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Futures Scalping

Futures scalping is a trading strategy that attempts to profit from small price changes – often as small as one or two price tics – in a particular futures contract. Because of the minimal distance between the entry and exit price of a typical trade, the span of time in the market can be short-lived. It’s not uncommon to see scalp trades lasting less than a minute down to even several to a few seconds. In turn, scalp trading often involves frequent trades over short spans of time and over the course of a trading session. Clearly, the point of view that you “let your profits run,” does not apply in this trading strategy. There are several reasons scalp traders bestow to support this strategy: Scalping restricts your market risk because of how briefly a position is in the market. Scalping requires small price changes affording more potential opportunities to enter the market – particularly in quiet markets – compared to strategies looking for large price moves over potentially lengthy periods of time. While any approach to futures trading calls for discipline, this approach to trading, given the trade frequency and volume it embraces, requires added sharpness. Scalping involves a focused awareness of the market being traded, sighting opportunities in and making fast decisions without delay.

This “rapid-fire” approach to trading is not without its challenges. From a basic trade execution standpoint, scalp traders need to be well acquainted and comfortable with the order entry features of the trading platform they’re using. Trade errors, including time lapses in trade entries and/or exits, or entering incorrect buy/sell orders can quickly erase any hard-earned gains. A trader’s self-discipline can be tested with every trade decision and with every market move and for scalpers, with high trade frequency the norm, that conduct can catlike slip into trading without planning and just like that your strategy goes to pieces. In its place, trading becomes unthinking and trade execution sinks to a whirlwind of in-and-out turnarounds. And let’s not forget the costs involved in trading. Commissions and exchange fees become material expenses for scalpers, more so when discipline breaks down.

It shouldn’t be surprising that novice traders find themselves attracted to this method of trading early in their foray into trading. It’s the classic kid-in-the-candy-store scenario where every market move translates to a trade opportunity. Probably contributing to this, traders don’t need to know much about the market they’re trading to attempt scalping. Fundamentals play an insignificant role in the decision making of the scalp trader.

The brokers at Cannon Trading – including a number with 20+ year backgrounds – can be valuable resources to consult and discuss trade strategy. Scalping is just one approach. Futures trading strategies include day trading, swing trading, long-term trading, spread trading, options trading – with virtually limitless variations. Get in touch for any assistance in helping you select the strategies suited to you.

*Futures Trading is risky and not suitable for everyone.

Futures Scalping

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