Scalping trading strategy
About
Traders who use a scalping strategy place very short-term trades with small price movements. Scalpers aim to 'scalp' a small income from each trade in the hope that all the small benefits accumulate. As a scalper, you must have a disciplined exit strategy as a large loss can eliminate many other benefits that have accumulated slowly and steadily. Forex scalping is particularly common for trading currency pairs.
A scalper would operate away from the common mantra "let your successful trades run", as scalpers tend to take their income before the market has a chance to move. As scalpers generally operate on a risk/reward ratio of around 1/1, it's common for scalpers not to make a large income per trade, focusing on increasing their total number of smaller successful trades instead.
A scalper would operate away from the common mantra "let your successful trades run", as scalpers tend to take their income before the market has a chance to move. As scalpers generally operate on a risk/reward ratio of around 1/1, it's common for scalpers not to make a large income per trade, focusing on increasing their total number of smaller successful trades instead.
PROS OF SCALPING TRADING STRATEGY
There is no overnight risk.
Scalpers do not hold overnight positions and most trades only last for a few minutes at maximum.
It's suitable as a hobby.
Scalping is suitable for people who want to trade flexibly.
Many trading opportunities.
Scalpers open several small positions with a less defined criterion in comparison to other strategies, therefore there are a lot of opportunities to trade on.
CONS OF SCALPING TRADING STRATEGY
Limited market applicability.
Scalping only works in particular markets such as indices, bonds and some US equities. Scalping requires very high volatility and trading volumes to be worthwhile.
Requires discipline.
As scalping requires larger position sizes than other trading styles, traders need to be extremely disciplined.
It's an extremely tense environment.
Monitoring the slightest price movements in search of benefits can be an extremely intense activity. It's therefore not recommended for beginner traders.
WHAT IS THE BEST TRADING STRATEGY?
When it comes to trading strategies, they can all perform well under specific market conditions; the best trading strategy is a subjective matter. However, it’s recommended to pick a trading strategy based on your personality type, level of discipline, available capital, risk tolerance and availability.
