Scalping is one of the most fast-paced trading strategies, and while it can be very profitable, many struggle to master nuances that make it successful. Quick decisions, speedy execution, and a great understanding of support and resistance are essential in making money with scalping.
However, traders fail en masse because they either don’t quite grasp the core principles or lack the actual tools and mindset needed to win.
Thanks to the power of good trading platforms and advanced technology, scalping can now be accessed by more traders than ever before.
However, with these comes the challenge of selecting the best setups and strategies that would give you an edge. Without the right knowledge and tools, even the best platforms cannot guarantee success in the fast-moving world of scalping.
In this how-to guide, I will explain three key tips to become a successful scalper, plus an amazing bonus tip which will 10x your results.
The strategies explain how to keep leveraging technology, master timing, and understand the risk-reward dynamics that will give you knowledge to consistently profit from scalping.
3 Proven Tips to Enhance Your Scalping Trading Success
Tip #1: Significantly Focus on Major Support and Resistance Levels
The scalper always has to remember the market in terms of baseball: how it’s not about home runs, but a series of singles and doubles.
Key to successful and consistent profit from scalping is identifying big points of support and resistance. These become the “bases” of the trade the way each trade is rounding base toward a small profit.
- Identify the Major Support/Resistance Levels: Identify the major price levels that are likely to attract price reversal rather than just tracking every minor price movement. The finest pocket for taking short-term trades is where price appears most likely to reverse from major support or resistance levels.
- Know When to Enter: Once you’ve identified these critical levels, the next step is timing your entry. Knowing when to buy at support or sell at resistance is an art that requires practice. Entering trades at the right time is essential for scalping success.
But, as a bonus, you can even use a timing indicator for well-timed entries so that you can get into the market at the best possible times to maximize your profits. Provided that both support and resistance levels and excellent timing are in place, consistent profits can be made.
Tip #2: Focus on Win/Loss Ratio More Than Risk/Reward Ratio
Probably one of the most common misunderstandings about trading, particularly about scalping, is that it has to do with the size of the risk/reward ratio.
Although this represents a key consideration in other strategies, the scalper prioritizes the win/loss ratio—the number of trade wins against the number of losing trades. Unlike the need for bigger wins to offset a loss in trend trading, the scalper takes many small, fast profits.
- Aim for More Winners Than Losers: In scalping, the goal is to get more winning trades than losing ones. Even if your risk/reward ratio is 1:1, taking multiple small wins can add up over time. The key is consistency and frequency.
- Accumulation of Profit: Because you are taking multiple small profits, you accumulate profits in a similar way compound interest works—a successive increase in capital so that every subsequent profit feeds off the last one.
The first thing to understand about scalping is that it is all about executing high-frequency small trades instead of waiting for big moves. Your goal is a substantial win rate and not much concern with the size of each trade.
Tip #3: Make Fast Decisions and Master Pattern Recognition
Scalping is a fast-pacing strategy where speed is the game. You have to make fast decisions and act almost instantly.
This may be the greatest challenge many new scalpers will face because so often, they may be used to slower, more deliberate trading styles.
- Quick Decisions: Unlike other trading styles, you can’t afford to think or write a checklist to enter a scalping trade. You need to spot the patterns and make the trade decision on the go. This requires a quick mind and the ability to process information rapidly.
- Develop Pattern Recognition: Successful scalpers develop pattern recognition through practice. Using simulators and demo accounts, you will build up experience and begin to recognize repeating patterns of price movements much faster. Eventually, you will be able to make trading decisions almost instinctively.
Scalping is not for those who think too much and overstrategize. It requires the mind of a chameleon, always quick to react and seize the opportunity.
However, with the right amount of practice and the proper focus, you can train your mind to act on its own and deliver in any situation.
Bonus Tip: Leverage Technology for Speed
One of the areas most overlooked when it comes to scalping is the fact that it entails speed, not just in your decision-making but also in your technology.
For real success with scalping, you must use the best technology at your disposal to streamline your trading process from top to toe.
- Fast Hardware and Software: Your computer and software need to be able to execute trades without lag. The more rapidly your system is, the stronger a trader’s chances of entering and exiting trades at the right time will be. Make sure that the trading platform is responsive and optimized for speed.
At the core of scalping lies quick order execution, making your internet connection very significant. A fast, stable, and reliable connection ensures that your trades go through without a delay, which can make all the difference between a profit-generating trade and one that got away.
- Direct Exchange Connection: As much as possible, have your connection directly made to the exchange rather than being forwarded via third parties such as brokers and clearing houses. This way, you can minimize the delay before you act when the right setup arises.
Conclusion
Scalping can actually be a very profitable trading strategy if done right.
With these three proven tips—that is, focusing on the major support and resistance levels, prioritizing the win/loss ratio over risk/reward, and making the fast decision based on pattern recognition—you are more likely to be successful.
However, to truly maximize your scalping potential, don’t underestimate the importance of technology. Speed is crucial in scalping, so leverage fast hardware, software, and reliable internet connections to ensure that you never miss a trade.
