Scalping in the financial markets can be an exciting way to make quick profits. It involves making numerous small trades, aiming to capture tiny price movements. But once the scalping session is over, what should you do? This article will guide you through the essential steps and considerations after scalping.
Calculate Your Profits and Losses
Keep Track of Each Trade
The first thing you need to do after scalping is to calculate how much money you made or lost. If you’ve been using a trading platform, it usually has a record of all your trades. Make a list of each trade you made during the scalping session. Note down the entry price, the exit price, and the number of shares or contracts you traded.
For example, if you bought 100 shares of a stock at \(50 per share and sold them at \)50.20 per share, your profit per share is \(0.20. Multiply this by 100, and you get a total profit of \)20 for that trade. Do this for every single trade you made.
Include Transaction Costs
Don’t forget about transaction costs. Brokers usually charge a fee for each trade. This could be a flat fee or a percentage of the trade value. Add up all these transaction costs for your scalping session. If your total profits are less than your transaction costs, you actually lost money, even if it seemed like you were making gains on each trade.
Let’s say your broker charges a \(5 fee per trade. If you made 20 trades during the scalping session, your total transaction costs are \)5 x 20 = \(100. So, if your total trading profits were \)80, you’re in the red after factoring in these costs.
Calculate Net Profit or Loss
Once you have the total profits from all your trades and the total transaction costs, subtract the transaction costs from the total profits. The result is your net profit or loss for the scalping session. This number is crucial as it gives you a clear picture of how well your scalping strategy worked.
For instance, if your total trading profits were \(250 and your transaction costs were \)100, your net profit is \(250 – \)100 = $150.
Analyze Your Trading Strategy
Review Your Entry and Exit Points
Look back at the reasons why you entered and exited each trade. Were your entry points based on sound technical or fundamental analysis? Did you exit too early or hold on for too long? Analyzing these points can help you improve your trading strategy.
If you notice that you often exited trades just before a big price jump, you might need to adjust your exit strategy. Maybe you can set more flexible stop – loss and take – profit levels. On the other hand, if you entered trades without a clear signal, you should work on identifying better entry opportunities.
Evaluate Your Risk Management
Risk management is a vital part of scalping. Check if you followed your risk management rules during the scalping session. Did you limit the amount of money you risked on each trade? A common rule is to risk no more than 1 – 2% of your trading capital on any single trade.
If you find that you risked more than this on some trades, you need to figure out why. It could be due to overconfidence or a lack of proper planning. Going forward, make sure to stick to your risk management rules strictly.
Identify Patterns and Trends in Your Trades
Look for patterns in your winning and losing trades. Are there certain times of the day when you tend to make more profits? Do you notice that you perform better in certain market conditions? Identifying these patterns can help you optimize your scalping strategy.
For example, if you find that you consistently make more profits in the first hour of the market opening, you can focus more on trading during that time. Or, if you notice that you do well when the market is highly volatile, you can look for opportunities during such periods.
Secure Your Profits
Withdraw a Portion of Your Profits
If you made a net profit from scalping, consider withdrawing a portion of it. This is a great way to lock in your gains and reduce the risk of losing them in future trades. You can use this money for other financial goals, like paying off debt, saving for a vacation, or investing in a more stable asset.
For example, if your net profit from a scalping session was \(500, you might withdraw \)200. This way, you still have $300 in your trading account to continue trading, but you’ve also secured some of your hard – earned money.
Diversify Your Investments
Don’t put all your eggs in one basket. Just because you made money scalping doesn’t mean you should keep all your funds in the trading account for more scalping. Consider diversifying your investments. You can invest in stocks, bonds, mutual funds, or even real estate.
Diversification helps spread the risk. If one investment performs poorly, others may perform well and balance out your overall portfolio. For instance, if the stock market crashes and your scalping trading account takes a hit, your bond investments might still be stable.
Set Up an Emergency Fund
Having an emergency fund is essential for everyone, even scalpers. If you face unexpected expenses in your personal life, having an emergency fund can prevent you from dipping into your trading capital. Aim to save at least 3 – 6 months’ worth of living expenses in an easily accessible savings account.
Let’s say your monthly living expenses are \(3000. You should aim to save between \)9000 and $18000 in your emergency fund. This money can be used for things like medical bills, car repairs, or unexpected job loss.
Learn from Your Experience
Keep a Trading Journal
Start a trading journal to record your scalping experiences. Write down details about each trade, including your thoughts at the time of entry and exit, market conditions, and any emotions you felt. This journal can be a valuable learning tool.
Looking back at your journal, you might notice that you made more mistakes when you were feeling rushed or overly excited. By being aware of these emotional triggers, you can work on controlling your emotions during future trades.
Take Courses or Read Books
The financial markets are constantly evolving. To stay ahead, consider taking courses or reading books on trading strategies, risk management, and market analysis. There are many online courses available that can teach you advanced scalping techniques.
Books written by experienced traders can also provide valuable insights. They can share their real – life experiences, mistakes they made, and how they overcame challenges. Learning from these resources can help you improve your scalping skills.
Join a Trading Community
Joining a trading community can be very beneficial. You can interact with other scalpers, share your experiences, and learn from them. These communities often have forums where you can ask questions, get advice, and discuss market trends.
You might find that other traders have faced similar problems as you and have found unique solutions. By being part of a community, you can also stay updated on the latest news and developments in the trading world.
Plan for Future Scalping Sessions
Adjust Your Strategy
Based on your analysis of past trades, adjust your scalping strategy. If you found that a particular indicator was more reliable than others, incorporate it more into your trading plan. If you realized that you were trading too frequently, consider reducing the number of trades you make.
For example, if you noticed that a moving average crossover indicator was very accurate in predicting price movements during your scalping, you can use it more often to determine your entry and exit points.
Set New Goals
Set realistic goals for your future scalping sessions. These goals could be related to the amount of profit you want to make, the number of trades you plan to execute, or the improvement in your win – loss ratio. Make sure your goals are specific, measurable, achievable, relevant, and time – bound (SMART).
For instance, your goal could be to increase your monthly scalping profits by 10% over the next three months. To achieve this, you might plan to make 50 trades per month with a win – loss ratio of at least 60%.
Monitor Market Conditions
Keep an eye on market conditions. The financial markets are influenced by many factors, such as economic news, political events, and central bank policies. Changes in these factors can affect the volatility and liquidity of the markets, which in turn can impact your scalping strategy.
For example, if there is an upcoming central bank meeting, the market might become more volatile in the days leading up to it. You can adjust your trading strategy accordingly, such as by reducing your position sizes or being more cautious with your trades.
Conclusion
Scalping can be a rewarding trading strategy, but what you do after scalping is just as important as the scalping itself. By calculating your profits and losses, analyzing your strategy, securing your gains, learning from your experiences, and planning for future sessions, you can become a more successful scalper. Remember, the key is to be disciplined, keep learning, and adapt to the ever – changing financial markets.
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