments.

2.5. Not a sentence, but a diagnosis

This chapter is not a filter that cuts off the "unworthy." It is a self-discovery tool. If you find yourself with features from an "unsuitable" portrait, but you passionately want to practice scalping, you have two ways.:

1. Consciously develop the missing qualities through training (for example, trading on a demo account using a timer), meditation, sports, and working with a psychologist.

2. Adapt the style: Instead of ultra-short scalping (seconds), you may want to try micro-swinging on 5-15 minute intervals, which gives you more time to analyze the market.

Remember: It's better to be a successful swing trader than an unhappy and deposed scalper. The market is faceless. It doesn't reward for efforts, only for results. And results are 80% determined by psychology.

In the next chapter: We will move from the psyche to the "hardware". What tools, programs and conditions are needed so that your new scalper psychology can manifest itself in full force? We prepare the workplace.

Chapter 3: Necessary Tools: Terminal, Exchange, and Speed

3.1. Requirements for a climber's equipment

Scalping is a climb to Everest in the world of trading. You won't go there with sneakers and a backpack from a supermarket. An inappropriate toolkit will not only complicate the task, but will also guarantee failure. This chapter is a checklist of professional equipment.

3.2. Computer and communication: the basics of the basics

Hardware (Hardware):

· Processor (CPU): Minimum 4 cores with a high clock speed (from 3.5 GHz). Preference is for Intel Core i7 / i9 or AMD Ryzen 7 / 9 of the latest generations. Most terminals are single-thread applications, and the frequency is important.

· RAM (RAM): 16 GB is the absolute minimum. 32 GB is the recommended standard. The market generates a huge amount of data. A smaller volume will cause lags and slowdowns at key moments.

· Storage: Only SSD (NVMe is ideal). Terminal loading, quote history – everything should happen instantly.

· Monitors: At least two, ideally three. On one – the main chart with a timeframe for scalping (1-5 min). On the second – an in-depth order book (Level II) and a tape of all trades (Time & Sales). On the third – a review chart (15 min/hour) and an order/position management window.

· Video card: Not critical for trading itself, but a powerful card will reduce CPU load when working with multiple monitors in high resolution.

· Backup power: An uninterruptible power supply (UPS) is mandatory. A 2-second power outage can cost you a month's profit.

Internet:

· Wired connection (Ethernet). No Wi-Fi. Periodic packet loss is deadly for a scalper.

· A dedicated line with minimal ping to your broker/exchange servers. Check the ping (latency) using special utilities. The goal is less than 10 ms, ideally 1-5 ms. This may require choosing a provider that specializes in low latencies.

· A backup channel (such as a 4G/5G modem from another operator) in case the main line goes down. Configure automatic switching in your router.

3.3. Trading terminal: your weapon

Choosing a terminal is choosing a type of weapon. Here are the main options for the Russian and international markets:

For the stock market (stocks, bonds):

· QUIK: Classic for the Russian market. Stable, with a deep cup. Requires configuration and learning. Hotkeys are customizable. Suitable.

· Transaq: A more modern alternative to QUIK with enhanced functionality. Popular among professionals.

· MetaTrader 5 (MT5): More suitable for forex and futures, but some brokers provide access to Mosbirja shares. Flexible, with algorithmic trading.

For the derivatives market (futures, options):

· NinjaTrader: One of the global leaders for scalping futures (CME, MOEX). Powerful built-in analytics, great DOM (glass) work, and convenient hotkeys. There is a free version for manual trading.

· ATAS (Advanced Tape And Searcher): The flagship for volume analysis and cluster analysis. It is ideal for scalpers working with a footprint and a market profile. Very popular on MOEX.

· Sierra Chart: A legend among professional traders. Extremely productive, highly customizable. It's difficult to learn, but it gives you incredible control.

· Thinkorswim (TD Ameritrade): A powerful platform with excellent visualization, but it is more focused on the American retail trader. Access to the cup and tape.

Selection criteria:

1. Depth of the cup (DOM/Level II): How detailed and fast the information is updated.

2. Customizability of hotkeys (Hotkeys): The ability to assign a complex action to one key (for example, buy 1 lot at the best price and set a stop at 10 ticks).

3. Speed of order execution: Test on a demo account. How quickly the order is sent and executed after pressing a key.

4. Stability: The platform should not "crash" during periods of high volatility.

5. Cost: Usage fees (if any) and data fees.

3.4. Data and exchanges: what to play?

· Liquidity is your everything. Trade only on the most liquid instruments: futures on indices (RTS, MX), on stocks (GAZP, SBER), on currency (Si, BR), blue-chip stocks, major currency pairs (EUR/USD).

· Why? A narrow spread (the difference between buying and selling), high execution speed, large volumes in the cup, which allows you to enter and exit with minimal slippages.

· Avoid: Low-liquid stocks, exotic pairs. Spread and slippage will eat up your microscopic profits.

3.5. Broker: your strategic partner

· Technical support: 24/7, by phone. An order problem at 10:01 should be solved by a call at 10:02.

· Rates: Key point. You need a special rate for active traders (algo trading) with a fixed commission per contract/trade, rather than a percentage of turnover. Consider: 100 transactions per day with a commission of 5 rubles per transaction = 500 rubles per day, 10,000 rubles per month. These are your fixed costs.

· API Access: For future automation or the use of third-party add-ons.

· Gateway stability: The frequency of "disconnections" from the broker's servers should be zero.

3.6. Workspace Setup: Ergonomics of Victory

· Chair: Ergonomic chair with lumbar support. You will spend hours in a static, tense position.

· Desk: Spacious, so that the monitors are at a comfortable distance.

· Keyboard: Compact mechanical keyboard (e.g. 60%) for quick access to all keys. Place it so that your right hand is on the mouse and your left hand is on the enter/exit keys.

· Mouse: Comfortable, with additional programmable buttons that can be assigned functions.

· Lighting: Does not create glare on monitors. Dim, neutral light.

· Silence: The workplace should be isolated from household noise.

Check list before the first launch:

· Two monitors are connected, and the resolution is set up.

· Wired internet, ping to the broker < 10 ms.

· The terminal is installed, and the hotkeys are set up for your hand.

· The speed of sending an order is checked on the demo account.

· The broker's tariff plan matches the scalper's activity.

· The UPS is turned on and charged.

· All notifications are disabled on the phone, and the door is closed.

Remember: In scalping, you're not only competing with other traders, but also with robots located in the same data center as the exchange. Your goal is to minimize your technological disadvantage. Investing in the right tools is not a expense, but rather a starting capital for this business.

In the next chapter: Once you have the right tools, it's time to learn how to read the market. We will dive into the microstructure of the market: we will learn to read the order book, the trade tape, and understand what the volumes actually show.

Chapter 4: Fundamentals of Market Microstructure: Order Book, Time & Sales, and Volumes

4.1. Behind the Scenes of the Chart: What the Candlestick Shows You

A five-minute candlestick tells you, "The price opened here, was here, closed there." It's like a news summary. But a scalper needs a real-time transcript of events. Who, with what volume, and at what second, moved the price? The microstructure of the market provides the answers by studying the very mechanism of making trades.

4.2. Order book (Level II, DOM) – a map of strength and intentions

What is it? A table of all active limit orders for buying (bid, Bid) and selling (ask, Ask), indicating the price and volume. This is not a history, but the current intentions of the participants.

How to read (basic principles):

1. Real-time support/resistance level: A thick "wall" of large buy orders at a certain price is dynamic support. A sell wall is resistance.

2. Market depth: Total volume at the best prices (Top of Book) and several levels below/above. Low depth = fragility, and the price can move significantly with a small market order.

3. Imbalance: If there is a total volume of 500 lots at the bid level and 100 lots at the ask level, buyers are more aggressive. There is a high probability of an upward breakout if this imbalance persists.

4. "The Fence" (Iceberg): One large application disguised as many small ones at the same level. It indicates the intention of a major player not to show his true size.

5. Cat and mouse game (Spoofing): A large order appears to create the appearance of support/resistance, and then is quickly removed when the price approaches it. The goal is to make other traders react and execute the order yourself

Scalper's tactics at the cup:

· Stop-loss removal: You see a cluster of small limit sell orders just below the clear low. This is a trap. A big player can push the price down so that these stop-losses work as market sell orders, and then turn around and buy cheaper.

· Level break: The price approaches the sell "wall". If you see the volume in the wall start to melt (bids are removed) before the price touches it, it is a strong signal for a breakout. Someone knows that the resistance is weaker than it seems.

4.3. Tape of all trades (Time & Sales, Tape) – the pulse of the market

What is it? A chronological list of executed trades in real time. Each line: time, price, volume.

How to read (the art of Tape Reading):

1. Speed and color: A fast stream of green (up) or red (down) trades shows momentum.

2. Large trades (Print): A trade with a large volume that exceeds the average. It is important where it passed:

· At the ask level, a large volume is an aggressive buyer taking the offer.

· At the bid level, a large volume is an aggressive seller dumping into the buyer.

· In the middle of the spread, it often means an internal trade or position transfer, which is a less significant signal.

3. Clusters of volumes at the same price: If the price is "stalling" at the same level, absorbing large volumes, it is an accumulation/distribution zone. Someone is actively accumulating or selling a position.

4. Inconsistency: The price is going up, but large prints are going down (selling on bid)? This is a divergence, a signal

4.4. Volumes (Volume) – gunpowder for movement

Volume confirms strength. Price movement on low volume – suspicious and reversible.

Types of volume analysis for scalper:

1. Cluster analysis / Delta (Footprint):

· Shows the distribution of volume within the candle by prices.

· Delta (Delta) = Volume for purchase (by market) minus Volume for sale (by market).

· Signal: A strong green candle with a negative delta (sellers are more active at each price within the candle) is a weakness. Large players may have sold to retail buyers during the rise.

2. Volume Profile (VP, Market Profile):

· Shows the prices at which the most active trading took place during the selected period (hour, day).

· Key levels:

· Point of Control (POC) – the price with the maximum volume for the period. The main balance.

· Value Area (VA) – the range where ~70% of the volume has passed. The "fair" price zone.

· Scalping at POC/VA borders: The price that returns to POC often finds support/resistance. A breakout of the VA border with volume is a strong signal to follow.

3. Comparison with VWAP (Volume Weighted Average Price):

· VWAP is the average price weighted by volume. Institutional players try to execute orders close to it.

· Tactics: Price above VWAP – a trend towards buying during the day. A rebound from VWAP from below – a potential long signal. A break of VWAP from above to below with volume – a change of control.

4.5. Synthesis: an example of reading a microstructure

Situation: Futures on the RTS index.

1. Chart: The price is testing the daily high.

2. Cup: At the level of sales (ask), there is a "wall" of 1,000 contracts. However, you can see that 500 of them are quickly disappearing.

3. Tape: A series of small up trades by ask appears, followed by a single large print of 200 contracts that consumes the remaining part of the wall.

4. Volume: A spike in volume is visible on the 1-minute chart, and the Delta is sharply positive.

5. Conclusion: A large player has removed their own order, weakening the resistance, and then aggressively purchased the remaining volume. This is a breakout signal. Your entry is on the breakout after the large print.

4.6. Perception training

1. Watch without trading. Spend 20 hours just watching the cup and tape of a liquid instrument. Write down what preceded sharp movements.

2. Cup simulator: Use special programs (for example, ATAS has a simulation mode) to practice your reaction.

3. Focus on one instrument. Each instrument has its own "handwriting" – characteristic volumes, typical size of orders in the cup.

Chapter summary: Microstructure is the language in which the market speaks about its true intentions. A chart is a picture. A cup and a tape are a live video with sound. Your task is to learn not to look, but to see and hear. This is the only way to gain an advantage over those who only trade by candlesticks.

In the next chapter: We will combine the theory of microstructure with practice by analyzing specific trading strategies based on working with a cup, a tape and a volume profile.

Chapter 5: Trading by Levels: Support/Resistance, POC, VWAP

If microstructure is live, then levels are key coordinates on the . 5.1. Levels: A Scalp's Terrain Map

map where action is most likely. A scalper does not look for "absolute" levels on monthly charts. It looks for working, tactical levels on its timeframe, where supply and demand collide right now. In this chapter, we will hone three main tools for finding them.

5.2. Dynamic Support and Resistance: Real-time Psychology

Classical levels by highs/lows are too crude a tool. A scalper works with more subtle manifestations.

How to find and use:

1. Levels from the cup (Bookmap levels):

· What is it: Horizontal clusters of limit orders in the cup, visible as dense horizontal lines on special heat maps or simply as "thick" levels in the DOM.

· How to trade: The price often slows down as it approaches such a cluster. Your task is to determine whether the level will be broken or retraced. Look at the speed of "dissolving" orders at the level (see Chapter 4). If the volume at the level is rapidly melting, prepare for a breakout and join in. If it is standing firm, play for a rebound.

2. Sessions High/Low (session extremes):

· What is it: The maximum and minimum price for the current trading session (for MOEX, from 10:00 to 18:40, for CME, depending on the contract).

· Psychology: These are clear, visible levels where stop orders of traders who are playing for a break or a rebound from extremes accumulate.

· Scalper's tactics: Do not anticipate a break. Wait for confirmation. Approach to High on low volume with negative delta? Preparing a short position for a false breakout (see below). Aggressive breakout of High on high volume with large prints on ask? We can join the movement.

3. Candlestick patterns at the micro level:

· What is it: Formations on 1-5 minute charts: Pin Bar (false breakout), Inside Bar (compression), Engulfing (absorption) at key levels.

· How to trade: The pattern only confirms the importance of the level. Enter at the close of the pattern candle or at its extremum breakout.

5.3. VWAP: The Compass of the Institutional Day

VWAP (Volume Weighted Average Price) is not just a line on the chart. It is the balance of power for the current session.

Logic: Large players (funds, algorithms) tend to buy below VWAP and sell above it, so that their average price is better than the market price. This creates a self-fulfilling prophecy.

VWAP scalping rules:

1. Trend vs. Range:

· If the price is consistently higher than the VWAP and uses it as support, buyers are dominant. Look for long setups on the rebound from the VWAP.

· If the price is consistently lower than the VWAP and uses it as resistance, sellers are dominant. Look for short setups on the approach to the VWAP.

2. VWAP breakout – change of control:

· VWAP breakout from below with increased volume and positive delta – possible change of mood to bullish. The first rollback to VWAP after a breakout is a point for entering a long.

· A breakout of VWAP from above to below with volume is a signal to the dominance of sellers.

3. Divergence with the price (Advanced tactics):

· The price makes a new High above the VWAP, but the VWAP itself begins to smooth out or turn down. This is a hidden weakness. We are preparing for a reversal or correction.

Important: The VWAP is updated again every session. It is most powerful in the first half of the main trading session.

5.4. Point of Control (POC) and Value Area (VA): Where the real battle was fought

Volume Profile shows where the volumes were traded. Its key levels are the areas where real trades were executed, rather than just orders were placed.

1. Point of Control (POC):

· The price at which the highest volume of trades was executed during the selected period (hour, day). This is the price of maximum consensus, the main front line.

· Tactics: POC acts as a powerful magnet and level. When the price moves away from POC, it often returns to it for "revaluation." A rebound from POC is a strong signal. Consolidation (sideways movement) around POC indicates that the market is searching for a new balance.

2. Value Area (VA) and its boundaries (VAH/VAL):

· Value Area is the price range around POC, where ~70% of the day's volume occurs. It represents the "fair price" zone.

· The upper limit (VAH) and the lower limit (VAL) are key dynamic support/resistance levels.

· Tactics:

· A bottom-up breakout of VAL with volume is a signal to start an upward movement. The goal is at least VAH.

· A top-down breakout of VAH

5.5. Synthesis: Decision-making sequence

Here is how it works in a bundle on the example of a long setup:

1. Context: The market is in an uptrend (the price is above the daily VWAP and POC).

2. Level: The price has rolled back and is approaching the daily POC, which also coincides with the lower border of the Value Area (VAL).

3. Confirmation from VWAP: The rollback stopped above the VWAP (the trend is not broken).

4. Microstructure: A cluster of buy orders (support) is formed in the cup at the POC level. The tape shows how sales at this level are absorbed (large green prints).

5. Entry signal: The appearance of a bullish candlestick pattern (e.g., pin bar) on the 1-minute chart at the POC level + the beginning of delta growth.

6. Stop loss: A few ticks below the POC, under the cluster of buy orders.

7. Take Profit: When approaching the next obvious level, such as the VAH or the session High.

5.6. Exercise for practice

1. Open the chart with Volume Profile and VWAP.

2. Highlight the last 3-5 strong movements for the day.

3. For each movement, determine:

· From which level (POC, VAH/VAL, VWAP, High/Low) it started?

· What was the volume and delta at the starting point?

· Where did the movement end (which next level became a resistance)?

4. Look for repeating patterns for your instrument.

Chapter summary: Levels are not magic lines. They are areas of increased probability where the market microstructure (glass, tape, volumes) should provide you with confirmation. Your strength lies not in prediction, but in recognition: "Ah, the market is respecting this POC again, and big players are buying here. Therefore, I can join with minimal risk."

In the next chapter: We will learn the most aggressive and precise tactic: scalping on liquidity, where we will literally "read the minds" of large players hunting for stop orders.

Chapter 6: Liquidity Scalping: How the Market "Collects Stops"

6.1. Liquidity is not an abstraction, it is your goal

So far, we have talked about levels where the price can reverse. Now we will delve into the reason why it does so. The market does not move on a whim. It moves towards the accumulation of orders – towards liquidity. For a scalper, understanding this is the key to predicting short-term movements with high accuracy.

The simplest analogy: Imagine that the price is a vacuum cleaner, and limit orders (especially stop-loss orders) are dust. The price is attracted to the places where this "dust" is most concentrated, in order to "suck" it up.

6.2. Types of liquidity: what the market "takes away"

1. Passive liquidity (Liquidity Pools): These are visible clusters of limit orders in the cup. Those very "walls" for buying or selling. They provide the market with the ability to make transactions with minimal slippage.

2. Hidden liquidity (Icebergs): Large orders disguised as many small ones. They are more difficult to see, but their presence can be felt by the stability of the level.

3. Stop Losses (Stop Hunts): This is the main "delicacy" for the market. Stop Losses are market orders that are activated when the price reaches a certain level. They are not visible in the order book until they are activated. However, an experienced trader knows where they are likely to accumulate.

Where do stop-losses accumulate?

· Behind obvious technical levels: Behind the session's lows/highs, behind round numbers (for the Si futures, levels multiple of 500 RUB), behind key Moving Averages, behind the previous day's High/Low.

· Behind levels that have been actively "tested": If the price has bounced off a level several times, many traders place stops slightly lower (for longs) or slightly higher (for shorts), hoping that the level will hold.

6.3. The mechanics of "picking up stops": how it looks in real time

Let's consider the classic situation of a False Breakout, the purpose of which is to take stop losses.

Scenario: A sideways market. The obvious Resistance level is at 100,000 points on the RTS.

1. Phase 1: Preparation (Accumulation).

· A big player (or an algorithm) starts accumulating a position near the level, but inside the range (say, at 99,800). He does it carefully, with limit orders, without pushing the price up.

· At this time, retail traders see the level of 100,000 and put stop-losses for buying (buy stop) just above it (at 100,020), waiting for a breakout and continued growth.

2. Phase 2: Provocation (Breakout).

· A large player removes their limit sell orders at the 100,000 level (or even places a market buy order). The price makes a sharp but small-volume move above the level (to 100,030).

· This activates all the buy stop-loss orders, which turn into market orders.

3. Phase 3: Reversal and Implementation (Fence).

· The big player meets this surge of purchases with their pre-accumulated offers (sells). He sells them at high prices what he bought at lower prices.

· The price, not receiving support, falls sharply back inside the range.

· Result: The big player takes profit. Retail traders who bought on the breakout are at a loss, and their stop-losses for selling will now be lower. The cycle can repeat.

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