Short Term Trading Strategy: Scalping with Example.
Introduction:
Scalping is a trading style specializing in taking profits on small price changes, generally soon after a trade has been entered and has become profitable. It requires a trader to have a strict exit strategy, because one large loss could eliminate the many small gains the trader has worked to obtain.
We it comes to short term trading, you must be more focused and determined to learn and trade yourself as the risk is high along with the Reward. It is more rewarding to do trades yourself and keep learning. Anytime before recommending stocks to members for short term trades, it is my duty to explain the strategies that i know before i could even give some short term calls. Every individual should know how the strategy works.
Scalping means to take small profits in small time.
Why settle for small profits? small movements happen very fast and are very favorable. The chances for hitting target is very very high.
Since it happens in small time, you can place up to 100 small profitable trades a day.
100 trades a day? what would be the cost? In India, the lowest cost is 0.02% per trade.
To successfully scalp trade, i would suggest the following
Trade in discount brokers to reduce the cost. Choose scripts with Good volumes to entry and exit at prices that you wish.
Have funds to trade atleast 3-5 contracts. Place only one contract at a time. Place maximum of 3 contracts per identified trades.
Since you are trading for short term profits and you are going to place lots of trade, you should be careful, concentrated and be disciplined. You should also be skillful in picking the right trade.
How much profits can you expect in a day?
I have done some live paper trades in Tradingview website. It was performed on the BTCUSD script on different time frames like 5 mins, 15 mins and 1 hour depending on opportunities.
Entry orders were place at 5 BTC each time with maximum of 15 BTC per single successfully identified trade. There is no cost involved in above trade as it was paper trade.
I would sum it up as below including cost of Brokerage and other charges per trade
Summing up from the above 9 trades:
Profit percent is low with smaller time frame, smaller time frames are more volatile and needs a good exit strategy.
Charges are 0.02% and we need to find a strategy that keeps making large number of small profits of 0.05%.
Also since margin is available in trading. You need to have a working strategy to make killer profits.
Strategies that can help in Scalping:
**Scalping with Oscillators. **Only with oscillators like RSI, CCI and Stochastics, it will be really hard to maintain higher win ratio.
Scalping with Oscillators and Bollinger Band: Simple and reliable strategy
How this strategy works?
Stock RSI (3, 14) should trend down after being overbought and NIFTY (5 mins Timeframe) should break the Middle of Bollinger band on the downside. Target Lower band of Bollinger Band.
Stock RSI (3, 14) should trend up after being oversold and NIFTY (5 mins Timeframe) should break the Middle of Bollinger band on the upside. Target Upper band of Bollinger Band.
False signals:
Stock RSI (3, 14) trends down after being overbought but NIFTY (5 mins Timeframe) stays above bollinger band.
Stock RSI (3, 14) trends up after being oversold and NIFTY (5 mins Timeframe) stays below bollinger band.
Conclusion:
Scalping is for determined, focused and skillful people who love winning trades. Strong skill to identify quality trades, Strong emotional control to restrict high greed profits in single trade, strategy to keep losses low with a good stoploss and Focus to trade and learn cannot stop anyone from being a successful scalper.