There are many traditional strategies traders use for exchanging assets. The method you will employ depends on your specific type of skills and your financial situation. If you feel like you can keep track of every little movement in a chart, you could shorter-term trading. If your financial situation is not so great, then you could again consider shorter-term trades. This is because these trades tend to be less risky, and they deal with smaller figures, so are more accessible. If this sounds like the kind of trading that may be relevant to you, then you may find interest in scalping.
What scalping is
Scalping is an incredibly fast-paced and somewhat stressful form of trading. However, traders using this method also risk minimum losses, that is, as long as they are able to keep up. This is partly because you tend to trade before the market makes any sudden moves. This is also because you are more likely to find people willing to trade with you for such small price changes.
Due to the very nature of this type of trading, the profits one can make tend to be very low. After all, your priority is to pounce on every small opportunity that presents itself, before you may lose it. You want to accumulate all the small profits into a greater whole, which means many, many trades. This also means you never follow any seriously profitable trends, so your profits on each trade tend to be quite low. As such, maximising your earning potential is of utmost importance to you.
Tips and tricks for scalping
If you do indeed decide to go with scalping, as your main or secondary trading strategy, there are a number of tips we can offer you. We should mention here that many of these sorts of trades can be quite taxing and are not recommended for beginner traders.
Firstly, be as quick as you can be. The quicker you are, the more you lower the risk of losses. You also open yourself up for the next trade, another chance for profit.
Keep your scalping organised
Secondly, you should always stay organised. This means that you have to keep your order executions in check. Even the slightest mistake in carrying out your order could mean a sizable loss for you. Furthermore, if you do want to ensure that you can carry out your transaction, your trades will have to be fairly large. This is because less people tend to be looking for low liquidity trades, so a high volume trade is more likely to go through.
Thirdly, you should want to beat the spread. Since you are dealing with such small profits, the spread, or commission, is quite likely to eat into them. This is why you must ensure that your profits are not too small and that the broker you choose has reasonable rates.
Fourthly, try to deal in a narrow range of trading styles. Since you are trading with such small profits, every available opportunity is worth considering. This is why you should go with both long and short trades, as together they can give you more potential for profit.
Next, be as capable as possible with charts. Your technical analysis skills must be on point, as you will not have the time to figure out underlying trends. This means being aware of many charts indicators, and being intimately familiar with all the relevant chart patterns.
Finally, be strict with yourself. Scalping is a strategy that is relatively low on risk, but only if you closely remain within these parameters. Every time you deviate from them, you are exposing yourself to more risk, and increasing your chances of losses. This is especially true if you are considering doing something you have not previously tried.
So scalping is a very reliable method for ensuring that low risk when dealing in financial markets. Unfortunately though, one must already be a relatively experienced and knowledgeable trader for this to work. It means strict adherence to several tenets if you want to avoid losses. These tenets include discipline, organisation, and frequent trading. As long as you keep close to these ideals, scalping becomes quite a viable method for surviving in the financial markets.