All About Options Scalping- A Profitable Trading Strategy

In addition, unlike scalpers, day traders use fundamental analysis on top of technical analysis when tracking price action. However, like scalpers, day traders avoid keeping their bets open overnight. And while this can provide huge profits if the trade is successful, losses will also be magnified if the markets move in an unfavorable direction. In options scalping, positions are held for a very brief period of time, frequently minutes or even seconds. This lessens the vulnerability to short-term or long-term market risks, lessening the effect of unforeseen circumstances. Options scalping is the practice of quickly purchasing and selling positions in the market, usually for a short time.

  1. Sell it right away for a nice profit, or at the latest, sell by the end of the trading day.
  2. Both scalp and swing trading are short-term investing strategies that rely on technical analysis and charts to profit from trends in particular assets.
  3. Political news (like election results and policy announcements) can also have a large impact on the movements of markets like currency pairs.
  4. As soon as the stock reaches the strike price, the trader exits the market, making a small profit.

Scalping strategies require traders to closely monitor the trading station and to open/close a large number of positions. Another benefit of scalping is that a trader does not need to know much about the asset in question. Unlike long-term traders who rely on fundamental information, scalpers’ focus is more on technical analysis. One of the best technical indicators to use in scalping these types of scenarios is the Parabolic Stop and Reverse (SAR), or Parabolic SAR. This scalping trading strategy will identify many contrarian trading opportunities throughout each day. Scalpers aim to rapidly enter and exit the financial markets, skimming profits from a high volume of trades.

The trade examples above showed entry and stop loss locations (when to exit the trade isn’t working). In uptrends take profits above prior swing highs when the price stalls or shows any signs of reversing. The same concept applies to downtrends with the price dropping below prior swing lows.

Access to Electronic Services may be limited or unavailable during periods of peak demand, market volatility, systems upgrade, maintenance, or for other reasons. After selling 30 shares, the trader will be long 320 delta (from their 10 long calls) and short 320 delta (from their 320 shares short ABCD)—still delta neutral. Because the trader is long calls, they’ll now have to short sell 30 more shares of ABCD at $480 to remain delta neutral.

The price began decreasing and 14 minutes later, ORCL hit the lower Bollinger band. In a nutshell, it is a scalping strategy that is focused on joining a trend in either direction by jumping into a stock as it pulls back to a popular moving average. Financial contracts that have or draw their value from other assets or underlying assets are what we refer to as derivates. Usually, scalpers trade forex or equities, but lately, options and futures also are being traded. In fact, you’ll find that your greatest profits during the trading day come when scalps align with support and resistance levels on the 15-minute, 60-minute, or daily charts.

Mitrade is Your Broker for Scalping

Forex scalpers tend to focus on 1-minute or 5-minute price charts. It’s very rare that a scalper will monitor charting time frames that are longer than 15 minutes. Change and % change show the change in price since the prior day. We’ll talk about that in the options scalping strategy sections below. Suppose a trader employs scalping to profit off price movements for a stock ABC trading for $10.

Because options, by their very nature, offer leverage, traders can manage a greater position with a smaller investment. In turn, this might increase the profits from profitable scalping transactions. The trading strategy known as “scalping” focuses on quickly turning a profit on resale and taking advantage of slight price movements.

Manage position size so that no single trade results in the account balance losing more than 1% or 2%. A 3% move in a stock could equate to an option moving hundreds of percent. No matter what method or market you’re trading, success comes down to profits coming in must exceed losses going out.

Due to the extensive use of leverage, scalping is considered a high-risk style of trading. As a technique, scalping requires frequent entry and exit decisions within a short time frame. Such a strategy can only be successfully implemented when orders can be filled, and this depends on liquidity levels. A successful stock scalper, however, will have a much higher ratio of winning trades versus losing ones, while keeping profits roughly equal or slightly bigger than losses.

In order to receive a confirmation from the Bollinger band indicator, we need the price to cross the red moving average in the middle of the indicator. We will stay with each trade until the price touches the opposite Bollinger band level. Another method is to track stocks breaking out to new intra-day highs or lows and utilizing Level II to capture as much profit as possible. This method requires an enormous amount of concentration and flawless order execution.

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But on the plus side, there are plenty of resources out there to help traders become experts. Scalpers frequently set tight stop-loss orders which determine the maximum loss they will be prepared to accept for each trade. This is especially important in the often-volatile forex market, and particularly around the time when key economic data is due. It can seriously magnify the profits one can make from those small price fluctuations.

Second, high-frequency trading (HFT) now dominates intraday transactions, generating wildly fluctuating data that undermines market depth interpretation. Finally, the majority of trades now take place away from the exchanges in dark pools that don’t report in real-time. Because the selling price of $480 was about 1% higher than the purchase price of $475, the trader should gain about 1%, or $5 per share, on 30 shares of ABCD (approximately $150). Let’s look at the financial metrics that affect the pricing of an options contract (aka the greeks), an overview of what gamma scalping is, and examples of gamma scalping.


Scalping trading strategies and techniques revolve around using technical indicators, and chart pattern recognition in order to identify opportunities. Like with all systems, scalpers can make great use of leverage to supercharge returns. By trading on margin and using borrowed funds from a broker, a scalper can best cloud security companies access larger positions with a relatively small amount of capital. Tight spreads are especially important for scalpers given the large number of trades they tend to make each and every day. This is one reason why these traders tend to stick to major currency pairings like the EUR/USD, USD/JPY and GBP/USD.

The holding times can vary from seconds to minutes, and in some cases up to several hours. The position is closed before the end of the total market trading session, which can extend to 8 p.m. Unlike scalpers who hold trades for less than 5 minutes, day traders​​ spend several hours on each trade.

A 1-minute and 5-minute time frame are the most common among scalpers. A moving average is one of the most popular technical indicators. In the chart below, we can see how scalpers use Exponential Moving Averages (EMAs) to establish positions. EMA is a type of moving average that places a greater weight and significance on the most recent data points. Scalping is a trading strategy that involves a high number of opened trades focused on smaller profits.

Scalping is usually used to help traders control and minimize any losses by placing tight stop-loss orders. In the erratic world of trading, this emphasis on risk management is essential for protecting wealth. You can use scalping in a variety of market situations, such as rising or falling markets. It’s a flexible strategy that adept scalpers can modify to fit current market conditions.

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