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

· 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.