Greed of Earning More Will Take You down – Book Small Quick Profits
There are many different strategies which are adopted for trading in the stock market. Some traders trade for small change in the stocks and other works for getting substantial change. Traders do intraday trading for gaining small profits and do short term trading for substantial profits on the single trade. The scalping is a technique for generating very small profits on the small price movements and adding up to the profits by doing multiple trades.
The scalping can be a technique in which the trader initiates 5, 10 or even up to 100 number of trades. The trader should rely on some indicator or some other strategy to judge the price movements efficiently. Also the trader should keep the stop loss in limits so that the big losses can be prevented which will otherwise wipe up all the profits obtained. Thus one big loss will take away the profits from many small trades.
As an example the market price of a particular share is 300 Rs and small profits of Rs 1 are captured continuously. Thus if the share is bought at a market price of 300 then it should be sold at 301 Rs. Similarly if the share is sold at 300 Rs it can be bought at 299 Rs. Thus if the scalping is done continuously it will add up to the profits. The stop loss should be kept with a risk reward ratio of near 1:1 or with a little less loss than the profit.
The principles of risk management and wealth management can be applied to make a proper plan for the trading. The probabilistic approach also proves useful for most of the situations. Thus the trader can work on self devised strategies like scalping or can rely on the accurate stock market tips provide by the advisory firms.