Scalping is a trading strategy that is most popular for its distinct characteristic — the short period between the trade’s opening and closing. And believe us when we say short because we actually mean fast as in few seconds to few minutes only. Scalping aims to make profits out of the day’s busiest times, hence its name.
Tell me more about scalping.
Scalping demands undivided and attention from traders to look and monitor charts. It requires quick eyes and decision-making because if not, you will not take as much profit from the opportunities you can possibly take. The opportunities that we are talking about are those small movements that happen more frequently than big ones.
Small profits to a large profit
Scalpers make multiple small profits from the few hundred trades they place every day. If we think about those small profits collectively, then we can be looking at a significant profit. Also, these small profits are the result of the quick bid-ask spread profit changes. A trader would choose a large position to make small profits in a short period of time. It is crossing the spread as quickly as possible.
No positions are left open for hours, let alone overnight. Scalping aims to open a position at the bid or ask price, then close it immediately a few points more or less for profits.
So, who gets to be scalpers?
We understand that people can have different preferences. So, if you are a person who finds thrill on fast and multiple trades throughout the day, then you might want to give scalping a try. Also, you need to have ample time to study and analyze charts since they are essential in this kind of trading style. It is also demanding. It would be great if you had quick decision-making and fast hands. If you do not have these but are interested in trying, you might want to practice and hone your skills.
Hence, if you are way too busy to give trading attention or if you can only give so much of your time, then scalping might not be the best idea for you. Also, if you prefer long-term and fewer trades, you might want to think twice.
Do you want to be a scalper?
So, if you’ve hit all the things on the scalping checklist, here are a few tips to help you gain more profit:
- Trade currency pairs that are liquid like the EUR/ USD, USD/ CHF, USD/ JPY, and the like. They have tight spreads and are the ones that people most likely choose. Tight spreads are essential since you will enter the market a lot of times.
- Place your orders only during the busiest times.
- Double-check the spread before anything else. You don’t want your transaction costs to be more than the profits you gain.
- Get comfortable in trading one currency pair at first before trading a lot of them to avoid confusion.
- Know your risk capital and always be aware if you are already hitting it.
- Continuously be updated with news and press releases because they can mean losses if you are not aware of them. Always check economic calendars.