Monday, October 21, 2013

Scalping: How The Smaller Profits Can Start To Add Up

Scalping is known as a type of trading that specializes in taking the profits on the smaller changes of price, typically right after a trade has been entered and is now profitable. This means that the CFD trader will need to have a strict strategy for exit since a single large loss will eliminate all of the smaller gains that were obtained through hard work. With the right resources and tools, like a live feed, the stamina and the right broker you will be successful in your strategy. 

Main Premises Of Scalping


There are three main premises of scalping that you need to keep in mind if you are planning on using this as your primary strategy of trading. These include: 

Less Exposure Will Limit Risk 

  • When you have a brief exposure into the market, you will diminish the chances of facing an adverse event. 
Smaller Moves Are Simpler To Get 
  • A larger amount of demand and supply is needed in order to get a larger change of price. It is much easier for the market to move 10 cents than it would be to move a whole $1. 
Smaller Moves Are More Frequent 
  • Even during the markets that are generally quiet, a smaller move is more likely to occur than a large move. Plus it's better for you to have smaller moves than larger moves in the first place. 


Primary Style Of Scalping 



A scalper will usually make a great amount of trades in a single day, anywhere from 5 to several hundred. They will usually use one minute charts; this is because the period of time is very small and they need to see the set ups as close to real time as they can. The instant and automatic execution of their orders is very important to scalpers, therefore a 24/7 broker is the best tool for them to use. 


Supplementary Style Of Scalping 


Those CFD traders that are within other frames of time have the option of using scalping as their supplementary approach in many different ways. The best way would be to use it when the market is locked in a range that is narrow or choppy. When there are no trends within the longer frames of time, moving to a frame of time that is shorter might show exploitable and visible trends, which might lead to scalping by the trader. 


The Bottom Line Of Scalping 


Scalping is a method that might product great profit for some CFD traders that choose to use it as their main strategy, or also for those that would like to use it as their supplementary strategy along with their other strategies. Making sure that you pay attention to the strict strategy of exiting is very important for making sure that your small profits are turning into large gains in the end. The frequent amount of small moves and making sure that you have brief exposure in the market are very important aspects that are the main reasons why this is such a popular strategy among many of the most successful CFD traders.

Author Bio
Alisa Martin is a master at scalp trading and has been working with stocks for 13 years. She prefers scalping with CFDs as her primary strategy for trading, due to how simple it is to use and how effective it can be if you use it right.


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