How Can You Profit From Scalping In Hong Kong?

Scalping is a trading strategy that exploits small market price swings. It’s based on the premise that every stock has two prices; a bid, where buyers are located, and an offer, where sellers are willing to part with their shares.

The key for this trading strategy is to identify when these swings take place because it takes less time for the price to swing up than down. Once you have identified them, you should buy at the bid price and sell at a higher offer price quickly to avoid missing out on any gains from the trade.

What is scalping?

Scalping is a trading strategy that incorporates both technical and fundamental analysis. A scalper looks to make profits on every trade, making trades quickly with no intention to hold for long periods – hence the term ‘scalping’. One or more short-term price fluctuations are considered one trade, allowing traders to make multiple trades during a day’s session. 

Scalping can be referred to as trading purely based on technical indicators; however, it also works well with fundamental analysis. Fundamental aspects include market conditions and news announcements. Traders use these elements to assess whether an asset’s price will increase or decrease throughout each day’s trading session.

Scalping strategies focus on instant small gains rather than a long-term investment. The objective is to exploit market inefficiencies for quick profits, usually on the bid or ask, rather than particular price levels. Scalpers also use the ‘fade’ technique when trading against other traders who are buying or selling by anticipating that these traders will attract the attention of speculators who will drive prices against them.

Key factors to consider before attempting scalping

If done right, scalping can generate healthy income in short periods; but there are some things one must be aware of before attempting, such as:

Risk management

When buying at a lower price, there is a chance it will drop further, so you have to ensure you are willing to incur losses if this happens.

Time

It would take time for you to buy and sell quickly, so do not attempt scalping during high volume times when it might be challenging to get in and out of the market.

Monetary investment

Scalping requires a relatively small amount of funds, but capital is required, and one must consider if the gains they make outweigh its risks before trying it out.

Be wary of stocks that do not move or fall too fast

If there’s no momentum, scalping doesn’t work very well with such stocks as your buying and selling will take up time and energy for no gains.

Stay sharp. 

Every minute counts in this game, so you must remain vigilant and never miss an opportunity to be successful.      

Risks associated with scalping

One risk associated with scalping is the high frequency of trades which leads to a high commission rate. There are also risks where traders may end up on the wrong side of trades if they aren’t careful, mainly due to their multiple trades within one day’s session. However, if trading strategies are used properly, and traders take care before making their choices, then scalping can be an excellent way to increase your daily gains while limiting downside risk.

Final Word

Hong Kong provides excellent opportunities for traders who practice scalping as the ability to make trades quickly and easily can lead to profits, as long as traders play their cards right, of course. One way that this is achievable is through CFDs and spreads. Spreads and commissions represent a significant portion of trading costs, so being able to minimise these costs by using a CFD allows traders to increase their profits significantly. New traders who want to trade hk stocks are advised to use an experienced and reputable online trader from Saxo Bank and trade on a demo account before investing their money.