Day trading strategy – Scalping

The simple scalping rule
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 Scalping Overview:

  1. Scalping is a day trading strategy that involves making many small-profit trades rather than fewer large-profit trades
  2. Scalping is one of the shortest-term trading strategies, and many positions last only seconds or minutes
  3. Scalping requires discipline—once a set profit or loss has been reached, the scalper needs to exit the trade
  4. Some scalpers use their own discretion to place trades while others create computer programs that automate their trading strategies.

Three characteristics of Scalping strategies:

There are three characteristics of scalping strategies: Short positions, small profit margins & high levels of leverage. Scalpers attempt to target price gaps and other short-term trading “loopholes” that allow them to quickly turn around a large position for a profit.

How to find the opportunities for scalping?

In order to find the opportunities for scalping, we will need to begin by selecting a few key technical indicators. These indicators can help us determine when short-term price gaps are likely to happen.

Because scalpers focus on short-term positions with low-profit margins, the best scalping strategies (such as the Triple S strategy mentioned below) require some leverage. It’s recommended that scalpers start with a large amount of capital. Opening and closing larger positions allow you to reduce the marginal costs of trading and maximize potential gains.

The Triple S strategy:

  • Step 1: Apply Best scalping strategy indicator: Volume
  • Step 2:Go to an M5 or M15 Time Chart
    • What you  first is if the volume indicator is showing you any trend, reversal, or stagnant price action. If the volume indicator increase, so will the price action
    • Once you see a drop off in the volume indicator, you know that there are fewer “ticks” and hence less interest in that trend. The strategy we want to focus on mainly is trend trading. You can use the volume indicator for reversal trades. But that’s not something we are interested in with this strategy
  • Step 3 Of the Best Scalping System is to Analyze the Volume Indicator: Look for a healthy Uptrend or Downtrend. Find pullback in Price action and wait for Volume to Slow Down or “Quiet down.” The volume indicator should tell you an enormous amount of information. If you see the volume indicator do this:
    • You know that the trend is either:
      1. Dying and heading for a reversal.
      2. Take a break before continuing to the upside.

      In this case, it took a break. There were fewer buyers and sellers at the time (traders making trading decisions). Then they picked up and continued to the upside. Our strategy takes advantage of this pullback before the price action continues upward in this example.

      So in this analysis step to the strategy you need to check out the volume indicator. Based off of what you now know, make a good trading decision based off of the current price action.

    • Scalping
  • Step 4 – The Volume Rise/Spike (after if slowed down) Make your Trade Decision Based off of Current Price Action: Best Scalping System.
  • This part is all up to you. There is no “line crossing,” “arrow appearing” or “a small voice telling you to buy now!” You have to understand a little bit about how the price action works before you decide on your entry. Using our example, the Volume indicator shot up drastically meaning that traders are getting in on the action and thus driving the price upwards!

Entry/Exit Strategy for the Simple Scalping Strategy:

With the current structure of this trade, it made sense that since we saw our “spike” in the volume indicator and it broke this small retracement trend we pulled the trigger and entered a buy/Sell!

Your exit strategy is simple.

You go for 10-20 points. Also, You Place a 5-8 points stop loss. Once you are up 10 points move your stop loss to 5 points to lock in a small profit (unless the spread is very large which you would most likely break even then.).

Technical Indicators for Scalping Strategies:

Exponential Moving Averages: these averages have been specifically weighted in order to react more sensitively to recent price movements. When using EMA charts, keep a close eye out for potential “crossovers.”

Moving Average Convergence Divergence (MACD)this trend-reliant momentum indicator helps balance 26 periods and 12 period moving averages. Despite what you may assume, the MACD can be used within any trading time-frame.

Bollinger Bandsthese handy bands contain the vast majority of price movements (about 95 percent). Use these bands to help determine when breakouts and trend reversals are most likely to occur.

Relative Strength Indexthe RSI is a momentum indicator that measures levels of strength and resistance on a scale of 1 to 100. This can help limit the possible risks attached to scalping

General Notes

Market has three well defined movements which fit into each other – Daily, thirty to forty days & four to six years
Book Method: Narrow ranges refer to distribution or accumulation stages
Theory of double top: When stock reaches at top it declines moderately to go up further higher. If keep on going down then it goes distinctly down.

Ways of losing Money:

Listen every news – specially which compel you for selling and forgetting that market has kept allowance for all these.
Get nervous on the minor fluctuations
Enter the stock which has already gain – Late entry or going with herd approach without having his own approach. Holding the stock long enough for the hopes it will go up which already oversold and appreciated
Lack of memory and virtue of patience
Don’t wait the period of dullness and enter the market without any directional Bias.

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