What is scalping in trading in simple terms

What is scalping in trading in simple terms

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Scalping is a style of trading on the stock exchange, which is called intense and stressful. Not everyone can use this method. To achieve success in scalping , a trader has to open short-term trades for hours, spending most of the day at the computer. We will tell you what scalping in trading is in simple words, and how it happens.

What is scalping in trading

Scalping is high-frequency trading, the purpose of which is to profit from the movement of the price by just a few positions. The trader monitors small price fluctuations, opens trades for small amounts, fixes the minimum profit and opens a new position. During a trading session, scalpers make dozens of transactions, which allows them to earn. To reach a regular and good income, you need to learn scalping in trading , since this style of trading has many strategies, requires self-discipline and the ability to work with charts.

A characteristic sign of scalping in trading cryptocurrencies is the duration of the transaction, it ranges from a few seconds to 10 minutes. The position can be held longer if the trader has caught the trend, but all open positions must be closed before the end of the trading session.

What markets use scalping?

Scalpers make money in various financial markets, including the spot and futures markets of cryptocurrencies , stock exchanges. In the spot market, margin trading is common, in which the scalper takes funds from the exchange at a percentage, so he increases the amount of potential profit. In the spot market, long positions are opened (if the price is expected to rise) and short (if the price is expected to fall).

In the futures market, scalpers do not trade cryptocurrencies themselves , but futures contracts. Futures is a contract to buy a specific asset at a fixed rate at a specific time. In simple words, futures traders take risks for the asset’s price in the future and make a profit if their forecast is justified. The most popular tool for implementing scalping strategies in trading are perpetual futures contracts.

The main types of scalping in trading and their features

Scalping can be classified according to several parameters. For example, according to the time interval used, three types are distinguished:

  • Pipsovka . Intensive trading in order to make a profit of 2-3 points. Trades are held for several seconds, up to a minute.

  • Medium term. Projected profit is 2 to 5 pips and positions are held for 5-10 minutes, sometimes up to 15 minutes.

  • Conservative. The trade can be held up to 30 minutes with an interval of 15 minutes, the expected profit is 2-3 points.

the methods used scalping in trading can be divided into the following types:

  • By glass. The scalper analyzes the order book, using its data to predict the course dynamics in the short term.

  • Pulse. A signal or impulse to enter the market can be high-profile political news, the movement of futures in the US or European markets, a sharp change in the rates of major fiat currencies, and other events that can significantly affect financial markets.

  • Hybrid. This is a mixed view, when using which the trader is based on both technical and fundamental analysis, taking into account the current situation on the exchange and external factors affecting trading.

  • on the indicators. Technical indicators are algorithms that allow you to track the movement of the exchange rate and predict price changes. Indicators often signal price movements with a delay, so they are not suitable for pips when a trade lasts less than a minute.

To master each of the types and understand the strategy in detail, it is worth learning it from the basics. Education scalping in trading should consist of theory and practice, a detailed analysis of several types of analysis, the development of indicators, chart patterns and other tools for price forecasting. On course at Crypto Crew , we teach beginners scalping in trading from scratch, help to choose the optimal trading style that is comfortable for the trader, invest safely and trade on the stock exchange efficiently.