Learning to trade the lower time frame is one of the most difficult tasks in the retail trading industry. When you take the trades in the lower time frame, the margin for error is really low. You should be using some of the most advanced methods to protect your trading capital. Now, if you ask a professional trader about scalping strategy, they might ask you to trade the market in a higher time frame. Some of them will suggest not to scalp at all. But today, we are going to give you some amazing guideline which will blow your mind.
If you manage to follow the tips mentioned in this article, you can expect to scalp the market like a pro trader. Most importantly, it will take less than six months to develop a sound scalping system. So, let’s dive into the key steps of learning.
Support and resistance level
Support and resistance are the most important factor for retail traders. Sadly, the new scalpers don’t have a strong idea about these levels. A support level usually pushes the price higher and a resistance level pushes down the price. So, you need to take the call option at the support zone and go for the put option at the resistance level. While drawing the support and resistance level, try to use the highs and lows of the market. Use the H1 or higher time frame even though you might take the trades in the minute time frame. Once you become good at analyzing the support and resistance level, you will become more confident about your actions.
Risk to reward ratio
One of the key reasons for losing money in the options trading industry is the poor risk management policy. Professional traders always love to trade the market with a high risk to reward ratio. If you read some educational content at Saxo, you will notice maintain a high risk to reward ratio is one of the key factors that will determine your success. Before you take the trades in the options market, you should be certain that you are going to win more money than you risk. If not, you should not trade the market.
Developing a system
While developing a system, you need to consider two things. First of all, learn to find the support and resistance with high precision. And then you should be focusing on the risk to reward ratio. Before you start trading the real market, use a demo account and try to make money by trading important trading levels. Once you have the basic skills, you should start using some advanced indicators to improve your performance.
The novice traders often make things a mess by using too many indicators. Instead of that, you may rely on the simple moving average and trade the market in favor of the trend. Those who are interested in the reversal trading method should give it a second thought since reversal trading is one of the most difficult tasks in the market.
Test your trading strategy
After developing the basic trading strategy, you have to test the performance of your system. The testing should be done in the demo account. If you test the functions of your trading strategy in the real account, you are going to lose too much money. You will fail to find the faults in your trading system. So, open a demo trading account and try to make a profit by using your trading. And make sure the win rate is over 60% or else you don’t have any strategy at all.
A trading strategy should be always simple. Try not to make the system overly complex as it will make you confused. Use the most basic tools and try to trade with the key trend. And find the trade signals during the active trading hours so that you don’t have to deal with the consolidation phase.