Scalping is a type of trading characterized by speed in decision making, taking advantage of opportunities as a result of market volatility.
As an extended trading modality, scalping stands out by favoring quick decisions to buy and sell financial assets.
Your success will come from the daily achievement of a large number of small profits resulting from many operations throughout the session.
In this sense, the action of scalping requires continuous work throughout the day of the stock market. In other words, it involves the implementation of methodical operations that seek to take advantage of price variations in a few seconds.
The need to decide on a purchase or sale of a certain instrument requires both extensive knowledge and technological access to financial tools and updating of the markets.
For this reason, this type of investment strategy has gained greater prominence in recent decades thanks to the growth of the Internet and the appearance of new technological devices.
Main features of scalping
Compared to the rest of the extended trading modalities on the investment map, scalping stands out for a series of characteristics to point out:
- aggressive character: The scalping modality involves undertaking significant levels of leverage and making decisions or investment strategies in a short time. It is the furthest thing from conservative, thoughtful and patient investing.
- Low risk aversion: Following the previous point, scalping traders usually assume higher levels of investment risk. It happens by being more exposed and unprotected against the volatility of the market.
- repeat pattern: Scalping bases its operation on making investment decisions in a matter of seconds to take advantage of small and continuous profits.
- Multitask: The attack of this type of trading strategy favors the multiplication of operations. That is, in one day it is possible to make a large number of purchases and sales.
- Stock market knowledge: The adoption of this trading position requires extensive knowledge of the drift of the investment markets. The result of this will be the ability to make quick and accurate decisions.
Relationship between scalping and day trading
Conceptually, scalping is similar to the investment strategy of day trading, although it is an accentuation of the latter model. Even in economic and investment disclosure, many authors place scalping as a category within day trading.
In other words, scalping also deals with making decisions to buy and sell financial assets in the short term, but it goes further. Scalping focuses on follow-up periods and charts around the minute.
Another widespread way of denominating this type of trading is quick trading or quick speculation.
On the other hand, although both modalities can be applied to all types of financial assets, the very nature of the foreign exchange market favors the application of scalping methodology.