Several traders are often attracted to scalp trading because of many associated benefits, one of which is less exposure to risks. Scalp trading presents a better number of trading opportunities and can help you place up to a hundred trades or more per day. It also provides you with the opportunity to restrain your greed since your profit targets are small.
What’s Scalp Trading?
According to Norris (2018), Scalping is a style of trading where traders take profits on small price changes arising from a profitable trade. This style of trading requires you to employ strict exit strategy since one huge loss could eliminate the entire small gains you had obtained.
As a scalper, you have the chances of a hundred trades in a day. But, you will most likely use a one-minute chart since you are constrained by time, though you need to keep your eyes on the setup, as close to real time as possible, as they take shape. If you will be embarking on this trading style, you need to get familiar with supporting systems such as Level 2 quotations and Direct Access Trading, etc.
Scalp trading is premised on the fact that a brief market exposure diminishes the chances of running into an adverse event. The second premise is that smaller moves are easier to obtain and are often more frequent than larger ones.
How can you identify profitable stocks for day trading scalping strategy?
When it comes to selecting the best stocks for daytrade, there are lots of methods you can adopt. However, when it comes to strategies for day-trading stock, traders will most likely opt for these three characteristics:
Significant daily volume
It is often advised that you trade during very liquid hours since liquidity brings more volatility to the market, which invariably offers you a quicker and outstanding move to make a profit.
As a master of scalp strategy, the volume is essential. Without sufficient volume, there will be inadequate liquidity. The problem with this is that the price will not move as expected and can lead to a thin market. Note this – one thing you must avoid is scalping a thin market. This has the capacity to ruin your finances.
Beyond the crucial option of choosing when to trade, selecting what to trade on is equally important. There is no doubt that you can scalp any financial instrument of your choice, whether binary options, stocks, bonds, etc. But, your main focus should be the ones that are heavily traded.
As earlier noted, the volume is key. This helps to protect you when a market has a negative effect on your moves. If you want to hit your target repeatedly and fast, high volume is essential to make a huge profit.
If you must win big, you must learn the strategies needed to ace investors. The challenge with this strategy is not just evaluating stocks but finding profitable stocks to evaluate. Therefore, if you must minimize risks associated with investing in such a volatile market, you need to investigate and invest in a properly-managed firm.