What is stock scalping and what strategy you need to follow in order not to lose money

Here’s what strategy you need to follow in order not to lose money if you want to trade and wonder what stock scalping is. Scalping is nothing more than the opening and closing of positions on financial instruments and products. Which in most cases are represented by stocks. Those who practice scalping are called scalper, a definition that indicates a category, a very specific class of trader.

They are in particular those who open and close positions in a very short time, usually within a few minutes with the aim of to gain on volatility. In other words, from the very short-term market fluctuations that shares and other securities register as they are listed on the market. But on what stock scalping is, there are many other things to add.

What does the scalper do to earn on stocks

Starting from the fact that generally every position opened by the scalper is high in value in order to obtain a good profit. Since small price fluctuations are exploited. Furthermore, in order not to lose money, at least the entire capital invested, the scalper always opens and closes positions, whether for profit or loss. Always setting very close stop loss and take profit levels.

For example, he opens a € 100,000 position on ENI (MIL: ENI). If quoted at 10 euros, it will set the level to take profit at 10.10 euros. And that of stop loss at 9.90 euros. To be sure of the maximum bearable loss. But all this in order not to lose money with scalping is not enough. Since it is necessary that the trading platform guarantees the execution of the order in stop loss always.

In this case it is said that the online broker implements and ensures the guaranteed stop loss. As, continuing the example, Eni shares could fall below € 9.90. Without touching this price level. And then going to form on the graph what in technical analysis is defined as a gap.

Profits and losses for scalpers, high risk but always under control

The daily trading gain for the scalper, therefore, is given by the difference, if positive, between the trades closed in profit. And those that instead registered a loss. Furthermore, after launching each order, the positions always close automatically. Profit or loss, precisely because the scalper has set the profit goal in advance. And that of maximum bearable loss.

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