In the investment world, scalping is a term used to denote the "skimming" of small profits on a regular basis, by going in and out of positions several times per day.
Scalping trading might seem like a fast, easy way to make money but at the same time, it involves trading currencies based on a set of real-time analyses.
The purpose of scalping is to make a profit by buying or selling currencies and holding the position for a very short time and closing it for a small profit.
Many trades are placed throughout the trading day using a system that is usually based on a set of signals derived from technical analysis charting tools.
Anyways, here are 5 SUPER effective scalping tips that you should consider implementing in 2022.
1. Minimize The Use of Indicators In Scalping Trading
As a scalper, you want to catch any minor trends or shifts in the market, which means you need to make quick decisions.
As much as indicators are useful, having too many of them will cause an overload of information, and before you can place a trade after interpreting every single indicator, the price move you were looking for will be gone.
Beginner scalpers always love to trade with lots of indicators. They think this is the best way to find great trades.
They overload their charts with too many indicators with the hope to find the best possible trade setups.
But when you take readings from too many tools, it’s really hard to predict the price movement of a certain asset, especially on lower timeframes.
2. Don’t Stick With A Specific Position In Scalping Trading
From a scalping trader's perspective, marrying a position means a trader has become emotionally attached to holding it, especially in the face of strong evidence that this is not the right position to be in.
This particular trading error can often result in excessive losses and wasted margin because a transaction intended to be a scalping trade
can turn into a day trading position, or, even worst.
Successful scalpers generally avoid getting emotionally involved with holding a particular position, especially when the market is clearly telling them they are on the wrong side.
3. Avoid Overtrading In Scalping Trading
One of the biggest obstacles standing in the way of amateur traders becoming professionals is their lack of recognition and(or) acceptance.
Of the fact that trading less frequently almost always produces more consistent and more profitable long-term market performance than over-trading and interacting with the market too often.
If you have had any experience trading real money in the markets you very likely have experienced first-hand just how slippery the “slope” becomes once you start over-trading, even when you are scalping trading.
Most traders don’t even recognize they are guilty of over-trading until they have lost so much money that they are forced to take a break from the market.
It is when they realize that they entered too many trades with no sound logic or rationale behind them.
In essence, amateur scalpers that get caught up in over-trading are simply gambling; continually entering the market randomly while hoping for a windfall profit.
4. Don’t Neglect Risk Management In Scalping Trading
Given the number of trades a scalper makes in any single day, it is paramount to lower the amount of margin dedicated to any single trade and minimize risk.
Most scalpers end up giving too much of their focus and time to the wrong aspects of trading.
Yes, scalping strategies, trade entries, technical analysis are all very important and you have to know what you’re doing and have a trading
plan and understand what your edge is to make money.
But, those things alone are simply not enough. You need the right “fuel” on the fire to make money while scalping the markets. That “fuel” is risk management.
The common rule is to never risk more than 1% of your initial deposit on a single trade, so if you have an account with $1,000 in it, you should not place any trade that is above $10 in the margin.
5. Keep An Eye On Financial Announcements In Scalping Trading
If you compare the fundamental and technical analysis of the Crypto or Forex market, you will quickly see that scalpers are mostly technical traders.
However, this does not mean that, as a scalper, you should disregard any data or information on the economic calendar. You should actually be aware of any major financial news announcements on the day you’re trading.
For example, if the Federal Reserve (FED) is about to announce changes in fiscal policies, you might want to be a bit more careful with any trades involving US Dollar pairs or US stocks.
Such news announcements can cause the markets to break away from the direction your trading instruments were pointing at. It might cause support and resistance levels to be crossed, perhaps, causing you to be stopped out.
So, that was it. Good Luck with your scalping career!