Scalping is one of kind of intraday strategies on the stock or exchange market. It's main feature is short time of deal and fixed or low profit. Pipsing – is kind of scalping with fixed low profit.
The specific features of scalping:
- short time of a deal, usually a few minutes – trading on timeframes from 1 minute to 15-minutes
- large number of deals during the day
- low profit
- large leverage
The purpose of a scalping strategy is to enter correctly into the market and to take maximum profit for the current price movement. The principle of scalping is large number of deals with low profit. (The time of deal is shorter than risk is lower).
Benefits of scalping strategies:
- large potential cumulative profit provided strong strategy executing
- simple trade strategies, that not require deep knowledge of technical and fundamental analysis
- independance from time of trading
Disadvantages of trading strategies:
- huge psychological forces
- high risks – the greet importance for this strategies to have methods of deposit managment
- scalping consume many time – It is necessary to monotor the market all the time
- Limitatios of the brokers – it is necessary to have a small spreads (less 1 point), and broker must support short-time deals (some brokers limit deal time at less 5 minutes).
Scalping strategies are not suitable for newbies, because the strategies require strong discipline, large expirience, attention and reaction speed.
The basic types of scalping:
- Scalping on a trend – it is based on suggestion, that price growth and fall in sequence change one to other, and, in generally, price moves in directon of trend. In this case is suggested, that price movement in the trend direction more probably and higher, than in backward direction. Deal is opened in the trend direction after the correction.
The kind of this trading is the trading within the chanel.
- Scalping using figures of technical analysis –is to observe price models and to enter into the market, if one of the figures was formed. For example, figure Head and shoulders was formed on the up trend. After that and breakthrough confirmation it is possible to open deal on sell.
- Scalping using technical indicators – for example, «Stohastic» oscillator; today there are many indicators for scalping
- Scalping with «Guides» monitoring - «Guides» is the high correlated assets, for exapmle, Ruble rate to dollar depend from oil price (oil price in this case is «Guide»)
- Scalping on a «glass» - is the kind of scalping, that is used, basically, on a stock market. It based on monitoring of the request queue and «Guides»