Scalping brings profits in short time

Scalping is basically a technique which involves opening or closing trades in a very short period of time in order to obtain quick profits.

This trading method is based on opening trades and closing them with small profits on lower timeframes. In this, it is mandatory for the trader to have a strict exit strategy because one large loss could eliminate the multiple small gains the trader makes.

For this strategy to be successful, a live market feed, direct access to broker and ability to place many trades simultaneously is required.

This works on the assumption that the selected stock will complete the first stage of movement. After that a stock may rise or decline. Its movement is uncertain. A scalper intends to make as many profits as possible, without letting them evaporate.

This is contrary to the strategy to continue to ride on profit yielding stocks wherein we increase the number of units of winning trades.

In scalping, we focus on increasing the number of trades not on the size of the stock. This cannot be achieved in a longer timeframe, so a scalper sticks only to smaller timeframes.

A successful scalper will have a higher ratio of winning trades to losing ones and aims at keeping profits little bigger than losses.

A scalper has limited market exposure which in turn insulates him from big losses. He catches hold of small price movements. Even when the market seems to be going sideways, small price movements tend to happen and enable the scalper to make profit from them.

A scalper will make a greater number of trades each day and will mostly rely on one minute or five minutes chart since the time frame is small and he or she needs to observe the setups as they shape up in real-time.

As orders need to be executed instantly, having online access to trading platforms is imperative. Direct online trading becomes instrumental.

When markets are choppy or moving in sideways and there is no noticeable trend in higher timeframes then the trader gets an opportunity to do scalping in smaller timeframes.

If a trader aims at taking up a trade with a risk reward ratio of 1:1 then scalping is a kind of risk management strategy.

Traders need to make quick decisions, spot opportunities and constantly monitor the screen. For those who are impatient and feel gratified with small profits, scalping is the best solution.

(The author is a homemaker who dabbles in stock market investments in free time)