Three Types of Scalping
Scalping is one of the most popular trading strategies. But not all traders fit this strategy. You must understand the exact meaning of scalping and the risks. In addition, you must understand the main terms of scalping and the time period used. We have discussed in the previous 2 articles.
In this article, we will discuss three types of scalping that are known by many forex traders. That is the first type of scalping called “market-making,”. That is where a broker tries to become a market maker by utilizing spreads. And enter deals and ask prices for certain shares simultaneously. However, this strategy only works for most stocks that move by trading large volumes without changing the initial price.
This type of scalping is very difficult because you have to compete with other market makers. Namely when submitting an offer and asking. Also, the RRR level does not match 1: 1. The profit rate is very small so that each share movement against the position of the trader can experience losses that exceed the profit target. This is not recommended.
Other trading styles
The other two styles are based on a more traditional approach. And it requires rapidly changing price movements. Both of these styles also require good analytical strategies and methods.
The second type of scalping is done by buying a large number of shares. Buy shares for sale to benefit from very small price movements. This type of broker will enter the position of buying several thousand shares. Then wait for small movements, which are usually measured in cents. Such an approach requires highly liquid stocks. Needed to allow traders to enter and exit from 3,000 to 10,000 shares easily.
If we analogy with forex, traders usually use small lots with many positions in the same direction. When there is a small positive movement (it can be incented) then the trader liquidates the position and gets a profit.
The third type of scalping is the closest to traditional trading methods. Scalper inserts (positions) a number of shares in the system settings or signals. Then the trader immediately closes the position after the first exit signal produces close to the RRR ratio of 1: 1.
The analogy with the forex market is that brokers do open positions in a number of currency pairs. Performed simultaneously and set RRR 1: 1. But if an exit signal appears first, then brokers must close all positions.
Well, if you want to be a broker, you can identify the broker of what type you like.
Happy hunting pips …