Scalping is a great way to trade if you are looking for quick profits. Instead of trying your luck at getting the most out of each individual trade, scalpers focus on how many trades they can place in quick succession and make money from that instead.
In this article, we are going to tell you how this strategy works and how traders got high profits using it.
The definition of scalping
Scalping or scalp trading is a strategy with a short trading period. It is a quick and easy way for traders to make money, especially when they are looking at short-term investments. Scalpers take advantage of the market by quickly entering and exiting trades to make small profits. They make many trades throughout the day, hoping that one will be profitable enough to match what they could have made from longer-term investments with higher earnings potential in less volatile markets.
How does scalping work?
To trade via scalping strategy, you need to know how it works.
The trader enters a limit order for an asset at a set price and then watches closely as prices fall below or rise past that value by one minute. In case of positive movement the trader closes the trade.
As you see, scalpers are always looking for the safest way to make money. They believe it is less risky to take small profits than big risks, so they set tight trading windows in terms of both price movement and time frame when scalping assets.
The beginners who would like to trade with this strategy can pick a broker between no-deposit bonus brokers. They offer no-deposit bonuses, so anyone can start trading without any funds on the account – accordingly with minimal risks. But traders are allowed to use bonus money only for trading purposes – this is how forex no deposit bonus 2022 India works.
Pros and Cons of scalping strategy
Let’s go through the advantages and disadvantages of this strategy, too.
pros
- minimal risks – scalping is a great method to limit the risks while trading because of its short holding periods.
- easy in use – you do not need any fundamental knowledge to start scalping – the deals are carried out in short periods of time, based on technical analysis settings.
- the chance of high profit is bigger – due to the fact that scalping does not depend on big price movements in the market, it has a chance of high profits.
cons
- takes a lot of time – it takes a lot of time to check up a lot of screen hours to monitor price fluctuations.
- difficult to predict market changes – even if you are monitoring 24/7 it is still difficult to predict the market conditions.
- high fees for spread – in parallel with the number of made deals, the spread fees are growing as well.
Conclusion
Scalping is an effective trading strategy both for novice and experienced traders who care about the safest way of money making. As every strategy it has pros and cons which you need to take into consideration while choosing it. The article introduced its definition and effectiveness as well as the disadvantages you can face with.
For US traders have a look at cftc regulated forex brokers to find out the best brokers in the USA.
Author
George is the Chief Market and Broker Analyst at brokertested.com. Prior to being recruited by brokertested.com, I served SVS Securities as Chief Market Analyst for two years. Earlier, he joined Morgan Stanley in Nov 2013 as Research Analyst.
George is a well-rounded financial services professional experienced in fundamental and technical analysis, global macroeconomic research, foreign exchange and commodity markets and an independent trader.