Scalping It is a trading strategy Buy and sell financial assets within a few minutes or even seconds. The trader’s goal is to execute ten or hundreds of trades per day and make a small profit on each of them.
For example, a trader who executes 20 trades per day, making a profit of $5 per trade, will have a total profit of $100 (same for a trader who executes 200 trades and makes a profit of $0.50 per trade).
To maximize the results of this approach, it becomes critical that you succeed in creating a strategy that will allow you to do so A measure of either the number of trades or profits You can be born from each.
In this article, we will look at some of the simplest strategies to improve your scalping trading strategy.
How does scalping work?
Scalping is a trading approach where the trader Entering and exiting multiple trades With the aim of making a small profit on each. As such, these trades are used The charts are very short term which is often less than 5 minutes.
Then they apply one of their strategies to trade the asset. For example, a trader using the VWAP indicator will place a long trade when the price moves above the VWAP indicator.
Similarly, a trader who uses moving average crosses will place a buy trade when the short and long term moving averages make a crossover.
A successful scalping strategy involves owning The best risk management tools. Some of the best risk management tools are stop loss and take profit.
Scalping trading strategies
Before we look at how to improve your scalping trading strategies, let’s take a look at some of the best scalping tactics:
- VWAP Scalping Strategy This is a trading style that uses the scalping methodology. In it, the merchant A Buy the trade when the price moves above the VWAP vice versa.
- Moving average scalping strategy This is a trading style where the trader buys when the price is above the moving average or when it is The short and long moving average make an intersection.
- Oscillators strategy – This is a trading strategy that involves placing a buy trade when the oscillators are at an oversold level and a sell trade when they are overbought.
- Chart pattern strategy This is an approach that involves looking at patterns such as the triangle, head and shoulders, and double top.
- Candlestick patterns – This is a trading strategy that involves looking at Japanese candlestick patterns such as Doji, Harami, and Bullish Pennant.
Strategies to improve scalping
There are many strategies that will help you improve your scalping strategy. Let’s go see and explore some of these methods.
One of the best scalping strategies to use is directional bias. It indicates a process Following an existing trend rather than forcing movements. Also known as trend following. The opposite of this is trend fading, which can be very risky at times.
Therefore, if the stock is in an uptrend, you should focus on buying. You can use several strategies to do this.
For example, you can Use a technical indicator Like moving average or Bollinger Bands to support your move. In the case of bullish trading, you should hold the position as long as it is above the moving average.
Always keep a trigger
The other thing that will improve scalping is Having a good catalyst. The catalyst indicates the main reason for a particular movement. There are several types of these triggers, including:
- merger and acquisition
- Management change
A good way to look at this is to focus on stocks Make big strides in the market. Some websites such as WeBull, TradingView, Market Chameleon, and Investing.com provide a list of companies that make big moves in the pre-market session.
Focusing on these companies, whether you know them or not, can help you speculate.
Another tip is relative volume to enhance your scalping strategy. This is where you look at trading volume and then Consider the average volume in a given period.
For example, if a stock is trading 1 million shares while the 30-day moving average is at 200,000, this means that there are more buyers or sellers of the asset. Fortunately, many companies such as Investing.com provide volume analysis data.
Always protect your trades
The next tip for better scalping is to always protect your trades. Fortunately, most online brokers provide risk mitigation tools such as stop loss and take profit.
a A stop loss will stop the trade automatically When it reaches a certain loss level while take profit will stop it when it reaches the profit target. You should always hedge your trades to prevent any big moves.
Don’t overdo it
Finally, the main advice that will help you in speculation is that you must Don’t overdo it Because of the risks associated with excessive trading.
In most cases, you should Determine the sweet spot It depends on the number of trades that you have to execute on a daily basis. For example, you can decide to carry out a maximum of 15 trades per day. In this, you should avoid placing more trades than this.
In line with this, you should always have a trading journal, which is a file The document that lists your trades. The journal can be a piece of paper or an electronic version. The magazine will help you avoid common mistakes and take advantage of some opportunities.
This article looked at some of the best tips to use when using a scalping trading strategy. We have explained how the scalping approach works and some of the most important things you will use to improve the situation.
Useful external sources
- What is the best scalping trading strategy? – Quora