Scalping is an effective trading method to capture quick profits from the index futures markets and reduce exposure by using tight stops. Although we use scalp trades frequently in our trading room, we do not limit ourselves exclusively to scalping futures contracts since the market is dynamic and changes from time frame to time frame.
Longer open trade periods may be utilized to capitalize on larger market moves to increase profits but scalp trading is a large part of our trading system.
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As index traders, we should always be testing different trading methodologies that can improve the amount of winning trades we execute. Scalping is one method that allows for increased potential for profitable trades since exposure in the market is greatly reduced when scalp trading index futures contracts.
When utilizing this method of trading, traders are capitalizing on extremely short term opportunities. If you already understand the concept of scalp trading and are looking for a scalping system, follow the link below:
Although scalp trading is widely employed by veteran traders, those new to the futures markets can also benefit by using short term trading methods. Building confidence as a new trader is vitally important and by setting our goals at obtainable levels, we can raise our levels of confidence. The emini futures markets are highly liquid and volatile, offering many opportunities for the trader to profit many times throughout the trading session.
By setting goals for only two or three points on each trade, the novice trader can build confidence by reducing exposure and lower risk of broken trades.
The key to scalping, is to approach the market with a trading plan to get in and out of the market quickly, not swinging for the fences hoping for a homerun. Small profits are the goal.
Given the nature of the futures market, there will be many opportunities each day for the trader to execute trades with the potential of profit. Veteran traders that use scalping as their chosen method of trading will, in most cases, execute a large amount of trades each day.
As a trading method, trades are entered and exited rapidly. Once the trader begins to implement the scalp trading method, he will learn to exit the market swiftly on both winning and losing trades. Since the trader knows he will exit quickly no matter if the trade is successful or unsuccessful, large losses are prevented.
New traders so often approach the markets with ideas of huge profits and making a mint rather than focusing on learning to be a successful trader. It is so important for new traders to build confidence and understand profits are the result of disciplined trading.
Although scalp trading is an excellent method for new traders to utilize, it is also a method that is expertly used by market professionals. What makes scalping so profitable is position sizing. Professional market players wouldn’t use this method of trading if it didn’t offer a substantial profit.
Trading one contract will yield small profits on a winning trade. However, by increasing the amount of contracts on each trade, the futures trade can increase the amount of profit through position sizing. On the flip side, risk levels increase substantially with each contract added to each trade.
New traders should start with only one contract and increase the amount of contracts traded on individual trades once confidence and skill levels increase. The futures market is no place for thrill seekers or those who find themselves trading out of desperation. This recklessness will always lead to total failure and empty trading accounts.
Another important factor to consider is your broker. Scalping is a trading method that yield smaller profits and decreases risk exposure. However, because the amount of profit is small, traders will need to execute many trades to show a decent profit. Broker commissions will have and affect on profits which makes having the right broker very important.
Competition is stiff in the futures brokerage industry and locating a broker with inexpensive trading fees is not difficult. Some brokerage firms cater specifically to high volume traders and offer competitive commissions. It should be understood, you will pay a commission on both sides of the trade, both on entry and exit, so this should be considered when choosing a broker.
Scalping requires quick execution of trades since traders seek to be in and out of the market very quickly. Make sure a broker is chosen that offers a reliable trading platform. Nothing frustrates a trader more than to attempt trade execution only to see the market move without their trade being executed because of their broker. It cannot be stressed enough the importance of a reliable broker.
Although scalping is most often employed by veteran traders, a new trader should consider scalp trading mini contracts as a way to obtain the confidence so necessary to trading success. Because this method reduces exposure time within the market, losses can be limited and account draw downs are kept at a minimum allowing the novice opportunities to execute many trades.
Scalp Trading Offers Advantages Over Other Forms Of Trading
If you are experiencing difficulty in your trading, maybe you should consider changing your method to a shorter time frame. Scalping involves a shorter time frame but does require the ability to be laser focused and quick on the draw. Since the holding period for a scalp trade is generally no more than a few minutes if not only for a few seconds.
New traders run into difficulty when they do not approach the markets with a defined plan and look for opportunity with a shotgun method. Day trading, scalp trading, no clearly defined plan for trading and basically entering a trade and hoping for the best outcome.
Their daily plan for trading is as fluid as the market itself, ever changing as the session flows toward the close. Veteran markets players know trading without a clearly defined system, or plan is a recipe for disaster.
By utilizing a scalping method, the trader limits his exposure and has a exit strategy designed to only cost him no more than a couple of points should the trade go against him. By design, scalping is for quick entry and exit.
The very nature of this method of trading reduces exposure and be default, minimizes potential losses. Although the index futures scalp trader generally executes many more trades a day than the atypical day trader, the scalp trader is in a better position to control the amount of losses incurred.
Professional traders have known for years scalping can generate excellent profits each day if the trader practices sound money management skills and follows a trading system with rules designed to protect against devastating losses that so often are a part of the rookie trader’s daily routine. The importance of a trading system can not be emphasized enough.
Unfortunately, new traders blinded by the profit potential offered by index futures trading, seldom have a system in place before jumping into shark infested waters. Once they blow out their trading accounts they finally realize that only when a trading system is in place will they be on the road to profitability.
Index future trading requires discipline and intestinal fortitude not required in many other money making fields. The financial markets are the arenas of the most informed and financially savvy participants, bar none.
In order to compete, the rookie trader must have a system in place that will improve their chances of success against stiff competition. By utilizing a scalping trading system and by exercising sound money management rules, the new trader can quickly be on his way to emini scalping success.
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4 comments:
Informative article on scalping. I've traded the DOW contract exclusively using a scalping method and the eminis lend themselves very well to this form of trading.
I scalp-trade the e-mini NASDAQ NQ. I only buy or sell in the direction of the one minute trend and enter off of shorter-term per second chart breakouts. It works great . . . . as long as the market is moving with good volume & volatility. When it is quiet with light volume, I stand aside. Gives me as many trades a day as I wish to take . .. . and I quickly grab-out with several small profits a day.
E: tradethetrend@acanac.net
I was hoping that 'Anyonymous' would comment on how a trend is defined on the one minute chart, what kind of breakout is taken, and what kind of target and stop loss levels are considered. Thanks
I was hoping that 'Anyonymous' would comment on how a trend is defined on the one minute chart, what kind of breakout is taken, and what kind of target and stop loss levels are considered. Thanks
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