Three Top Tips for Success with Scalp Trading

by Bob F. CCO

Scalp trading is the practice of trading with high frequency, taking small profits, to build gains incrementally. It’s a strategy that can yield results from even the most minor price movements, as scalpers will usually take profit of anywhere between one and three ticks.

While anyone can learn to become a scalper, there are a few things to keep in mind that will help you achieve success in scalp trading.

1. Discipline is Key

Successful scalp traders always stick to their exit strategy and seek to minimize losses above staying in a trade for the potential of more profit. If a trade turns into a loss of more than one or two ticks, you should exit and try again with another trade.

Don’t hang around with an open position waiting for the market to move back in your favor. Often, a successful scalp trader will find that there’s a correlation between fast exits and profitability.

In the same vein, scalping is a highly active strategy involving constant attention to trading activities. Good scalpers don’t walk away from their screen and leave positions open. It’s also important to find the fastest and most efficient means of order execution.

2. Don’t Get Hung Up on Charts, Indicators, or Fundamentals

Many scalpers eschew the kinds of charts and indicators that are frequently used by traders implementing other strategies. The rationale for this is that taking the time to analyze a chart or apply technical indicators is time that could be spent simply following market movements and scraping single-tick profits.

Similarly, scalpers often don’t care about the fundamentals of the asset they’re trading. If you can read the markets, you can learn to trade any asset profitably using a scalping strategy without having to understand all of the attributes of the asset. For example, a trader may scalp Bitcoin futures without knowing anything about blockchain, cryptocurrency mining, or digital wallets.

3. Commissions Can Kill Scalping Profits

Because a scalp trader is making many trades and taking only small profits, its absolutely critical to keep trading fees as low as possible - or preferably eliminate them completely. Fees charged as a percentage of the trade value can quickly eat into your scalping profits.

Zero-commission trading has been possible via many different stock brokers for some time now. However, the cryptocurrency sector offers some of the best potential for gains, given that traders have access to higher leverage than in traditional markets.

Digitex Futures is the first cryptocurrency exchange to offer traders access to high leverage, zero-commission trading of Bitcoin and Ether futures, via a one-click trading ladder interface that’s tailor-made for scalp traders. The company will also start offering markets in traditional assets such as gold, in late 2020.

Successful traders aren’t born - they’re made. Implementing a successful scalping strategy can take practice and iron discipline. However, with time and experience, it can be a highly profitable and satisfying way to trade.