Scalping is a trading strategy in which a trader takes advantage of small variations in prices in lower time frames.
It goes against the norm where an investor holds their coins for a long time to gain profits by winning even less or half of their trades. Instead, it follows the idea that the number of successful trades should be much bigger than the loss. While keeping their profits slightly higher than the losses, a skilled and successful scalper has a high ratio of winning trades than losing ones.
The main assumptions of scalping include:
- Less exposure to the market reduces the probability of an adverse event/loss.
- Small moves are comparatively easier to attain. A huge imbalance regarding supply and demand is the major warrant of price changes. For instance, for stock, it is easier to make a $0.02 move than to make a 2$ move.
- Larger moves are less frequent than smaller ones. Even during stable market positions, a scalper can exploit several small moves.
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