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Scalping for Intraday Trading



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Important Note: Intraday trading is a high risk activity and unless you are know the right way and have high risk appetite, do not indulge in such activity.

There is a possibility of losing your capital itself.

Scalping is one of the several trading methods available.

It is a commonly used method for trading in securities, commodities and currencies.

It is a method of using arbitrage of small price gaps created by the bid-ask spread.

This approach is basically suitable for investor who wish to learn and try an intraday trading approach and thereby learn and pracise in real time.

A good time to practise trading is when exchanges and stock brokers conduct mock trading sessions.

Exchanges provide a Trading Contingency Drill Calendar for the list of dates on which the drill is conducted. For example, the NSE drill dates is available at https://www.nseindia.com/global/content/market_timings_holidays/contingency_drill.htm

Allow me to explain a Scalping approach that can be used in intraday trading.

This is a reasonably safer intraday method compared to most other intraday methods.

Since, we are not going to take much risk, the returns too will be paltry.

The first requirement to do Scalping is that we need to have a cheap brokerage trading account and hence the transaction cost is small.

You need to have a discount broker whose brokerage rates are as cheap as possible.

This is very important because brokerage charges eat a huge pie of our earnings and irrespective of whether we are making profits or not, brokers always earn.

As usual, I start by screening for fundamentally good companies and start by doing a buy side trade with small quantity.

For example, if I have the budget to accumulate 2500 shares of a company, I start on buy side for a maximum daily buy budget of 100 shares per day (2500 shares / 25 trading sessions in a month).

I buy 25 shares at say Rs. 100 as a CNC trade (cash only - no margin used to be safe).

After the buy, i put a sell at say Rs. 102. At the same time, i put an averaging buy for 25 shares at 99 and for 50 shares at Rs. 98.

The Rs. 1 gap between the trades is computed based on average of typical momentum historically analyzed. Using Rs. 1 as an example to explain here

So if 25+25 gets bought, the earlier RS. 25 @ 102 order will be changed to Rs. 50 @ 101 for example.

If 25+25+50 gets bought, the earlier RS. 50 @ 101 order will be changed to Rs. 100 @ 100.5 for example.

This way i trade with max 100 shares on buy-sell. If i am unable to sell, i take delivery

I use technicals to look for good buy entry levels during this accumulation phase.

The daily returns we get from this process will be peanuts.

This process is repeated for 25 days till the accumulation is complete

After accumulation phase is over, i look at sell side trade opportunities.

Since i now have 2500 shares in demat, I start with sell of 100 shares at say Rs. 100.

Then I sell 100 more at Rs. 101, 200 at Rs. 102, 400 at Rs. 103 and so on.

When 100 @ Rs. 100 gets sold, i place a buy order at 100 @ Rs. 99

As subsequent sells happen, the buy order is closed

This way we can practise and safely do intraday trading with holdings that are in demat.

This method of trading for small margins is called Scalping.

This is because I hold the shares like for ever. Trading in fundamentally good company basically.

Everyone has their own investing and trading styles. One can use what is convenient and suitable to them

My Max portfolio is 10 companies. Usually one or two always give opportunities

If no opportunities, no trading

Idea is to get safe and stable returns consistently

Always check for technicals before entering a position.

On some bullish days we may not get a sell opportunity and the trend for the whole day will be positive.

Look for High Beta Stocks to take advantage of momentum.

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