Scalping in Day Trading

By www.ProfitableTradingTips.com

Traders who engage in rapid
momentum trades are often scalping
in day trading.


These traders make their profit from the
difference between bid and ask prices.


Even in a flat market traders can profit
from scalping in day trading.


In order to successfully make a business
out of scalping in day trading the trader
needs to pay close attention to the
market, always be aware of market
fundamentals, and keep abreast of
technical analysis.


Despite the theoretical possibility of
trading in an absolutely flat market the
price of a stock constantly moves to
some degree throughout the trading
day.


Thus when scalping in day trading one
acts as a mini trend trader as well.


There is a rhythm to scalping in day
trading and it is fast.


Traders seek to profit from the actions of
traders to simply take the bid and ask
prices of a stock.


This strategy guarantees a profit if the
trader acts quickly.


It can result in losses if the stock price
moves too quickly.


As an example, Xyz Corporation has a bid
price of $10.10 and ask price of $10.15.


If the scalper can buy at the bid price
and sell at the ask price he gains $0.05
per share, a small amount but a lot if
repeated many times throughout the
day.


However, the market might move lower
before he can complete his trade.


Let’s say that the stock moves so that
the bid price is now $9.90 and the ask
price is $9.95.


The trader who purchased for $10.10
now needs to sell at $9.95 if he wants to
quickly exit his trade.


The other choice is to continue the trade
in hopes that the market will turn
upward and not fall farther.


This later course is anathema to scalping
in day trading.


When scalping a trader is never trying to
outguess the market but simply helping
to make the market and make repetitive
small profits.


Bid and ask prices are available on
markets across the world.


Gaining the spread on every trade is the
goal when scalping in day trading.


The ideal scalping trade would be
instantaneous.


Buy at the low price and sell at the high.


Getting in and out in an instant would
seem to be the ideal situation if dealing
with absolutely static bid and ask prices.


However, the market is never static so
traders must look to market direction
even when scalping in day trading.


A successful scalper also engages in
trend following in day trading.


Scalping in day trading takes advantage
of market movement as well as the bid
to ask spread.


While trend traders use technical
analysis to read market sentiment they
attempt to ride out a trade to gain the
maximum profit.


On the other hand a scalper will jump in
and out of a position as the stock moves
back and forth in its trend.


Thus when scalping the trader has the
opportunity to make money as the stock
goes down as well as up even though it
eventually moves in one clear direction
for the day.


By scalping in day trading the trader cuts
his risk of losses, only trades when profit
is clear, and only picks the best stocks
and days for trading.


Throw in a little range trading in day
trading to keep a clear sense of market
direction and you have the complete
stock scalper.


Scalping in Day Trading

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Scalping in Day Trading