What is Scalp Trading? A Peek Into How Investors Earn Quick Profits Through Sudden Price Movements
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In the world of the stock market, trading strategies come in different forms. Scalping is one of the widely used trading strategies. Be it a part-time trader or full-time trader, both do scalping trading to make quick profits. These quick profits are the result of sudden price movement in the price of the stocks.
What is Scalp Trading?
The concept saying that in scalping, traders enter the trade after their analysis tells them that the movement on the favorable side is about to come. Sooraj Singh Gurjar, Founder and Managing Director, Get Together Finance (GTF) further explained that after experiencing a quick move, traders book profits. This helps in not blocking your funds for a long time in the trade and making good profits in accordance with your capital.
Booking Big Profits With Several Small Profitable Trades
Scalping is a trading strategy that allows you to make big profits with several small profitable trades. A trader can take various trades and utilize small price movements to make collectively big profits with the help of scalping. Basically, it is the art of “scalping” small profits from each trade.
Why It's a Risky Trade?
Scalp trading is equally risky as it requires in-depth advanced technical analysis knowledge from the trader’s side to compensate for the risk.
Alongside, a trader should have mastered trading psychology, they shouldn’t let their emotions control their trading decision. Sooraj further explained that often scalping traders get carried away in the grief of loss or the excitement of profits, both lead to adverse trading results. One needs to keep their mind in line to find good trades and also make themselves strong enough to let go of the losses.
A trader needs a hefty capital for getting good profits. Since a trader wants to capture quick moves they cannot hope for big price targets. Hence, to make big profits in short movements, a hefty amount of capital is required so that the quantity can be increased, which also raises the high risk capital.
Scalp Trading: How does it work?
1) It involves capturing the small price movements and making profits out of them. But, to capture these movements, you need to understand the advanced technical analysis for studying candlestick charts.
2) A trader needs to analyze the previous price movements of the stock to analyze the patterns and predict how the stock is going to react in certain circ*mstances.
3) Further, you need advanced knowledge to identify the current price trends, and accordingly mark the potential entry and exit points in the trade. Sooraj noted that a trader needs to focus on the study of technical analysis to make sure not to make the wrong decision during the actual trade.
Challenges
Though scalping allows you to make quick profits with advanced technical analysis study, Sooraj highlighted that it still comes with its own set of risks and rewards. But, once you learn the principles of demand and supply and price action, you can use them to increase your accuracy in scalping.
However, always risk your capital wisely and never get stuck into the loop of revenge trading and overtrading. Always sit to trade with a perspective of not losing anything, profits are surely secondary.
