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Scalping Transactions
Have you ever heard of scalping? New investors may wonder what this term, which sounds so barbaric, has to do with the financial world. In fact, it is a popular trading strategy.
If you are interested in opening and closing positions quickly in a short time, please continue to look down. This article will introduce you to the concepts and techniques of scalping trading strategies from shallow to deep.
What is Scalping?
Scalping, also known as hat snatching, is a popular trading strategy that is characterized by the rapid start and end of a trade in an ultra-short period of time.
Scalping is the shortest form of day trading that specializes in profiting from small changes in asset prices. The name comes from the way it achieves its goal-to complete a large number of transactions in one day and accumulate small profits.
The principle behind this technique is that small streams can also be gathered into rivers. The key to scalping is to open large trades and make small profits in the shortest holding period (seconds to minutes). Few scalpers hold positions for hours, as the main goal of this technique is to open a position at the ask or bid price and then quickly close it at a few points or higher to make a profit. All scalping positions will be closed at the close of the day.
Traders who implement this strategy are known as scalpers. They believe that small fluctuations in prices are easier to make a profit than large fluctuations. Scalping traders can make hundreds of trades in a day and make small profits.
It is important to note that the scalping trading strategy requires a certain level of expertise as it is known as one of the most challenging trading strategies. Scalping trades are fast paced and require traders to make decisions in seconds, which requires superior concentration and judgment. Therefore, traders should consider carefully and prepare a bottom plan to prevent possible huge losses.
Scalping Trading Strategies and Tips
In fact, every scalper will apply a variety of trading methods, and scalping strategies can be used as an auxiliary strategy for the underlying technique or overall trading plan.
Successful scalpers try to find price patterns, support and resistance levels, and technical indicator signals. In order to maximize the effect of scalping, you can focus on price charts with multiple time intervals, such as one-minute and five-minute candlestick charts.
Momentum indicators are one of the commonly used indicator tools, such as Stochastic oscillators (Stochastic oscillators), relative strength indices (RSI) and smooth moving averages (MACD); There are also price chart indicators, such: moving averages (MA) and Bollinger Bands (BOLL). In addition, you can use other technical analysis metrics as needed.
The most popular scalping technique is to use only the time and sales in the market to decide the time and price point of the transaction. Another common method is to preset a profit target amount related to the asset price, which can be between 0.1% and 0.25%. You can also track stocks that break through the daily price highs/lows, using Level II (order book) to get as much profit as possible. Finally, some traders will pay attention to current news and trading situations, or upcoming events, which may have a certain impact on the price fluctuations of certain assets.
However, one of the most convenient ways to trade scalping is to trade contracts for difference (CFD). CFDs give you more money allocation freedom and more market share with less initial capital. Leverage makes your investment return higher, and of course the risk of loss is magnified at the same time.
CFDs also provide you with the opportunity to trade assets without actually owning them, speculating on price movements, greater liquidity and lower execution thresholds. In addition, the use of CFDs for scalping transactions does not require the payment of financing interest, as all positions will be closed at the close of the market.
So, start the scalping tour, or not? It all depends on your personal trading interests and goals. If you prefer fast trading and are eager to learn some new techniques, then perhaps a scalping strategy is a good choice. Of course, this strategy can be very challenging. If you are a novice, it is best to practice with a demo account before you are ready to dive into real trading.
A few things about the scalping trade
As with any other trading strategy, before deciding to add a scalping strategy to your overall trading plan, it is important to understand several characteristics of scalping trading.
First, why is the scalping trade so loveable? An important advantage of the scalping strategy is that the relatively small size of the transaction, its exposure is also small, which gives us all the opportunity to profit from unpredictable market changes;
this provides more trading opportunities for scalping trades as small price movements are easier to enter the market. Coupled with the fact that small fluctuations are more frequent than large fluctuations, even in a relatively robust market, there are still many small price changes that can be used for scalping strategies.
In addition, you can make as many as a hundred or more transactions per day.
The downside to the scalping strategy is that such demanding and fast trading is not for everyone. For some traders, this is profitable, but it also brings corresponding risks. Precise timing and fast execution are essential in conducting scalping transactions. If the market changes and you don't react quickly, you are likely to suffer a huge loss. Think of scalping as a marathon, and you have to be quick to take advantage of every favorable opportunity.
How to trade scalping
It is more appropriate to regard scalping as the assumption that most securities complete the first stage of price movement in a short period of time. Scalping traders want to profit from the spread between the purchase and sale of assets, so it can also be said that scalping trades take advantage of market volatility.
Scalpers will choose to buy assets when the bid-ask spread is small, when the asking price is lower and the bid is higher than usual. On the contrary. A scalper sells an asset when the bid-ask spread is higher than usual, I .e. when the asking price is higher and the bid price is lower.
Even during periods of smooth market trading, many traders still rely on scalping for profit. Since each transaction has a certain transaction cost, scalping transactions may result in a situation where the cost is higher than the profit. But if used properly, it's a good way to get a steady profit.