Scaling strategy is a trading method for making small profits on a regular basis, by entering and exiting many times a day. Traders who implement this strategy need to have a strict time management plan for closing and opening trades because the goal of this strategy is to seek small profits regularly, so if you do not careful, a large loss makes traders lose the profits they accrue from so many small profits. So is Scalping a good strategy? To achieve success in this way of trading, traders will have tools to support such as a direct data source. This allows you to directly access and place multiple transactions at the same time.
How Scalping work?
With Scalping, traders will try to surf as quickly as possible, entering multiple orders multiple times in a trading session as soon as they see the signal. After exiting the trade, the value of the currency pairs may stop or continue to rise. Scalper’s main purpose is to want a small, regular and secure profit. This is in contrast to the goal of some other traders: to optimize profits by risking “let your profits run” and increase the size of the trade when you think the price will continue to rise. Scalping strategy again applied the form of increasing the number of times the profit and reducing the scale of profit. This means that it takes traders a lot of time to achieve a profit that is only half or less than the number of their trades. Is Scalping a good strategy? When a trader makes a successful trade with this method, the percentage of trades they gain profit will be more than the failed trade and the profit they will get will be close to or greater than compare with normal trading strategy.
Spreads in Scalping compare with Normal Trading Strategy
Scalper seeks to profit from spreads in a security’s bid-ask spread. This is the difference between the price that the broker will buy and sell. So the higher the profit when the bigger the difference. However, there are cases where the market is stable, the difference between Bid and Ask is not much changed. This allows traders to consistently earn profits with consistent trades.
Three Types of Scalping
Market-making: Scalping traders will endeavor to make a difference by combining listing on the bid price and requesting a certain stock. This method can only be successful for stocks with little volatility, the price has no change despite trading in large volumes. In order to execute this type of transaction, traders have to confront market makers in acquiring preferred stock, so it can be said that this is a difficult way to achieve success. A second difficulty is that the profits that traders earn are extremely small. So it just any loss can affect the initial profit target.
Two types remain of Scalping takes a more traditional approach and stocks must move to a more volatile market. Traders need to be able to observe changes in prices more frequently and more carefully.
The second type of scalping, traders will buy large quantities of stocks and make profits based on the market with very small price changes. The number of shares that traders buy in this method can be in the thousands and the next thing they do is to wait for a small fluctuation from the market, usually in cents.
The third type of scalping is a method similar to the traditional method. Is Scalping a good strategy and how do traders do it? Traders will buy stocks based on any signals from the system and they will close the trade as soon as the first exit notification is made. The risk : reward ratio of this method is 1:1.