Scalping as the name suggest, is the fast paced, mind rattling and total exciting strategy used by traders in stock market. Scalping is one of the trading method intra day traders use to decide their trades. Scalper as defined by Investopedia is a person trading in the equities or options and futures market who holds a position for a very short period of time in an attempt to profit from the bid-ask spread.
Features of Scalping
1) Trading usually are for very short period say for example for few seconds to 15 minutes time frame.
2) Traders place many and frequent orders
3) Main purpose of scalping is to get the benefit from the difference in bid and ask price
4) Scalpers have to be focused and be aware of the price and volume movements second after second
5) It usually suits the person who are impatient and have less tendency to wait for longer period
6) Quick decision maker - a must requirement to trade
It is the game of strong hearted person having ability to take quick action not only to book small profits in multiple traders but be capable of exiting from the position at the time when price hit stop loss
Scalper Theory: There are multiple strategies scalpers follow. One of them is average price and volume change strategy. Today we are going to learn the first lesson and the most important one that scalpers use.
Scalpers monitor below two pointers very closely.
1) The movement in the Volumes
2) Difference in change in price and average price for the selected time frame.
Based on the above parameters the call is taken and the targets are decided.
Keep in mind, you should traded when the counter is most active and during the busiest point of the trading session
Steps to follow:
1) In the given time frame, check the high and low price of the stock
2) AVerage of the difference in price
3) Check the volumes
a) If close price increase as compared to last period close price and the volumes are increasing - It suggests that buyers are more than sellers
b) If close price decrease as compared to last period close price and the volumes are increasing - It suggests that sellers are more than buyers
4) Aggregate the buyers volume and sellers volume separately
5) If buyer volumes is more than seller volumes, it indicates the trend is bullish else the control is in bears hands
6) To decide the target, subtract the average price from the low price for bearish trend. In case the trend is bullish, add the average price to the high price and the said amount can be your short term target.
Let us try to understand with the simple formula
Formula - Scalping Theory - Base Volumes
▶High - 100
▶Low - 88
Therfore
( High - Low) / 2
Or
( 100 - 88 ) / 2 = 6
So add result to Low Price
ie....
6 + 88 = 94
Now - Volume
Volume Increase Close below - 94 - Bear trap
Volume Increase Close above - 94- Bull Trap
Now Break Out
Target Below - 88- Should be 88 - 6 = 82
Similarly
Target above 100 - Is 106
Let us now proceed to the video by Puneet S. Marwah on the Scalper Theory - Volume based
excellent strategy nice explained. i have one doubt. In the excel sheet provided by you, on 16 dec, bharatfin has closed at 641.25 which is below the pivot price of 653, hence on the next day open ie on 19 dec can we SELL at open = 640 for a target of 447 or we have to wait to break below the low of 550 for short entry?
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