Scalp trading is a short-term trading technique undertaken to earn money from small price changes. Such small amounts finally add up to result in a substantial gain. Individuals who engage in scalp trading are referred to as scalpers.
Normally, scalpers tend to trade in several small successive deals. They are required to adopt a stringent exit plan; the scalp trader has to be strict when it comes to deals, as a single large loss may take a toll on several small profits made in other trades.
The scalp trading strategy calls for self-discipline and a significant amount of will. A scalp trading style provides traders with the thrill of stock market trading.
As mentioned earlier, scalp trading is a short-term technique as a trader looks forward to making daily profits. It involves buying and selling many times a day, earning profit from price differences. The scalping strategy aims to buy an asset at a lower price and sell it when it goes up.
It is vital that a trader discovers highly liquid assets that give them price fluctuations often throughout the day. In case the asset is not a liquid asset, a trader will not be able to scalp.
Liquidity assures a trader about the ideal price when they enter or exit the marketplace. Generally, scalpers work on the market on three principles: lower exposure limits risks, small moves are easier to obtain, and small moves happen frequently.
While a few other trading styles, such as position trading, depend on technical and fundamental analysis to identify trades, scalp traders are known to focus on technical trading techniques primarily.
For those who want to minimise market risk, lower their exposure, and are content with smaller and quicker profit margins, scalp trading remains apt for them.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.
