Scalping
Introduction
Scalping is a day trading technique used to identify short market movements to make profit. When a security doesn’t have a clear trend (upward or downward), the short price movements is what Scalpers are looking for. Using large number of trades within a short period of time, then the small market movements can add up to make quite reasonable profit.
Scalping Trading usually uses short time frame to identify opportunities. Typical time frames used in scalping are 1, 5 and 15-minutes.
Scalping techniques depend solely on technical analysis and far less on financial data as small market movements are driven by supply and demand and not news or financial results of companies. Scalping can be done manually or with the use of Automatic Bots. Manual scalping however will need executing frequent trades in a small period of time and also avoiding emotional trading as the gains may well be vanished if the security is not sold on the right time.
Usage
Scalping techniques may be used in different markets, including Stocks, Futures, Forex and Options. Scalping can also be used with leverage to maximize profits.
Care has to be taken when choosing a broker for Scalping. It’s prefered to trade with a broker with low spread values. As the price movement in Scalping are not large, a high spread can eat profits made during scalping.
Types of Scalping Strategies
Moving Average Based Scalping Strategy