Are you a day trader who ponders the pros and cons of scalping? It’s one thing to follow prices and take several positions per day, letting each ride for perhaps an hour or so. That’s how most day traders operate, always going to cash in before the closing bell. But what if you want to take advantage of minuscule price changes and do round-trip transactions in the span of a minute or less?
Plus, what if you do that kind of lightning fast trading up to 100 times per day? By definition, you’d be a scalper, one of those rare day traders that lives by action on the one-minute chart and doesn’t think twice about getting into and out of dozens of positions in a single session. If you want to become a scalper, full-time, part-time, or just occasionally, here’s the least you need to know about the technique.
It’s About Tiny Profits
When your scalp, your goal is not to earn large profits on any given deal. Because positions are sometimes held for just a few seconds, the aim is to make a minimal profit. But, when you put on 50 positions per session, those small rewards add up. But there are several requirements for scalping, primarily the need for fast, live data. Additionally, anyone who scalps must work with a broker who had a direct feed. There’s really no other way to leverage the power of instantaneous information about given security. When you make buying and selling decisions based on tiny price changes, even a one-second delay in the quoted bid-ask spread can mean failure instead of success.
The Broker Makes a Difference
If you intend to get involved in the world of scalping, even as a sometimes participant, it’s essential to be very careful about which broker you choose. The selection process must include strict vetting. For example, determine if the provider supports Metatrader 4, has a live, accurate data feed, and offers rep support for people who want to engage in scalp trades. A reputable provider like easyMarkets will also provide a range of learning materials to help you improve your trading knowledge.
Pros and Cons of Scalping
Why engage in the form of trading that means you’ll be getting into multiple positions every day? The factors that attract many people are the speed, the action, the instant feedback, the low risk on each trade, and the chance to endure several losses in a row yet still post a profitable day. For prospective scalpers, here’s a list of pros and cons:
- Experience breeds success. Once you get accustomed to the one-minute chart, it’s possible to earn consistent profits.
- No single trade will break the bank if you aim for small profits and follow a careful exit strategy.
- You can operate in otherwise stagnant, choppy markets because you’re only searching for tiny price changes.
- Trade sizes tend to be large so that you can earn a profit from negligible pricing movement.
- The process can be physically and mentally exhausting until you get used to it.