Scalping trading strategy is a technique based upon a real-time technical analysis. When talking about stock trading, scalping is a technique in which traders make large numbers of trades, and each of them produces small profits. The primary purpose of scalping is to make benefits as little as a minute without holding any position for hours, days and weeks. Investors who use this style of trading are known as scalpers.
About Scalping Strategy
A strict exit strategy is required for traders in scalping. The traders aim to get as many small profits as possible without holding any position. Scalping is just the opposite of the theory “let your profits run”. The process of scalping involves fast booking of small profits and losses that appear in the market. Every one of us knows that the stock market is the most volatile and most liquid market.
Advantages of Scalping Trading Strategy
- Scalping trading strategy is bi-directional. It means you can benefit from both the bottom and top markets.
- There is no need to analyze the market and to do forecasts.
- At the end of the day, you can take your entire profit home without worrying about market conditions.
- There is no need to wait for a longer time to start a stronger trade.
- You will get much bigger profits.
- Stop-loss points and tight leverage makes it less risky for every type of business.
- You can earn a good profit by trading just a few hours a day.
- Small moves take place more than the larger moves, and a good stock trader can use these moves efficiently when the market is quiet.
Disadvantages of Scalping Trading Strategy
- A large deposit is required.
- The cost of transactions is very high compared to other stock trading strategies.
- There is no margin for errors in scalping.
- You need to make cold and calculated decisions instantly after understanding and analysing the situation.
- High commission fee.
- Risk profit ratio is 1:1 in many cases.
- The strict discipline required.
- Compared to other trading strategies, the cost of error is much higher.
- Need advanced software.
One Minute Scalping Strategy – Best for Profits
- Introduction Scalping is a trading strategy that usually works best using a short-term time frame. Contrary to the position of trading strategy, scalping focus on making many profitable trades with small margins
Usually, you won't have much time to do a comprehensive fundamental and technical analysis when scalping. The moving average continues to change and the price is constantly "corrected."
- Less Margin, More Trades If you try to apply a one-minute scalping strategy, volume indicator, M5 / M15 time chart, and the price action trend must be the first thing you see.
The key to scalping when using a short time frame is to identify price changes before the entire market has the opportunity to act. Therefore, many brokers can apply stop-loss commands and stop-limit that are tight from time to time. The catch here is to exit frequently with low margins, as low as 1%.
Choosing the Top Broker for Scalping
It is essential to choose a broker wisely before starting scalping. Because there are so many brokers who do not allow scalping and keep you away from closing the trades that last less than three minutes. So the very first step to choose a perfect broker for you is by eliminating those brokers who do not allow scalping. Many brokers charge a commission on scalping, and that is not a bad thing, but in this condition, you need to calculate the commission with your charges. There are several other points to keep in mind while choosing a perfect broker for scalping such as
- Regulated by any authorised financial authorities.
- Quality of order execution
- Competitive costs and spreads
- High-speed execution
- Secured funds
- Lower rejection and slippage rates
- No control over trading strategies or styles
The best trading platform for Stock trading and scalping is undoubtedly Zerodha. Traders can trade a wide range of assets or financial instruments such as CFDs, Stocks, Indices, Stock, and much more.
Best Scalping Indicators – RSI & Moving Average
- Relative Strength Index (RSI) Some scalping trading strategies use momentum in the market to identify the best entry points and out. The relative strength index (RSI) is an oscillator, which means it can predict the direction of future assets for a certain period of time.
RSI can be used to determine excessive prices; In particular, if the RSI is above 70, the market is overbought and if the RSI is under 30, the oversold market. The best way to utilize this oscillator for your scalping trading strategy is to set a 1 minute graph (or a 5 minute graph for beginners).
- Moving Average (MA) Moving Average can help identify a long and short position to take towards trends. To lock your profits, you must close your purchase when the upward momentum ends and EMA-7 surpasses EMA-14.
Because of its simplicity and efficiency, the use of moving averages is considered the best stocks trading strategy for beginners. In addition, this system is ideal for stock trading even though it also works well with other assets.
Scalping is an extremely useful trading style; however, it requires hard work, so it pays off the reward. The more a trader will perform the more profits he/she will achieve. If a trader starts scalping the trading style, personality, and ability should match the trading strategy. Scalping can turn out to be the most profitable trading strategy for the trader, but the only thing to keep in mind is adherence to strict exit policy.