Live Trading is the simplest method of trading available for traders to use in all markets. There are hundreds of strategies that have been developed over time, but many fall by the wayside because they are deemed too difficult to apply in reality. Scalping, or scalping an order, has always been a source of confusion for new traders, but what does it entail?
A trader who employs the strategy will open and close trades within minutes without regard for market trends or whether they should buy or sell. It doesn’t sound like much fun, risking losing money time after time while trying to pick out good entry points along the way. But if you follow some simple rules, scalp trading can be very profitable, mainly when traded during high liquidity periods.
So How Can You Profit from Scalping?
The key to profiting from scalping when trading stocks is to choose a stock with high volume and narrow spreads. When the price is close to 0 for both bid and offer, it’s nearly guaranteed that you’ll be able to scalp.
For example: if the spread on the stock is 5p wide, it will cost you 10p in fees + profit/loss per transaction. But if the spread is 0p wide, you’d only need to pay 10p in fees. That means an extra 20% of your profit could go towards your bottom line (which is how we get such low prices).
Trading stocks that fluctuate by more than 1 point during trading hours can also lead to very profitable short-term gains. If you’re not keen on spending all day looking at graphs and taking trades, then these are the stocks for you.
To take advantage of this, choose your stock and keep an eye on it all day. When you see that the price is fluctuating quickly throughout the day, look to enter trades at critical moments when the price reaches a point where it looks likely to stay still or bounce back again.
A trader who employs strategies like these will make quick gains with very little time spent analysing markets throughout their trading days. Scalping enables traders to enjoy the thrill of profits without spending hours studying charts before ever making a trade – although anyone who wants to dive deeper into the technical analysis can later use what they’ve learned as part of their strategy too.
What Risks are Associated with Scalping?
Trading stocks with a high volume will always be safe, but there are still risks involved. If the price moves too quickly, then you can hasten your losses by exiting trades before they’ve had the chance to bounce back again – especially if there’s little liquidity later in the day when everyone’s trying to enter trades at once. That means it’s essential to have a backup strategy so that you don’t lose sight of where the stock is likely to end up by the end of a trading session – even if it fluctuates wildly along the way.
No matter what strategies you use, one thing will remain consistent throughout – taking small profits repeatedly contributes far more to your account balance than losing small amounts on individual trades. Your goal should always be to make the most of every trade you take – not just for one day, but every day.
It is where scalping becomes so helpful, but it’s also why you need a backup plan in place if things go wrong. As long as you don’t expect dramatic movements often, scalping can be an effective way to earn consistent profits on continuous trades throughout your trading days.
In Conclusion
Trading stocks for short term gains is a tried and tested way to make consistent profits from your trading activities. It is a good strategy for beginner traders because it doesn’t require much knowledge about markets or specific trading strategies – you don’t even need to analyse the market.
All you need is a stock that fluctuates rapidly and somewhere safe to keep your profits until it’s time to withdraw them at the end of the week/month/year. Saxo Bank will be able to help you with this.
