Scalping in the stock market: secrets of using short-term trading
Most supporters of trading currency pairs on Forex are convinced that significant investments will be required to make money on the stock exchange.
This opinion was formed mainly under the influence of the popularity of the “Buy and Hold” strategy .
By which long-term transactions are opened and a small leverage is used, since market noise simply will not allow you to work differently.
The essence of this trading system is to buy from 3 to 10 of the most liquid assets, that is, shares of companies with large capitalization - blue chips, and sell them at a more favorable price.
Sberbank;
Gazprom;
Lukoil;
Rosneft;
VTB 24 and others.
The advantages of such scalping in the stock market:
• insignificant expenses on broker commissions;
• simple strategy logic;
• potential profitability from 2.5 to 10% per month, depending on the composition of the investment portfolio;
• the opportunity to earn money with a capital of 50,000 RUR without leverage;
• effective risk diversification.
However, before you start trading, you should pay attention to some disadvantages:
• relatively low profitability compared to effective short-term earning strategies;
• It will really take time to achieve tangible profits.
Beginning traders should understand that the strategy discussed above for making money in the stock market is not the only one.
It is recommended to pay attention to several successful and proven trading strategies with potential returns of up to 60% per month.
Of course, using them in practice will require some experience, for which it is recommended to open a demo account.
Features of scalping in the stock market
One of the main advantages of securities exchanges compared to Forex is low or no leverage.
This significantly reduces trading risks.
Another attractive feature of making money on stocks is the relative predictability of these assets. By studying the quarterly reports of the desired company, which can be found in the public domain, and comparing this information with the pricing dynamics of the RTS index, it is possible to make an accurate forecast.
The stock market also differs from the over-the-counter market in the transparent formation of the spread.
In the QUIK terminal, the developers have provided a “price glass”, which displays the number of buy/sell orders. Extreme values should be interpreted as a spread.
The wider the price range, the more attractive the asset for intraday trading, since this creates all the conditions for maneuvers. Traders call this trading approach trading inside the spread.
Scalping trading in the stock market using correlation
Correct application of trading systems based on correlation practically guarantees success in online trading.
The effective use of correlation in Forex has been discussed in detail here .
Now let's talk about a simple way to apply this method in stock trading.
The algorithm of actions is simple:
When the RTS index grows, you should open 3-5 charts of shares of companies that are part of its structure.
Beginner traders are advised to consider only blue chips. The profit potential for them is insignificant, but the almost complete absence of trading risks fully justifies the choice of these particular stocks.
The growth of the RTS index indirectly indicates the positive dynamics of growth in the value of shares, the issuers of which are highly capitalized enterprises.
From 3-5 open charts, you should choose the asset that lags behind the rest in growth rates. These are the shares you should buy by investing more than 10% of your capital in them.
The deal should be closed either when the RTS index chart reaches the local level, or 1 hour before the end of the trading session.
The potential profit of this strategy varies from 0.2 to 0.6% per day with an average growth of the RTS of 1.5-2%. If you increase the leverage , then you will be able to increase the amount of profit received several times.
Conclusion
Scalping in the stock market is possible.
Moreover, this style of making money on financial markets can compete with trading currency pairs in terms of profitability. The main advantage is low trading risks and the complete absence of non-trading risks.