SCALPING. WHAT STRATEGY DO TRADERS CHOOSE?
Scalping on various exchanges. Who is this strategy for? What are the best assets for trading a scalping strategy? We will discuss the nuances of the most active tactics of speculation.
If you are reading this article, you probably know that there are many markets, trading strategies and ways to make a profit. The amount of information and the number of opportunities today has grown so much that a novice trader will need several years of continuous work to test each of them. The number of books, courses, and seminars is no longer calculable. Where to look?
It’s already clear to battered market skeptics that quick enrichment is a marketing myth, and they pay attention to other factors:
- on compliance of the trading strategy with the set goals,
- risk appetite
- psychotype and way of thinking.
This is, ultimately, that becomes decisive when choosing your niche in trading. In this article, I will describe my experience, observations, and recommendations to novice traders on the choice of the market and trading strategy.
Do not take the ideas in this article too dogmatically, there are always exceptions to general statistics and unwritten market rules. You might be the exception.
Rumor has it that the only option for a novice trader to increase the account is to do scalping or trading with large leverage and goals of 5-10 ticks.
Prices within the day often change and large trend days rarely occur, therefore, according to statistics, it is easier to take a small goal than a more remote one, which attracts traders.
Initially, scalping existed in stock pits, after which it switched to monitor screens.
Professional scalpers have the closest contact with the market compared to other traders, which implies not a candlestick or technical analysis at all, but a reading of the order flow, “tape”, horizontal and cluster volumes.
The essence of the scalper’s advantage is to see an imbalance between demand and supply before others, immediately react, take a few ticks and exit with a profit. The five-minute “candle” (bar) on the chart is already outdated information for the scalper. Therefore, professional scalping exists mainly in stock markets, where it is possible to see what is happening inside the “bar”.
WHERE IS SCALPING PROFITABLE AND WHY?
Popular markets for this style are futures for the S & P500 (ES) index on CME, less commonly, CL oil futures (it is more suitable for day trading).
The popularity of ES futures is such that bursts of trading activity in the stock market on this instrument are quite easy to visually determine. Before sudden movements, there is an acceleration of the flow of orders and an increase in volume, which can be used to take advantage.
In my experience, scalping currencies are the least suitable. The Forex market is set in motion by large players, dealers of large banks, and the emotional component within the day is not so pronounced on it. The exceptions are news release periods, but you can hardly scalp during a “storm”, say, on EURUSD.
Scalping is also sometimes done by traders in the US stock market. To do this, you need to understand its dynamics well and develop relevant experience. The emotional tension on the NYSE / AMEX / NASDAQ stock exchanges is not inferior to the heat on the S & P500 futures, the glass and the “ribbon” are also present there. However, an entry ticket to the stock market will cost more. If you can start trading on ES futures with 2-3 thousand dollars, then for stocks you will need several times more.
WHAT ABOUT THE RUSSIAN DERIVATIVES MARKET?
Scalping was once popular on RI futures ( futures on the RTS index ), but the development of algorithmic trading has made this strategy more complicated and the market more “noisy.” Many previously successful scalpers in Russia have evolved into intraday traders or switched to other strategies and other markets.
Scalper lifestyle – hard work during active hours of the trading session (2-3 hours).
The maximum opportunities for the scalper will fall on the opening of markets in the United States. It will be about making dozens of transactions per day and maximum concentration on the process. Analysis and preparation for the scalper are not so important, the acquired instincts and iron discipline are important.
The scalper is actively fighting to maintain its small advantage and maintain the mathematical expectation of trading at the proper level, otherwise, the commission (which it generates in large quantities) will turn into significant losses. Try on yourself how this style suits you?
In the following articles, we will consider intraday trading options, positional and swing trading. Each of these strategies will be convenient at some specific moment, for traders with a certain character and set of assets, but it is always good to know about all options in order to understand the difference and not to chase ideas that are not destined to come true.