| April 10, 2019
What is Scalping Strategy in Algo Trading Platform
Traders use many peculiar strategies for generating
risk-adjusted alpha in the market.
is a short-term trading strategy which involves a trader trying to beat the
bid/offer spread (as with any currency, there are both bid and offer prices.
The difference between these two prices is known as the bid/offer spread) and
make some profit out of skimming a few points before closing the trades. In
most cases, scalpers have an interest in downturns in the market and how they
can take advantage of them and this is mostly reviewed through the order flow
The main advantage of scalping is the ability to
gain profit from small price changes within the shortest time frame possible,
which is often augmented by a larger position size. This is an intra-day type
of trading which means that positions are closed before the end of the trading
day or session. Scalping is known for its pace and quick executions.
In the most maximal examples, trades are opened and
closed within a few seconds, if a sufficient price movement has been made. Due
to its high-speed nature, traders need to be precise with their timing and
Scalpers will take many small profits, and not run
any winners, in order to seize gains as and when they appear. The aim is for a
successful trading algo trading strategy through
a large number of winners, rather than a few successful trades with large
Scalping is about placing the right trades every
day and trusting the process with the help of algo trading platform. Makeno mistake about it; the process is what is going to make you successful.
How to Create a
If you decide that scalping is the trading style for you, you will need
to define a set of rules or guidelines to follow that will create your trading
plan. Furthermore, scalpers cannot have reliance for
real-time market depth analysis to get the buy and sell signals they need to
book multiple small profits in a typical trading day. They can tailor
themselves to the modern electronic environment and use the technical indicators
that are custom-tuned to very small time frames.
frame: Principally,1 minute or 5-minute time frame should
be good. As a scalper, your entry and exit are extremely important. This is
because you are only making 10 to 20 pips each trade and your stop loss for
such trades are usually very tight. Scalping is one of the most challenging
styles of trading to master. Many traders want to
instrument a scalping strategy, but don’t know where to kickoff. The truth is,
you can develop a simple scalping strategy in as little as three steps.
the trend: The first step to scalping is
finding the trend. Finding the trend is important because it helps create our
trading unfairness for a currency pair.
your entry: The next step in developing a
scalping strategy is to decide on an entry mechanism.
risks: The last step of any trading strategy is to manage
risk. While there are a variety of ways to place stops, traders should also
consider the told risk associated with their trade.
SCALPING Vs TRADING
Trading – Short
Scalping- 5-15 minutes
Trading – 15-60 minutes, daily
Trading- Price actions and indices
Scalping-More than 5 days
Trading- 1-3 per day
Scalping- Big account size as they take
high risk in the market
Trading- Average account size
Scalping- Ultrafast result
Trading- In a day
Scalping- Medium to High
Trading- Low to medium
Scalping- Risk of High losses
Trading- Large losses can be made
Scalping- Alert and precise
Scalping- Small, multiple and fast
Trading- Fewer with longer holds
Scalping- Mostly Trend following
Trading- Varies from trader to trader
Scalping - Scalpers are the
seasoned traders who know the market, understand trends, use a complex
combination of tools and fundamental or technical analysis very fast, and can
decide a matter of seconds.
Trading - While beginners in
trading can take the middle approach, combining scalping with day trading
strategies, the best scalpers have years of experience. On the other hand, even
beginner day traders who have patience understand the market and aim for
longer, but safer results can gain profits when they follow the more extended
Scalping has become one of the most popular short-term trading
strategies algorithmic trading India used by both retail and institutional
traders, provided with a pragmatic approach, open to fresh trading
opportunities, alertness, vigilance, and fast decision-making skills.
Furthermore, for good reason: it’s a relatively low-risk strategy that works in
any market conditions.
However, when developing a strategy, it’s important to backtest and
paper trade it to ensure that it produces the expected results and is the right
fit for you.