Three Types of Scalping
Scalping is one of the most popular strategies but not all traders match this strategy. You must understand the exact meaning of scalping and the risks, the main terms of scalping and timeframe used. We have discussed in the previous 2 articles.
In this article, we will discuss three types of scalping known by many traders. That is the first type of scalping called “market making,” where a scalper tries to become a market maker by utilizing spreads and entering bid and ask prices for certain shares simultaneously. However, this strategy only works on most stocks that move with large volume trades without changing the starting price.
Scalping this type is very difficult to do because you have to compete with other market makers when placement bid and ask. Also, his RRR level does not match 1aaa1: 1. The level of profit is so small that any movement of stocks against trader positions can experience losses that exceed the target profitnya.This less recommended.
The other two styles are based on a more traditional approach and require rapidly changing price movements. Both styles also require good strategy and analysis methods.
The second type of scalping is done by purchasing a large number of stocks sold in order to profit on very small price movements. This type of scalper will go into the position of buying several thousand shares and wait for a small movement, which is usually measured in cents. Such an approach requires a highly liquid stock to allow traders to enter and exit positions from 3000 to 10,000 shares easily.
If we analogy with forex, traders usually use a small lot but have many positions with the same direction. When there is a small positive movement (can be in the cent) then the trader liquidates the position and get a profit.
The third type of scalping is the closest to traditional trading methods. Scalper inserts (positions) a number of shares in the setup or signal of the system, and immediately closes the position after the first exit signal generated close to a 1: 1 RRR ratio.
The analogy with the forex market is that the scalper does open positions in a number of pairs simultaneously and setup a 1: 1 RRR. But if there is an exit signal appears first, then the scalper must Close All Position.
Well, if you want to be a scalper then you can identify what kind of scalper you like.
Happy hunting pips ..