scalping profit

How to Profit from Scalping: A Winning Futures Trading Strategy

Digitex Futures
Trading
• Adam Todd
April 2, 2021

Digitex CEO Adam Todd has made his career on the back of a trading technique called scalping. It’s a highly successful futures trading strategy for short-term traders – under the right conditions. However, when the conditions are right, you can learn to win at scalping in any market. Here, Adam shares his tips and insights for how to implement your own winning scalping trading strategy. 

As a successful futures and sports betting trader, my trading style was always focused more on avoiding losing trades than on riding the winners. And the way I did that was to make my trades as short-term as possible. I discovered that the longer I held a position, the bigger the risk that my position would turn into a loser. 

There seemed to be a direct link between my success, and how little time I held a position before going flat again. The shorter the amount of time in a position, the better chance I had of that trade not being a loser. This was most likely due to the nature of my trade selection process which was to be flat for most of the time, occasionally darting in and out of the market stealing single tick profits from larger moves when momentum picked up.

My scalping strategy basically involved judging when the momentum is high enough to keep the move going for another 30 seconds. If I didn’t get at least a single tick profit within that timeframe there was no reason to stay in that trade.

Successful Scalpers Don’t Get Tied Up in Learning About the Asset

As a young pit trader, I had no idea what a Bund futures contract actually was or why it moved around so much. Later, as a sports betting trader, I wouldn’t even know the name of the horse on which I was placing and laying hundreds of bets. Yet, I would go weeks and sometimes months of full-time trading as a scalper without having a single losing day. 

Short-term scalping requires no fundamental knowledge of the underlying instrument on which you’re trading. As soon as you have entered a position you’re looking to exit it, hopefully with a one or two tick profit but willing to scratch it or lose a tick without any emotional attachment to the trade. 

This style of ultra short term, manual trading is labor-intensive and requires the full concentration and attention of the trader. You can’t be checking emails and looking on Facebook and reading random crypto trading articles while you’re scalping to win. 

Besides, you don’t need to know what’s going on out there. It doesn’t matter why a price is moving when you’re a scalp trader because whichever way it goes you’re going to be following it. 

Scalping shouldn’t be a contrary style of trading because the active approach means you can get yourself in a huge mess very quickly. The safest style of scalping is simply following the price, jumping in when momentum is at its highest and then getting out quickly. 

It’s actually better to have no opinion or knowledge of the long term price direction of the underlying instrument so that it doesn’t affect your ability to go against that opinion in these short term scalp trades.

How Fees Ravage Profits

The scalping style of trading described here is the easiest to learn, requires no specialized knowledge about the underlying instrument and will give you steadier, less volatile results. But the big problem is that this style of trading is particularly susceptible to the ravages of the maker and taker fee model of crypto futures exchanges. 

It was possible for me to successfully scalp trade traditional futures markets in this manner because the futures tick value of one tick on the Bund was 25 Deutsch Marks and the commission to buy and sell one futures contract was less than 3 Deutsch Marks and I got a scratch trade rebate every time I bought and sold at the same price. 

All I had to do was make one tick for every 10 round turns to break even, and anything I made over that was profit. It was a lot harder than it sounds. But it was possible because the commission fee to buy and sell one futures contract was one-tenth of the value of one tick. 

However, the taker fee model used on every other crypto futures exchange has established commissions that are astronomically high. Currently, my style of short term scalping to win is literally impossible. The commission cost of buying and selling one futures contract with a taker order is more like ten times the value of one tick. 

That’s absolutely crazy. It’s literally impossible to beat odds like that running against you. At the exact moment you enter a trade, you’re ten ticks offside already. There’s a built-in mechanical edge that you cannot beat, and which guarantees you will lose over the long run. 

On Bitmex, the taker fee is 0.075% of the notional value of the underlying instrument. That may look small, but if you’re trading with 100x leverage that’s actually 7.5% of the margin you put down to enter the trade. If you exit the trade with a Taker order then your trading fees are 15% of the order value! 

For example, total fees on a $1,000 trade with 100x leverage are $150 [100 x $1,000 x 0.00075 x 2]. How can you ever expect to beat a 15% edge working against you?

A typical trade for a short term scalper might go like this: the price starts moving fast so I enter a trade quickly with a taker order that either smash the bid or lifts the offer. Then I immediately place a maker order to join the bid or offer to get out. If it’s not filled within seconds then I’ll cancel that and lift the offer or hit the bid with another taker order to exit the trade. 

I entered the trade with a taker order so now I need to make ten ticks just to break even. And if I exit the trade with a taker order I’ve got to make 20 ticks profit just to break even. That’s just impossible for a short-term scalp trade. 

I can still place trades as maker orders only but it’s impossible to trade profitably when you’re limited to only maker orders. This is especially true in very volatile markets – like crypto – and you will constantly not be getting filled on the good moves. 

Simply put, the maker fee and taker fee model generate large commissions for the exchange and makes it impossible for profitable short-term scalping. A huge number of traders are unable to participate and the massive liquidity they would provide is suffocated by the exchange’s need to charge high fees on turnover. 

As a scalper, I shouldn’t be paying a percentage of the notional value of the underlying instrument. I’m providing liquidity and should be encouraged, not squeezed out of the market entirely.

How Digitex Enables Profitable Scalp Trading

The Digitex Futures exchange is a short-term trader’s paradise. With absolutely no trading fees of any kind on taker orders, traders are free to pursue day trading futures strategies like scalping that are not viable anywhere else, creating massive liquidity in the process. 

That liquidity isn’t constantly drained by the exchange in the form of commissions. Instead, it continues to churn around in the trading ecosystem until it is won by the better traders. As a result, the chances of becoming a winning scalp trader on Digitex are far higher because we’re not siphoning off commission fees as percentages of the notional value of traded contracts. 

The viral marketing potential of a futures exchange that doesn’t have any built-in mechanical edge working against its traders is massive. The effective deployment of user-generated content combined with viral marketing techniques is starting to create a very large and active userbase, further increasing liquidity. 

Living a Traders Dream

Successful trading is a dream of many millions of people and Digitex wants to help make many of those dreams come true. We hope that many thousands of people will experience the unbridled freedom and excitement of becoming a profitable short-term trader who gets to live a lifestyle that most people will only dream of. 

Imagine if you can consistently make $50 a day or $200 a day or $500 a day from trading? How much would that change your life and the lives of everyone around you for the better? 

If you want to start implementing your own successful scalp trading strategy with zero fees, sign up for an account now and start living the trader’s dream.

April 2, 2021
Digitex Futures
Trading

How to Profit from Scalping: A Winning Futures Trading Strategy

Adam Todd
scalping profit

Digitex CEO Adam Todd has made his career on the back of a trading technique called scalping. It’s a highly successful futures trading strategy for short-term traders – under the right conditions. However, when the conditions are right, you can learn to win at scalping in any market. Here, Adam shares his tips and insights for how to implement your own winning scalping trading strategy. 

As a successful futures and sports betting trader, my trading style was always focused more on avoiding losing trades than on riding the winners. And the way I did that was to make my trades as short-term as possible. I discovered that the longer I held a position, the bigger the risk that my position would turn into a loser. 

There seemed to be a direct link between my success, and how little time I held a position before going flat again. The shorter the amount of time in a position, the better chance I had of that trade not being a loser. This was most likely due to the nature of my trade selection process which was to be flat for most of the time, occasionally darting in and out of the market stealing single tick profits from larger moves when momentum picked up.

My scalping strategy basically involved judging when the momentum is high enough to keep the move going for another 30 seconds. If I didn’t get at least a single tick profit within that timeframe there was no reason to stay in that trade.

Successful Scalpers Don’t Get Tied Up in Learning About the Asset

As a young pit trader, I had no idea what a Bund futures contract actually was or why it moved around so much. Later, as a sports betting trader, I wouldn’t even know the name of the horse on which I was placing and laying hundreds of bets. Yet, I would go weeks and sometimes months of full-time trading as a scalper without having a single losing day. 

Short-term scalping requires no fundamental knowledge of the underlying instrument on which you’re trading. As soon as you have entered a position you’re looking to exit it, hopefully with a one or two tick profit but willing to scratch it or lose a tick without any emotional attachment to the trade. 

This style of ultra short term, manual trading is labor-intensive and requires the full concentration and attention of the trader. You can’t be checking emails and looking on Facebook and reading random crypto trading articles while you’re scalping to win. 

Besides, you don’t need to know what’s going on out there. It doesn’t matter why a price is moving when you’re a scalp trader because whichever way it goes you’re going to be following it. 

Scalping shouldn’t be a contrary style of trading because the active approach means you can get yourself in a huge mess very quickly. The safest style of scalping is simply following the price, jumping in when momentum is at its highest and then getting out quickly. 

It’s actually better to have no opinion or knowledge of the long term price direction of the underlying instrument so that it doesn’t affect your ability to go against that opinion in these short term scalp trades.

How Fees Ravage Profits

The scalping style of trading described here is the easiest to learn, requires no specialized knowledge about the underlying instrument and will give you steadier, less volatile results. But the big problem is that this style of trading is particularly susceptible to the ravages of the maker and taker fee model of crypto futures exchanges. 

It was possible for me to successfully scalp trade traditional futures markets in this manner because the futures tick value of one tick on the Bund was 25 Deutsch Marks and the commission to buy and sell one futures contract was less than 3 Deutsch Marks and I got a scratch trade rebate every time I bought and sold at the same price. 

All I had to do was make one tick for every 10 round turns to break even, and anything I made over that was profit. It was a lot harder than it sounds. But it was possible because the commission fee to buy and sell one futures contract was one-tenth of the value of one tick. 

However, the taker fee model used on every other crypto futures exchange has established commissions that are astronomically high. Currently, my style of short term scalping to win is literally impossible. The commission cost of buying and selling one futures contract with a taker order is more like ten times the value of one tick. 

That’s absolutely crazy. It’s literally impossible to beat odds like that running against you. At the exact moment you enter a trade, you’re ten ticks offside already. There’s a built-in mechanical edge that you cannot beat, and which guarantees you will lose over the long run. 

On Bitmex, the taker fee is 0.075% of the notional value of the underlying instrument. That may look small, but if you’re trading with 100x leverage that’s actually 7.5% of the margin you put down to enter the trade. If you exit the trade with a Taker order then your trading fees are 15% of the order value! 

For example, total fees on a $1,000 trade with 100x leverage are $150 [100 x $1,000 x 0.00075 x 2]. How can you ever expect to beat a 15% edge working against you?

A typical trade for a short term scalper might go like this: the price starts moving fast so I enter a trade quickly with a taker order that either smash the bid or lifts the offer. Then I immediately place a maker order to join the bid or offer to get out. If it’s not filled within seconds then I’ll cancel that and lift the offer or hit the bid with another taker order to exit the trade. 

I entered the trade with a taker order so now I need to make ten ticks just to break even. And if I exit the trade with a taker order I’ve got to make 20 ticks profit just to break even. That’s just impossible for a short-term scalp trade. 

I can still place trades as maker orders only but it’s impossible to trade profitably when you’re limited to only maker orders. This is especially true in very volatile markets – like crypto – and you will constantly not be getting filled on the good moves. 

Simply put, the maker fee and taker fee model generate large commissions for the exchange and makes it impossible for profitable short-term scalping. A huge number of traders are unable to participate and the massive liquidity they would provide is suffocated by the exchange’s need to charge high fees on turnover. 

As a scalper, I shouldn’t be paying a percentage of the notional value of the underlying instrument. I’m providing liquidity and should be encouraged, not squeezed out of the market entirely.

How Digitex Enables Profitable Scalp Trading

The Digitex Futures exchange is a short-term trader’s paradise. With absolutely no trading fees of any kind on taker orders, traders are free to pursue day trading futures strategies like scalping that are not viable anywhere else, creating massive liquidity in the process. 

That liquidity isn’t constantly drained by the exchange in the form of commissions. Instead, it continues to churn around in the trading ecosystem until it is won by the better traders. As a result, the chances of becoming a winning scalp trader on Digitex are far higher because we’re not siphoning off commission fees as percentages of the notional value of traded contracts. 

The viral marketing potential of a futures exchange that doesn’t have any built-in mechanical edge working against its traders is massive. The effective deployment of user-generated content combined with viral marketing techniques is starting to create a very large and active userbase, further increasing liquidity. 

Living a Traders Dream

Successful trading is a dream of many millions of people and Digitex wants to help make many of those dreams come true. We hope that many thousands of people will experience the unbridled freedom and excitement of becoming a profitable short-term trader who gets to live a lifestyle that most people will only dream of. 

Imagine if you can consistently make $50 a day or $200 a day or $500 a day from trading? How much would that change your life and the lives of everyone around you for the better? 

If you want to start implementing your own successful scalp trading strategy with zero fees, sign up for an account now and start living the trader’s dream.

Latest News

Simple Habits to Boost Trading Profits 1

Simple Habits to Boost Trading Profits

Trading
• Ali Martinez
May 26, 2020

A quick glance at the candlestick chart of any cryptocurrency in the market may seem to provide a wide range of opportunities to profit. With some altcoins appreciating over 100% in a matter of days, as many new DeFi tokens are showing us recently, even the biggest crypto skeptic would think, “If I had bought here, I could have doubled (or more!) my investment in less than a week.”

Remember, at its peak, DGTX offered a 1600% return on its ICO value.

But the truth of the matter is that trading is not easy.

There is a widely known statistic that says that 90% of traders are not profitable. So over time, 80% of those who endeavor into this profession lose money, 10% usually break even, and 10% percent are able to generate returns from the price action in the markets.

By understanding these figures, Digitex Futures Exchange is doing everything in its power to help traders around the world reach their financial goals. Not only can investors and market participants alike benefit from this zero-commission trading platform, but our team has also put out valuable educational material that will help you become part of the 10% traders who consistently make money.

Now, we want to drive your attention toward risk management and position sizing. Having a clear picture of the risk your account can tolerate will help you find the right position size for your next trade.

With this information, you will be able to maximize your profits and minimize your losses the moment you start applying these simple habits.

Plan Your Trade, Trade Your Plan

Risk management is one of the many areas of trading that is often disregarded by most of those at the beginning of their trading journey. However, understanding what is at stake before entering any trade is what separates successful traders from gamblers.

A profitable trader usually determines where he is going to place a stop-loss order before even thinking about the profits a trade could generate. This type of order cannot be set at random price levels. They need to make sense so that they are not triggered by the regular fluctuation in the market.

As a rule of thumb, most retail investors risk no more than 2% of their investment capital on any single trade, and hedge fund managers usually risk less than this amount, according to Investopedia.

Assume you have investment capital of $1,000 in your trading account. If you risk 2% on every trade in your account, that translates to a $20 potential loss per trade. This means that a losing trade will not wipe out your entire capital. For this to happen, you would have to lose 50 consecutive trades, or 100 trades in a row if you reduce the risk to 1%.

Now that you have a better understanding of how much capital you can lose per trade, determining the size of your positions is very easy. We will illustrate this idea by employing different technical indicators to help time a potential trade.

Executing a Well Sized Trade

The Tom Demark (TD) Sequential indicator is currently on a red nine candlestick on Ethereum’s 45-min chart. This index estimates that if the same price action continues, Ether could be preparing for a rebound.

Indeed, the bullish formation forecasts a one to four candlesticks upswing before the continuation of the downtrend. Breaking above the 7 moving average within this time frame will add credence to the optimistic outlook.

If this were to happen, ETH could find resistance around the 50 moving average. But a more significant barrier to pay attention to sits by the 100 moving average since this area has been able to reject the price of Ethereum before.

Ethereum US dollar price chart
TD Setup Estimates that Bullish Momentum Is Building Up. (Source: TradingView)

With the high probability of a long trade underway, you need to remember first that your maximum account risk is at 2% so you cannot risk more than $20 per trade, assuming that your investment capital is $1,000.

To figure out the correct position size you will take into consideration where to place your stop-loss order and your entry point. A few cents below the recent low is a reasonable price to set your stop-loss order, which could be around $197. If you were to enter the long position around the current price levels of $199, the trade risk is $2 per ETH.

By dividing your account risk, which is $20 per trade, by the trade risk, which is $2 per ETH, you will determine that the right position size for this long trade is up to 10 ETH. If everything plays out and this altcoin surges to the 50 moving average you could make $40 while a sudden downswing to $197 will kick you out of the trade with a $20 loss.

Now, it is time for you to calculate what is the maximum risk your trading account can tolerate so you can define the right position size for your next trade.

Understanding what you are doing before you trade is vital if you want to minimize your losses. That’s why, at Digitex Futures, we have our testnet open alongside the actual trading platform so that you can practice as much as you want before you start trading. Sign up for an account now and you can choose testnet or mainnet to either hone your skills first or get started trading right away.

May 26, 2020
Trading

Simple Habits to Boost Trading Profits

Ali Martinez
Simple Habits to Boost Trading Profits 2

A quick glance at the candlestick chart of any cryptocurrency in the market may seem to provide a wide range of opportunities to profit. With some altcoins appreciating over 100% in a matter of days, as many new DeFi tokens are showing us recently, even the biggest crypto skeptic would think, “If I had bought here, I could have doubled (or more!) my investment in less than a week.”

Remember, at its peak, DGTX offered a 1600% return on its ICO value.

But the truth of the matter is that trading is not easy.

There is a widely known statistic that says that 90% of traders are not profitable. So over time, 80% of those who endeavor into this profession lose money, 10% usually break even, and 10% percent are able to generate returns from the price action in the markets.

By understanding these figures, Digitex Futures Exchange is doing everything in its power to help traders around the world reach their financial goals. Not only can investors and market participants alike benefit from this zero-commission trading platform, but our team has also put out valuable educational material that will help you become part of the 10% traders who consistently make money.

Now, we want to drive your attention toward risk management and position sizing. Having a clear picture of the risk your account can tolerate will help you find the right position size for your next trade.

With this information, you will be able to maximize your profits and minimize your losses the moment you start applying these simple habits.

Plan Your Trade, Trade Your Plan

Risk management is one of the many areas of trading that is often disregarded by most of those at the beginning of their trading journey. However, understanding what is at stake before entering any trade is what separates successful traders from gamblers.

A profitable trader usually determines where he is going to place a stop-loss order before even thinking about the profits a trade could generate. This type of order cannot be set at random price levels. They need to make sense so that they are not triggered by the regular fluctuation in the market.

As a rule of thumb, most retail investors risk no more than 2% of their investment capital on any single trade, and hedge fund managers usually risk less than this amount, according to Investopedia.

Assume you have investment capital of $1,000 in your trading account. If you risk 2% on every trade in your account, that translates to a $20 potential loss per trade. This means that a losing trade will not wipe out your entire capital. For this to happen, you would have to lose 50 consecutive trades, or 100 trades in a row if you reduce the risk to 1%.

Now that you have a better understanding of how much capital you can lose per trade, determining the size of your positions is very easy. We will illustrate this idea by employing different technical indicators to help time a potential trade.

Executing a Well Sized Trade

The Tom Demark (TD) Sequential indicator is currently on a red nine candlestick on Ethereum’s 45-min chart. This index estimates that if the same price action continues, Ether could be preparing for a rebound.

Indeed, the bullish formation forecasts a one to four candlesticks upswing before the continuation of the downtrend. Breaking above the 7 moving average within this time frame will add credence to the optimistic outlook.

If this were to happen, ETH could find resistance around the 50 moving average. But a more significant barrier to pay attention to sits by the 100 moving average since this area has been able to reject the price of Ethereum before.

Ethereum US dollar price chart
TD Setup Estimates that Bullish Momentum Is Building Up. (Source: TradingView)

With the high probability of a long trade underway, you need to remember first that your maximum account risk is at 2% so you cannot risk more than $20 per trade, assuming that your investment capital is $1,000.

To figure out the correct position size you will take into consideration where to place your stop-loss order and your entry point. A few cents below the recent low is a reasonable price to set your stop-loss order, which could be around $197. If you were to enter the long position around the current price levels of $199, the trade risk is $2 per ETH.

By dividing your account risk, which is $20 per trade, by the trade risk, which is $2 per ETH, you will determine that the right position size for this long trade is up to 10 ETH. If everything plays out and this altcoin surges to the 50 moving average you could make $40 while a sudden downswing to $197 will kick you out of the trade with a $20 loss.

Now, it is time for you to calculate what is the maximum risk your trading account can tolerate so you can define the right position size for your next trade.

Understanding what you are doing before you trade is vital if you want to minimize your losses. That’s why, at Digitex Futures, we have our testnet open alongside the actual trading platform so that you can practice as much as you want before you start trading. Sign up for an account now and you can choose testnet or mainnet to either hone your skills first or get started trading right away.

Latest News