Buy Low, Sell High and Keep Your Eyes On The Ball
If you can implement a strict exit strategy, one of the biggest advantages of scalping is that it can be very profitable. You can leverage small changes in the price of a stock that may not necessarily reflect the overall trend of the commodity’s price for the day. Also, you do not have to follow the fundamentals because they don't play a significant role when dealing with only a very short timeframe. For this reason, you don't need to know that much about the stock or Crypto you are trading.
Another major advantage of this strategy is that there is very little market risk involved. It is designed to limit the losses from any one stock by making tight leverage and stop-loss points. Scalping is also a non-directional strategy. The markets do not need to be moving in a certain direction to take advantage of it: it works when markets are moving up and down. Finally, many scalping strategies are easily automated within the trading system that is being used because they are usually based on a series of technical criteria.
However, there are also drawbacks to using scalping as a trading strategy. First and foremost, scalping involves a maximum number of trades, compared to other strategies. Opening many trades comes with higher transaction costs because you are paying a commission on every trade. With scalping, you must take advantage of high amounts of trades to generate enough profit. The risk of just generating small profits, especially if investing minimal amounts may not be worth it. Some scalpers make dozens or hundreds of trades a day; this strategy can be very time-consuming and requires high levels of concentration.
You want to win big! Invest large amount of money and keep your eyes on the ball. Buy Low and Sell High. As for an example, today I invested 50K on Bitcoins at a 50K CDN value and close that transaction three hours later for 56K generating a profit of $6,000.00 representing a ROI of 12%. I would have invested $100.00; my return would have been $12.00CDN. I would have invested 500K like my friend George did, my profit would have been $60,000.00.
In short, if you don’t dispose of large sums of capital to trade with, Scalping may not be your best possible investment strategy.
Do the maths!
Michel Ouellette JMD, ll.l., ll.m.
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J. Michael Dennis, ll.l., ll.m.
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