Grand Capital continues a weekly series of educational articles — we are happy to assist you on your trading path, helping you to learn anything that powers you to make the right decisions. Today’s topic is scalping — the most dynamic of all trading styles.
This trading strategy involves a rapid tempo of deals, when you open and close positions within a very short time span. Depending on what you feel your asset is going to be: ascendant or descendant, choose buy or sell type of a deal. After the graph spiked, fix your profit immediately. This approach is very different from “let your profits run”, and requires your trading sessions to be somewhat cautious and high-attentive.
Using scalping as a primary trading style may be tricky because constant chart control might cause fatigue. A scalper tends to use one-minute charts and instant executions of orders to keep the trading flow as close to real-time as possible.
Although the frequency of deals is so huge, the price differences aren’t enough to earn large profits. That is why scalping usually goes along with leverages and high position sizes. Don’t consider this too dangerous: a careful approach to risk management will help out. For example, when you see a clear ascendant movement, position your stop-loss at the start of the ascendant wave, then place your take-profit order at twice as high as a stop-loss. This way you don’t lose too much money and are more likely to earn.
Scalping vs. day trading
Scalping is in some way similar to day trading. These trading styles, however, are different mostly in time frames and position size. The whole day is too long for scalpers, so they open at least five positions per day. Also, scalpers tend to choose 1-minute to 15-minute charts.
Risk-management tips in scalping
Chart moves may be unpredictable, so it is crucial to have a stop-loss in place. Scalpers usually place stop-losses around five pips below the entry price, as the position size is quite large. Also, it is wise to use lower leverage at least at the start of trading. This way you can lower risks involved with a single trade.
Try scalping with our trading tips! We hope you will succeed with this strategy. Follow Grand Capital’s social media pages to catch up with the next articles! Good luck.