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THE MARKET WHISPERER 32 7

Scalping

Traders can be divided into three types: swing traders, day traders, and
scalpers. The three methods can be integrated, which is my preferred
mode of operation.

Scalping refers to very short-term trades. Swing traders hold stocks
over to the next day, and day traders generally try to get as much from
the stock as possible within one day of trading. Both swing and day
traders generally base their systems on technical analysis with a touch of
fundamental analysis.

Scalpers are based one hundred percent on technical analysis. Their goal
is the very short term. Changes of just a few cents for several seconds up to
some minutes are sufficient. This means that in order to earn a livelihood
from the market, scalpers need to trade in relatively larger amounts than
day or swing traders. Scalpers with little backing (which is, sadly, the
case for most of them) make up for what their pocket lacks by trading in
financial products which can be leveraged more than the typical leverage
of the world of stock trading. These may include futures, leveraged twenty
times more, options, and of course FOREX (foreign exchange) which can
reach leveraging of up to 500 times more, expressed as 500:1 margin. The
absurdity is that trading in these strongly-leveraged products is harder
and incredibly more risky than stock trading. Nonetheless, the dream of
“striking it rich quick” draws people with no funds and no experience
into the hardest areas of trading, where they will often begin, and almost
invariably end, their trading careers.

Here is a classic career-end scenario typical of most of the leveraged-
futures traders I know: