Scalping is a popular type of day trading strategy that involves opening many small trades per hour and then adding profits and subtracting losses. Generally these trades last very short, sometimes even a few minutes or seconds (depends on your objective and analysis). The goal is to make many small profits per day while limiting the amount of losses.
What is a scalping strategy?
Day trading is the practice of opening multiple trades in a day. It differs from other approaches simply because day traders don’t believe in holding trades in the overnight session. They believe that doing so is a high risk thing that will tend to lead to significant losses.
Therefore, day traders use a number of approaches. There are those who initiate trades in the morning and then close them when they are ending the day. There are other day traders who spend their entire day finding and implementing different strategies.
Scalping is a relatively unique strategy in that the trader tends to open a trade and then close it within a few minutes. As such, they use very short term charts, with a maximum size of about 5 minutes.
Using longer charts in scalping will tend to lead to substantial losses because each candlestick represents a longer period. For example, each candlestick in a hourly chart represents one hour.
1 minute scalping strategies
A 1 minute scalping strategy refers to a situation where a trader uses the 1 minute chart to conduct analysis and execute trades. In a 1 minute chart, each bar usually represents 1 minute period, meaning that you will be seeing the bars move in real time. The chart below shows how such a chart looks like in Cardano’s chart.
A 1 minute chart can be deceiving in the longer term. For example, a visual look of the chart above shows that the coin is basically in a downward trend.
However, when we shift it to a four hour chart, it shows that the coin is actually in a bullish trend. But in this case, one minute traders don’t care about the performance in longer periods.
Trend following
One of the most popular 1 minute scalping strategies is known as trend following. Its name tells it all. It is a trading strategy that identifies an already established trend and then follows it until it changes its direction.
If an asset is moving in an upward trend, then you can initiate a buy trade and hope that the trend will continue. Similarly, if the stock is moving in a downward trend, you can short the asset and benefit as the price rises.
Trend following is a fairly simple strategy to use when you are scalping in a 1 minute chart. Your goal is to find an asset that is in a bullish trend and then just buy, especially when it makes a pullback. In this case, you will make some cash when the price rises and then move on to the next one.
At times, you can ride a bullish trend and then make money when a bearish trend starts. This is usually possible because most bullish trends tend to be followed by a bearish move.
