Scalping
Scalping is a very short-term trading style that involves making dozens or even hundreds of trades in a single day, each aiming for tiny profits.
The idea is to accumulate small gains that can add up to significant profits by the end of the day.
How its works
Scalpers hold their positions for seconds or minutes. They aim to capitalize on small price movements, often relying on bid-ask spreads and minute market fluctuations.
Due to the high frequency of trades, scalping requires access to highly liquid markets, fast execution platforms, and low trading fees.
This is considered one of the most profitable trading types that allows more flexibility, as you don’t need to be glued to your computer screen all day.
Techniques
Effective scalping techniques include
Market Making
This involves placing buy and sell orders at slightly different prices to profit from the bid-ask spread.
Order Flow Analysis
Scalpers often analyze the order book to identify potential short-term price movements.
Range Trading
This technique involves identifying key support and resistance levels and making trades within that range.
Scalping vs Day Trading
While both scalping and day trading involve short-term trades, scalping is much more rapid and requires a different mindset.
Scalping demands quick reflexes and an ability to make split-second decisions, while day trading, though fast-paced, allows for a bit more deliberation.