Scalp trading is a very popular topic amongst many futures, forex and stock traders. It can be profitable and fun IF you have the personality for it. Scalp trading requires a lot of time in front of the monitors typically and can provide many trades during each session. While this may be right up your ally, some would strongly argue that they do not wish to stare at a monitor nor do they want to spend a lot of time doing an analysis of the financial markets. Our philosophy is that there really is no "right" or "wrong" way to trade as long as you are making money.
Regardless of anyone's style of trading it is more important to suit your own personality so you do not get the urge to alter your methods. Consistency is key and if you are not trading what you love it could be more detrimental if you attempt to force a different style. Another aspect that could really harm your overall success is trying too many styles. If you do your research up front you will most likely have a good idea of which methods work and which do not. Following your due diligence you may choose what is most logical to you.
Below you will find 5 tips that may help your futures, forex or stock scalp trading:
Look for a method that can be used across multiple time frames.
As a scalp trader you will most likely be analyzing the small time frame charts to determine entries, stops and targets. If the method is only capable of being used for the small time frames it can be very limiting. For example if you decided to trade your own retirement account or even a long term account you will now need to use a completely separate method which may be rather confusing when trying to do both.
Stick with it for at least 3 months (not including your learning curve)
This is easier said than done, however there is simply no way to know if a trading strategy will perform consistently without rigorous testing. I am not referring to "back testing", it should be executed in real time and in a demo account. At the end of the 3 month period you will be able to determine certain patterns in your strategy from your trade journal that will help you to filter out inconsistencies.
Use multiple time frame analysis
No matter which scalp trading style or strategy you are using it is always a good idea to know what the different style traders are potentially thinking. For example if the larger money (larger time frame) is reaching a measure of confluence that displays a reason to sell, it is good practice to take this into consideration especially if you are attempting to buy.
Look for confluence of methods
Any trading strategy will most likely have multiple aspects that should be met before executing a trade. The more things that line up the better your chances are for success. Some of the more popular aspects would be trend lines, support and resistance, Fibonacci measurements and so on. When these all take place at the same time, it would indicate that many traders are seeing their requirement for entry and this helps the probability for your trade working out in favor.
Read price for targets and stop
Last but certainly not least is using price action to determine how large or small your targets and risk should be. For all traders, but primarily for scalpers there is a tendency to take very quick profits and most often there is much money still left on the table. It is important not to confuse this with greed! By using the psychology of the market to methodically show you where to exit you could stand to have much larger profit potential.