Canadian Stock Alerts - The Art of Scalping
Trading well in the stock markets is left to those with the best discipline.
And the Art of Scalping could be the most under rated form of day trading discipline.
The day trader who scalps for no more than 10% and then sells regardless will never go broke, he or she won't ride the big waves of course, but think of it this way
Your $5,000 TFSA, when traded and scalped for 10% profits could look like this
Day 1 - $5,000 invested, a $500 profit earned
Day 2 - $5,000 re-invested, a $500 profit earned
Day 3 - $5,000 re-invested, a $500 profit earned
Day 4 - $5,000 re-invested, a $500 profit earned
Day 5 - $5,000 re-invested, a $500 profit earned
At the end of week 1, no big profit days, but at week's end you are up 50%. Now repeat that in week two, still only investing your original $5,000 TFSA and your original $5,000 is now worth $10,000.00 by the end of week two.
And further, if you did that for 50 weeks, your $5,000.00 TFSA would be worth $130,000.00
Don't be tempted to invest more than your original $5,000.00 for at least a few months, for safety sake.
If you buy 25,000 shares of a .20 stock on the pullback, the stock only has to move up 2 cents and you've earned 10% .. let me give you two great examples:
If you caught the Canadian drilling news at Stock Research Portal on Friday August 14, 2009 for Aura Silver Resources you could have scalped likely a lot more than 10%. As the stock did run on the news from .15 at the open to over .50 during the day on 9 million shares traded.
And just two days prior to the Aura news release, Lydian International had news of their own. News that lifted the stock from the open of .55 to a high that day of .88 on 1.8 million shares traded. So clearly the news matters, but it matters most, when the volume is there to support it.
But as a disciplined process oriented day trader, you take your 10% and say "thank you very much".
So what if you left money on the table, you had a profitable day and in the end, that's the discipline void of any fear or greed. Discipline is not easy I admit, we're all human, but it's that discipline that keeps you from making emotional trading decisions. Emotional trading is death to a day trader!
My strategy is pretty simple, I check the Stock Research Portal (just sign up for a free membership) for Canadian drilling news releases regularly, then see if higher than usual volume comes in. If it does, I will always wait for a pullback in the share price, never EVER chase it. On the pullback you are ready for some disciplined stock scalping.
So there you go, "the art of scalping" scenario, and how it can keep you focused, disciplined and in the money.
About The Author: Mike Perras is a former media executive and faculty of business professor. Today he is a freelance writer and also manages the Canadian Stock Alerts blog. It is updated weekdays in real time, and the primary focus is to find stocks with higher than usual trading volume. Mr. Perras doesn't advocate buying the stocks he mentions. Nothing in this article is either designed to meet readers personal financial situations, or intended or taken to be investment advice.