Stocks & Commodities V. 23:10 (76-78): Scalping As A Trading Style by Vadym Graifer Scalping got a bad name during the 1998–2000 market boom, mostly thanks to the media. Does scalping really deserve the bashing? Scalpers inhabit an area of fairly small trade movements and feed off the table of bigger fish. The casualty rate is high (although this statement cannot be limited to scalpers only), but those who survive are well prepared to profit, in spite of the constantly changing trading environment. This ability to adjust immediately is worth it, as such a skill is necessary to prosper in difficult and quickly changing markets. BUT WHAT IS SCALPING? The basic definition of scalping is a trading style in which a trader takes a profit on the first leg of a movement, not allowing the stock any meaningful retreat. It is based on an assumption that it is easier to get a higher amount of winning trades when profits are taken faster, minimizing the cases when relatively small profits evaporate and turn into a loss. This is contrary to the more conventional and commonly accepted approach where a trader lets profits run, risking losing them on a reversal or a severe pullback, and trying to make up for a diminished win/loss ratio by a bigger ratio of winner vs. loser. |
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