Last week in part 1 of this post, I linked a video by Julia Galef, where she use the metaphor of a Soldier and Scout to refer to two different mindsets. 

In the trading/scalping world. These two metaphors could be used to highlight two key skills needed to scalp. Let's see what they are.

Scalper as a Scout - If you remember in the video, Ms. Galef says, "The scout's jobs is not to attack or defend, his/her job is to identify the terrain, look for any obstacles, and above all understand whats out there as accurately as possible" 

In the scalping world it means, knowing the "Range" probabilities of the instrument that you are trading. You need to know how far can it go in either direction. The following are some of the questions that you would need answers for.

1. What is the median/mean range of the instrument that you are trading?
2. What is the standard deviation? or IQR interquartile range?
3. What is the probability of a mean reversion of the instrument on an intraday basis?
4. Are there any time based probabilities? For example is there a a time slot where the probability of a mean reversion is higher?
5. If range expansion happens, at what time slots is there a higher probability of an expansion? or does it expand in a linear way? 
6. Are there any day based probabilities? For example are Mondays on an average low range day or expiry days are high range?

As as scalper you need to know all these and more, that's the terrain on which you would be fighting the battle. How can you even afford not to know it? Remember how the Allies (with all their artillery and trained soldiers) lost the Battle of Gallipoli against the Ottaman empire. One of the main reasons for that was inaccurate maps and lack of understanding of the terrain. 

Back to markets, so without understanding the range probabilities of the instrument, your trading tools (read charts, indicators etc.) are all of no use. You cannot be shooting bullets if you are down in the ditch. 

Scalper as a Soldier - While you definitely need to know the terrain well, you also need to know how to fight the battle. Which in the language of trading would mean, entries, exits, scaling-in and scaling-out, understanding indicators and other tools for precise entries and exits.

You also need, psychological traits of courage, patience, and most importantly resilience.  

Lastly, it's important to recognize that as Soldiers sometimes we loose sense of the territory, after all maps are not territories. They are abstraction of the territory. Maps are in our minds.

In the words of the Polish American philosopher Alfred Korzybski these are metaphors of belief and reality - "Reality exists outside our mind but we can construct models of this 'territory' based on what we glimpse through our senses." - Perhaps that's the reason we use the term "Mental Maps" and not "Mental Territories".

The only way out of this Map vs. Territory paradox, is to reconcile both, as often as possible.