Priority Exclusive: Short Term Trading Strategy: Scalping with Example.
Scalping is a trading style specializing in taking profits on small price changes, generally soon after a trade has been entered and has become profitable. It requires a trader to have a strict exit strategy, because one large loss could eliminate the many small gains the trader has worked to obtain.
We it comes to short term trading, you must be more focused and determined to learn and trade yourself as the risk is high along with the Reward. It is more rewarding to do trades yourself and keep learning. Anytime before recommending stocks to members for short term trades, it is my duty to explain the strategies that i know before i could even give some short term calls. Every individual should know how the strategy works.
Scalping means to take small profits in small time.
Why settle for small profits? small movements happen very fast and are very favorable. The chances for hitting target is very very high.
Since it happens in small time, you can place up to 100 small profitable trades a day.
100 trades a day? what would be the cost? Yes the cost of Brokerage, STT and other charges will be higher. To successfully scalp, you need do high volume trades and also find a good discount broker to ensure the cost of each trade is less.
What is the cost of trading Rs. 8,00,000 (Considering average single lot Futures) with a discount broker:
You can see that the cost of trading intraday equity worth Rs. 8,00,000 is Rs. 310.96 and trading F&O futures worth Rs. 8,00,000 is 169.25. (Taken from Zerodha website)
To successfully scalp trade, i would suggest the following
1. Trade in F&O Futures to reduce the cost. Choose scripts with Good volumes to entry and exit at prices that you wish.
2. Have funds to trade atleast 3-5 Future contracts. Place only one contract at a time. Place maximum of 3 contracts per identified trades.
3. Since you are trading for short term profits and you are going to place lots of trade, you should be careful, concentrated and be disciplined. You should also be skillful in picking the right trade.
How much profits can you expect in a day?
I have done some live paper trades in Tradingview website. It was performed on the BTCUSD script on different time frames like 5 mins, 15 mins and 1 hour depending on opportunities.
Entry orders were place at 5 BTC each time with maximum of 15 BTC per single successfully identified trade. There is no cost involved in above trade as it was paper trade.
I would sum it up as below including cost of Brokerage and other charges per trade illustrating similar trades in F&O Futures.
|Trades Identified||Time Frame (Mins)||Demo||Demo Profits||% Returns||Single lot||Profits||Charges||Charges%||Profit after charges||% Returns after charges|
|Fund in account||1,00,000||5,00,000||22133.33||1521||20612.33||4.122%|
|Strategy is to hold funds for atleast 3 to 5 lots of Futures.|
|Charges are based on Zerodha charges of 40 plus STT and other Charges|
|Margin of 8% to 15% has been considered.|
Summing up from the above 9 trades:
- Profit percent is low with smaller time frame, smaller time frames are more volatile and needs a good exit strategy.
- Charges are 0.02% and we need to find a strategy that keeps making large number of small profits of 0.05%. Trading NIFTY Futures you need to find a strategy that identifies 6 points move in the NIFTY.
- Also since margin is available in Futures. You need to have only 3 lacs to 5 lacs to place 3 trades worth of 24,00,000 to 28,00,000 in single identified strategy.
Strategies that can help in Scalping:
- Scalping with Oscillators. Only with oscillators like RSI, CCI and Stochastics, it will be really hard to maintain higher win ratio.
- Scalping with Oscillators and Bollinger Band: Simple and reliable strategy
How this strategy works?
- Stock RSI (3, 14) should trend down after being overbought and NIFTY (5 mins Timeframe) should break the Middle of Bollinger band on the downside. Target Lower band of Bollinger Band.
- Stock RSI (3, 14) should trend up after being oversold and NIFTY (5 mins Timeframe) should break the Middle of Bollinger band on the upside. Target Upper band of Bollinger Band.
- Stock RSI (3, 14) trends down after being overbought but NIFTY (5 mins Timeframe) stays above bollinger band.
- Stock RSI (3, 14) trends up after being oversold and NIFTY (5 mins Timeframe) stays below bollinger band.
Scalping is for determined, focused and skillful people who love winning trades. Strong skill to identify quality trades, Strong emotional control to restrict high greed profits in single trade, strategy to keep losses low with a good stoploss and Focus to trade and learn cannot stop anyone from being a successful scalper.
Fresh Priority Exclusive Strategy with high success ratio (Video to set the charts is also available).
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