Scalping Stock Trading: What You Need to Know
If you’re just starting in the stock market, one of the most common questions you may have is whether or not you should be scalping stocks. This can be an effective method of trading and investing, but it isn’t without its risks and drawbacks.
Learn more about what you need to know about scalping stock trading in this guide to the fundamentals of the process and how it can help you make money in the stock market.
A Quick Guide to Scalping Stock
Scalping stock trading is certainly not without its risks, but with time and effort, you can gain an edge on the competition. Read on for the best strategies to help you get started in scalping stock trading.
Know the Risks Involved
One of the most frustrating aspects of stock trading is how confusing it can be. There are numerous tips and rules, and all of them say something different. While we can’t begin to address every rule and piece of advice you might come across, we can make sure you’re always aware that there is risk involved in stock trading.
No matter what method or strategy you use, no matter how good a trader you become, there will always be risks associated with day trading stocks, so be prepared to make such decisions.
Trade a Smaller Number of Shares
Trading smaller numbers of shares can help reduce your cost basis and lower your risk at any given time. When you trade a small number of shares, it’s easier to keep a close eye on what’s happening with each trade. Larger trades tend to have more moving parts and therefore, involve more risk. If you have a smaller number of shares per trade, they’ll also be less expensive in terms of commission fees.
In short, scalping works best when you’re using a fractional-share brokerage account that lets you place lots of tiny bets instead of just one or two big ones. That way, you can get into many positions over time without having too much money at risk in any one position.
Use Scalping Indicators
If you want to trade like an expert and use both price and volume analysis, it helps if you have a tool that allows you to do so. The NinjaTrader® scalping indicator can help with those types of trades, as well as trend-trading ones. The indicator is designed for high-frequency traders but can be used by anyone who wants something free and easy to use.
What’s more, all its data updates happen in real-time which means no lag times between when an event happens and when you see it reflected on your charts—and that means more timely trades.
Learn Every Strategy Before Attempting to Use It
Just because a strategy worked for someone else doesn’t mean it will work for you. Be sure to learn about every strategy before using it, and remember that rules are meant to be broken. It’s okay if a particular trading method isn’t suited for your needs. Focus on finding a style of trading that suits your personality and schedule.
Keep Tabs on Big News Around Major Stocks
If you’re trading as an active investor, paying attention to big news events can be a profitable way to find opportunities in stocks as they move around.
One of the biggest mistakes that novice traders make is buying into a stock because it’s going up or selling. After all, it’s going down. Instead of reacting emotionally, look for stocks that appear out of line with other stocks in their industry and then look at why that might be.
Only Use Trusted Brokers
Use trusted brokers instead of risking it all with sketchy characters who think nothing of stealing from their clients. Some dishonest brokers will even go so far as to engage in illegal activity, where you’re charged a fee for every trade you make. If you feel like your broker is doing something shady, look elsewhere.
The last thing you want is a criminal behind your investments. Stock trading is an exciting, dynamic way to make money, but it can also be very risky if you don’t have the right training. Keep these tips in mind to help you get started with scalping stock trading.
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