Scalping and Financial Spread Betting
One of the most popular strategies for traders, particularly in the early stages, is known as ‘scalping’. A strategy which seeks to minimize risk, the theory behind scalping is that by closing financial spread betting positions quickly and taking small gains when they present themselves, the trader is less exposed to downwards fluctuations in price and can build up a profitable pot over time with many smaller trades.
The main advantage here is the preservation of capital – by scalping individual profits of a few PIPs as they arise, the trader is banking a profit at every turn with a view to creating a stable stream of income and increasing capital throughout a trading day with minimal downside exposure.
Obviously, the main strength of scalping is also its main weakness, and less disciplined traders may quickly get frustrated at closing positions that turn out to deliver hundreds of PIPs in favour at such an early stage. However, for the risk-averse trader, and particularly for traders that are new to the game, trading on this short-term multiple basis is a good way to get started without jeopardizing their capital amount.
Likewise, scalping requires almost constant engagement throughout the trading day if you’re looking to make any significant level of profit, constantly opening and closing positions in response to the market and incorporating the comparatively expensive trading costs of such a strategy in the process. Compared to longer term trading, this can be quite stressful, and requires a constant hands-on approach which might not be suitable for every spread bettor.