Scalping is a New-Age choice of most to trade with higher frequency for smaller duration and smaller gains. It is similar to running a Grocery Shop for smaller gains over multiple trades.
It is best suited to those choosing short term certainty over long range expiry gains. At the end of the day, if in full momentum can be converted into a Positional Trades.
Scalping is dynamic in nature but not as fast and furious as many would think so.
What does it need?
It needs a good Technical Analysis practicing system with well defined Exit Strategies. They shouldn’t be dependent on been Stopped out with Stop Loss which is a sure shot way to loose 100% of Trade Capital.
Scalping need not mean 5-10 mins arbitrage like trading. Scalping can last from 30 mins till 15:15 hours near close of the day.
It is best in Low Margins of 0.25% to 1% to capitalize on moves small enough of 0.5%-1%. Scalping needs brokerage levels of not more than 0.05-0.1% providing exposure of 25-90 times
A typical Reliance with 0.25% Margin may achieve exposure of 80-90 times depending on proximity of Stop Loss.
Scalping is best with Stop Loss 0.38% below or above Low or High of next immediate Higher Time Frame Indecision (BH<50%CH) Candle. Immediate Higher Time Frame Indecision (BH<50%CH).
Candle takes care of varying ATR of immediate move than average ATR of previous days, that could either Stop one out or Exit early in momentum-filled trades.
Stop Loss based on Immediate Higher Time Frame Indecision (BH<50%CH) candle could be in the range of 1-2% from one’s Entry Price.
Stop Loss defines Risk Reward (RR):.In Scalping one’s obsession on RR needs a shift to Return on Margin (‘ROM’). Paid as in a short 30 mins or so, RR may not be achievable.
If 1-2% Stop Loss from one’s Entry Price is not to your liking then indulge only in Pullback or Reversal Trades as Momentum Trades may call for a faraway deep Stop Loss SL of 1-2%.
Scalping is best over maximum 10 trades per day.
You can end trading on profit after first or 4th trade too. If you start with Day’s Trading Capital of/- do not trade if margin demand exceeds Rs.5,000/- per trade.
As earnings range could be in the range of loss 100% to profits of 300%, each trade to be kept within 1/10th. Of Day’s Trading Capital.
Even if the first trade nets/- on /- Margin the return on Day’s Capital of /- of 4% for the day is reason to halt trading.
Indulge in Scalping!