How to effectively use scalping on the stock exchange
Scalping on the stock exchange is a trading strategy characterised by the rapid opening and closing of many trades within a short period of time. The trades are held for a minimum period of time, ranging from a few seconds to a few minutes. The use of technical analysis is the basis of this strategy.
Making a fast profit is what scalping is all about. The aim is not to hold a position for a long time but to act quickly. This strategy is ideal for currency exchange, known for its liquidity, and is one of the most volatile markets. Therefore, it is important to take advantage of every opportunity to profit from currency fluctuations.
Features of using scalping
Key features of using scalping on the exchange include the potential to earn up to 10 points per transaction, with losses limited to 7 pips, including the spread. This means that in order to achieve a high level of profitability, it is necessary to make a large number of transactions.
Scalping requires the following skills and resources from the trader:
1. Time and attention. The strategy relies on multiple orders, which requires regular market analysis. Furthermore, scalping currency pairs can only take place for a few hours, so it is essential not to miss this time.
2. React quickly. Profit-making scalping requires the ability to predict market dynamics. A trader must assess the situation quickly and decide whether to open or close trades immediately.
3. A willingness to take risks. Like any other strategy, scalping can involve losses, and a trader must be aware of this probability. The risk is associated with the use of leverage, as it can increase both profits and losses.
Given the characteristics of the strategy, it is crucial to understand how scalping fits into a particular market activity.
How to work with scalping
One of the most critical aspects of this approach is the correct choice of timeframe. Most traders use the 1-15 minute timeframe. However, most orders are executed on 1 and 5 minute timeframes. The focus is on making the minimum profit within 1 minute and maximising gains within a 5-minute period.
When evaluating the most profitable currency pairs, you should pay attention to those with high volatility. In this case, you can count on the possibility of a large number of movements. It is also important to evaluate the pair in terms of spread. The optimal value is a spread of 10-30% of the income, and it is better if it is as low as possible.
For scalping, use indicators that signal the opening of a position. At this moment, the trader should open a trade and close it after the corresponding signal.
