Scalping is an advanced strategy used to trade binaries with short expiries—30 seconds and 60 second binaries are suitable for scalping. The idea behind this technique is to open as many market positions as possible in a day and close each position in a matter of seconds.
Scalping Can Help To Generate Significant Returns on Your Portfolio
The returns on each short term trade are small but an accumulation of these small returns throughout the day can lead to a massive chunk of profits. Due to the short expiries, a trader can enter into hundreds of positions on any given day.
Ideally, a trader should choose short expiry periods such as 60 seconds. However, other expiries such as 15 or 30 minutes can be used when trading with the scalping technique. A major mistake that new traders make is to hold the trade for a longer period when they initially opened the market position with the intention of scalping. To get the most mileage, stick with one strategy instead of jumping into another one in the middle of a trade.
Technical analysis tools for scalping
When trading with scalping, you will need to choose one of several technical analysis tools for your trades. Some of these include Bollinger bands, chart patterns, and parabolic stop and reverse just to mention a few.
Whichever technical analysis tool you use, accuracy and speed are of essence. Analyze charts with time frames as short as one to 15 minutes to ensure that the analysis is specifically relevant to the short expiry periods. A chart that shows one hour analyses will not give you the accurate readings you need to execute a trade using scalping.
If you were to use the Bollinger bands, it is usually advisable to utilize the default 20 points for the moving average and 2 standard deviations for the upper and lower bands. Of course, you can adjust the default readings to increase the signals, which will give you less accurate analysis or decrease them for more accurate chart readings.
Scalping is best utilized by advanced players. It is a great day trading strategy for making many small but cumulative gains, which can amount to substantial returns.