Scribd
Upload
143 views

Tips For Novice Scalpers: Barriers To Entry

Scalping is a trading strategy that requires quick decisions and constant monitoring as traders buy and sell securities frequently to profit from small price changes. While scalping can be profitable, it is not recommended for novice traders as it involves fast decision making and frequent trading. Some tips for novice scalpers include mastering efficient order execution to minimize costs, choosing a broker with low commissions, sticking to trend trading and trading with liquid high-volume stocks, starting with trading on the buy side, using basic technical analysis, and strictly adhering to a discipline of closing all positions each day. The keys to success with scalping are making small profits frequently and minimizing risks from each trade.

Uploaded by

doremon
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
143 views

Tips For Novice Scalpers: Barriers To Entry

Scalping is a trading strategy that requires quick decisions and constant monitoring as traders buy and sell securities frequently to profit from small price changes. While scalping can be profitable, it is not recommended for novice traders as it involves fast decision making and frequent trading. Some tips for novice scalpers include mastering efficient order execution to minimize costs, choosing a broker with low commissions, sticking to trend trading and trading with liquid high-volume stocks, starting with trading on the buy side, using basic technical analysis, and strictly adhering to a discipline of closing all positions each day. The keys to success with scalping are making small profits frequently and minimizing risks from each trade.

Uploaded by

doremon
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Tips for Novice Scalpers

With low barriers to entry in the trading world, the number of people trying their
hands at day trading and other strategies such as scalping has increased.
Newcomers to scalping need to make sure the trading style suits their personality
because it requires a disciplined approach. Traders need to make quick
decisions, spot opportunities and constantly monitor the screen. Those who are
impatient and feel gratified by picking small successful trades are perfect for
scalping.

That said, scalping is not the best trading strategy for rookies, as it involves fast
decision-making, constant monitoring of positions and frequent turnover. Still,
there are a few tips that can help novice scalpers.

 Order execution: A novice needs to master the art of efficient


order execution. A delayed or bad order can wipe out what little profit was
earned and even result in a loss. Since the profit margin per trade is
limited, the order execution has to be accurate. As mentioned above, this
requires supporting systems such as Direct Access Trading and Level
2 quotations.
 Frequency and costs: A novice scalper has to make sure to keep costs in
mind while making trades. Scalping involves numerous trades — as many
as hundreds during a trading session. Frequent buying and selling are
bound to be costly in terms of commissions, which can shrink the profit.
This makes it crucial to choose the right online broker. The broker should
not only provide requisites like direct access to markets, but also
competitive commissions. And remember, not all brokers allow scalping. 
 Trading: Spotting the trend and momentum comes in handy for a scalper
who can even enter and exit briefly to repeat a pattern. A novice needs to
understand the market pulse, and once the scalper has identified
that, trend trading and momentum trading can help achieve more profitable
trades. Another strategy used by scalpers is a countertrend. But beginners
should avoid using this strategy and stick to trading with the trend.
 Trading sides: Beginners are usually more comfortable with trading on
the buy-side and should stick to it before they gain sufficient confidence
and expertise to handle the short side. However, scalpers must eventually
balance long and short trades for the best results. 
 Technical analysis: Novices should equip themselves with the basics
of technical analysis to combat increasing competition in the intra-day
world. This is especially relevant in today's markets dominated by high-
frequency trading, as well as the increasing use of dark pools.
 Volume: As a technique, scalping requires frequent entry and exit
decisions within a short time frame. Such a strategy can only be
successfully implemented when orders can be filled, and this depends
on liquidity levels. High-volume trades offer much-needed liquidity.
 Discipline: As a rule, it is best to close all positions during a day's trading
session and not carry them over to the next day. Scalping is based on
small opportunities that exist in the market, and a scalper should not
deviate from the basic principle of holding a position for a short time
period.

The Bottom Line


Scalping can be very profitable for traders who decide to use it as a primary
strategy, or even those who use it to supplement other types of trading. Adhering
to the strict exit strategy is the key to making small profits compound into large
gains. The brief amount of market exposure and the frequency of small moves
are key attributes that are the reasons why this strategy is popular among many
types of traders.

You might also like