The financial market includes different styles of trading, such as Intraday, Swing trading, Positional trading, Scalping. The traders who are engaged in Scalping trading, known as Scalper. The prominent trading strategy is applied by both institutional and retail traders. Basically, scalping indicates quick small returnable trades. In this article, we will go through scalping trading strategies in details.
What is Scalping Trading
This strategic trading mainly focuses on intraday trading and also on the quick short-term profit. The objective of this trading is to limit the risk factor by taking a small profit repeatedly. It has gained lots of popularity among profession short-term traders. The Scalping strategies make an easier way to catch the small price moves in the stock market. As it deals with the small price change, traders need to be very strict and concentrate on the exit strategy. A large gap in price may cause a big loss because in this type of trading traders basically invest a huge amount of money.
Features of Scalping Trading
- As traders have to concentrate on minutes details of price action, it is most important to have proper tools such as a live data feed, a direct access broker.
- The scalping trading theory is totally different from “let your profit run” mindset. Scalpers tend to take as many small profits as possible.
- In order to sustain in this trading, traders have to have high focus and quick decision-making ability. A fraction of time can take you to a higher profit or a huge loss.
- Application of Scalping is more valid when there is high volatility in the market.
Three Types of Scalping Trading Strategies
Here Scaplers simultaneously watch out the bid and offer price movements. The trades are based on them. Stocks with big volumes without any real price change are accurate for this types of scalping. The strategy is hard enough as traders have to compete with the market makers for shares on both bids and offers.
Small Price Movements
This type belongs to traditional price change. Scalpers purchase bulks of share and wait for very small price movements. The movements are so small that these are counts by cents.
The method works on the 1:1 risk/reward ratio. After entering the market, Scalpers wait for the particular risk/reward ratio to make an exit.
7 Simple Scalping Trading Strategies
- Scalpers should find out high volume stocks for this trading,
- Here, proper entry and exit time are so important, most of the trades depend on this strategy.
- Investors have to be very attentive and concentrate during scalping because a fraction of second is important here.
- The probability of loss is higher here. Therefore, traders prepare themselves about this types of trades.
- Using oscillators in this trading is of the best strategies. Stochastics, Bollinger bands are the most widely used technical tools to trade scalping.
- Support and resistance is another significant factor in scalping.
- Try to do one trade at one time. Most of the successful Scalpers follow the strategy.
However, this is a brief overview of various scalping trading strategies. Though the probability of loss is higher, traders with experience and knowledge of this can earn huge profit.
Indrajit is a professional blogger and trading system developer. Amibroker expert, WordPress expert, SEO expert and stock market analyst.Trading since 2002, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely.