Scalping

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Scalping is one of the most popular trading styles. The essence of this method is reflected in the name — "remove the top layer, the scalp".

Description[edit]

Scalping as a trading style "took profit and left". Interpretations are different. Some experts determine the time of the scalping transaction in a few minutes; others call from a few minutes to several hours. The main difference between scalping and other trading strategies is the presence of the trader in the minimum movement of the asset. Scalper catches the minimum movement of the market and aims to "pick up the big move". He takes away the very first and strong impulse movement and quickly leaves the positions without thinking about what are further prospects for the development of price movement, even if it probably coincides with the direction of its transaction. The task of the scalper is to pick up the first price roll.

Novice traders prefer scalping to other types of trading in the financial markets. This type of trading does not involve fundamental analysis, which requires serious knowledge and understanding of the processes of the world economy. And these processes are reflected in the market movements.

Scalper does not need to conduct serious market research with the help of technical analysis, to apply complex mathematical-graphic and technical methods. However, the opinion that this type of trading is the easiest and most affordable for beginners, is very far from the truth.

Advantages and disadvantages[edit]

On one hand, scalping is really useful for novice traders to learn how to see how the price of an asset moves, to highlight the most likely entry and exit points from the placed positions, to understand and see the current market situation on the chart. This is facilitated by constant monitoring and analysis of charts, experience of trial and error.

On the other hand, it is a rather complex type of trading that requires maximum concentration of attention for a long time. After all, a scalper can make a lot of transactions per day. And this situation repeats itself daily, session over session.

The arithmetic ratio of successful and unsuccessful trades can be negative, i.e. the number of completed orders closed with a minus can actually be higher. However, the result of trading, with the right strategy of risk management and money management, will always be positive.

Tools[edit]

Some scalpers do not use any indicators. Working tools for them is a chart and depth of market. Others, on the contrary, successfully apply the methods of graphical analysis, technical indicators.

The most suitable tools for scalping are graphical patterns in combination with moving averages or channel indicators. Triangles, flags, pennants in their structure have local levels of support and resistance, breakout or retreat from which give a signal to open a deal. The moving averages and the channel borders also act as certain price levels of the selected time frame. Therefore, the logic of their use fits into the same principles.

For scalping, as for other types of trading, it is necessary to choose assets that can potentially have a good movement. The price charts on small time frames should be clear for visual perception and evaluation.

For scalping, traders need to choose assets that are traded in large volumes during the day and in volatile markets, when price movements are quite significant.


See Also on BitcoinWiki[edit]