Scalping is a trading method loved by many traders. It is especially for traders who love the “quick and clear” style because the duration from the start of order execution to the end is very short. So what is Scalping? How to trade Scalping to get the highest efficiency in Etoro?
What is Scalping?
Scalping (surfing) is a trading style in Etoro that is done in a very short time (from opening to closing of orders) to make a profit.
Compared to other trading styles, Scalping is an action that is repeated continuously during the day. Most orders are never held overnight as traders often do not expect high profits. Their purpose is just a small profit in order to “make a mickle from many a little” so the time from opening order to closing time is sometimes extremely short, even just a few minutes. Therefore, even when the market is sideways, Scalpers are still profitable.
Why is Scalping so popular among traders?
The Scalping strategy really helps you feel “at ease” with less heart attack compared to other strategies. Of course, the profit will be much smaller than other strategies.
It forces traders to be very patient and hardworking in “pick up the small change”. Or you have to trade with a large volume in a trading position to make the profits really attractive.
In fact, for years, many people believed that scalping required manual trading. Many traders do not have time to “stick their eyes” to the screen so they often overlook this form.
However, currently, the MetaTrader 4 (MT4) and MetaTrader 5 (MT5) software allow traders to be fully automated in order entry as well as stop-loss or take-profit. They allow traders to not have to stay in front of the screen all day.
Advantages of the Scalping trading strategy
Here are the advantages that make traders love this “speedy” method. It makes us feel flexible, agile, proactive in short-term transactions.
Simple trading system
Scalping is really a strategy that anyone can understand, even if you are new to the market. It doesn’t require too much knowledge about the financial markets.
Low risk level
Scalpers mainly trade on short timeframes and never leave orders overnight. Normally, orders are closed during the day by traders. Therefore, dangerous situations such as reversal orders due to the impact of objective factors are limited. Such as interest rate news, statements of a high-ranking official, etc. all can affect the trading assets.
Probably increase the odds of winning
The Scalping trading method usually aims at very small profits. If you choose the right time, within a few minutes, you can completely close an order and make a profit as desired. You can make money even when the market is sideways with the Scalping trading method.
Use high leverage
Traders can use high leverage when trading Scalping to open large positions and earn attractive profits for trading. It is important to note that no matter how leveraged you are, you should also manage your capital appropriately in case of risks occurring.
Potential risks when trading according to the Scalping method
Of course, this style won’t be suitable for everyone. A Scalper must be a highly focused person to observe charts during all trading sessions. In particular, it is necessary to have quick reflexes to make a timely decision when opportunities arise.
That is why it is quite stressful to trade with this method. If you are not someone who can react quickly to a market change, you will probably lose money.
Too large transaction fees
Due to the large volume of transactions carried out throughout the day, commission fees are a problem with the Scalping method. So if you want to reduce these fees, you should choose a platform with a low fee.
Basic strategies for Scalping in Etoro
How to trade Scalping with the RSI indicator
Conditions: A 1-minute Japanese candlestick chart. Set up an RSI indicator in Etoro.
Open a BUY order when: The price is in the oversold zone and the RSI is below 20.
Explanation: When the price enters the oversold zone, there is a high probability that it will rebound. Therefore, when the price is in the oversold zone and the RSI indicator is below 20, open a BUY order right there.
Open a SELL order when: The price is in the overbought zone and the RSI is above 80.
Explanation: Normally, the price will get down when the RSI hits the overbought zone. SELL orders should be opened as soon as the RSI is above 80.
Combined with support and resistance
Conditions: A 1-minute Japanese candlestick chart.
Open an UP order: The price enters the support zone.
Explanation: When the price hits the support zone, there is a high probability that it will rebound. And when the price hits the support zone, it’s time to safely open a BUY order.
Open a DOWN order when: The price hits the resistance zone.
Explanation: When the price hits the resistance zone, it is more likely to bounce lower. We can most effectively open a SELL order at the resistance.
Things to note when using the Scalping method in Etoro
– Scalping should be done only with asset pairs of high liquidity and low spread.
– Only trade within the volatile time frame of the day.
– Comply with capital management principles.
Through the above article, How to trade hopes to help you understand what Scalping is and things to note to help you use Scalping more effectively. Whatever trading method you choose, it is important to remember that profits should always be guaranteed and losses should be within acceptable ranges.