Scalping is often dismissed as a trading strategy due to its high-frequency trading nature. Ultimately, trading can only be classified into two types – profitable and unprofitable. While tweaks can be made to intraday and positional trading strategies and used interchangeably, scalping requires a special focus and unique strategies for success. Although it is hard to master, it is not impossible to successfully scalp the Indian market.
What is scalping?
Scalping is a type of high-frequency trade in which traders enter and exit a position in under a few minutes. In this short window of time, traders will exit with small profits or losses. Since scalpers enter and exit positions frequently, the small profits can amount to something substantial at the end of the day.
Advantages of scalping
- Limited risk due to limited exposure to market volatility.
- Smaller movements are easier to capture.
- Smaller movements are more frequent.
Skills required for scalping
- Quick thinking.
- Fast responsiveness to changes.
- Previous experience in trading.
Preventing losses while scalping
- Strict stoploss is still important.
- Low brokerage to make the small profits count.
- Do not enter a trade without getting the complete go-ahead from your trading system.
- Trade in sufficient volume to scale your efforts.
Who shouldn’t scalp?
- Anyone who is hard pressed for time.
- Anyone who cannot handle numerous entries and exits in a short time frame. Scalping can sometimes be mentally exhausting.
- Beginner traders.
- Anyone who makes sufficient profits with intraday or positional trading.