Scalping is one of the more well-known and popular trading strategies you can adapt to fantasy finance contests, and one that has been around for almost as long as day trading has been possible. The basic idea of scalping is to buy and sell stocks multiple times within a day, making a small profit each time from minor fluctuations in price.
While other strategies aim to ride a price change as far as possible, scalping involves getting out of the trade as soon as it turns into profit. Scalpers are usually looking to collect that profit and get out as quickly as possible, potentially executing the entire trade in a matter of minutes if not seconds.
As scalping strategies aim to complete trades in very short timeframes, this raises the question of whether they can be applied to fantasy finance. One would think so given that some fantasy finance platforms such as StockBattle offer fantasy contests that take place over a brief window of time, sometimes 15 minutes or less. These are similar timeframes to scalping trades. Scalping in fantasy finance even carries the advantage that, unlike in day trading, you can scalp downward trends with no additional risk compared to buying.
The Basic Rules of Scalping Strategies
While there is a wide variety of scalping strategies, almost all of them can benefit from following a few basic rules and tips:
- Create a watch list of stocks that you follow and only draft the most likely to show major moves based on your news sources and personal analysis
- Buy during breakouts and look for an immediate upward move
- If none occurs, immediately get out of the position
- As soon as the trade is in profit, start selling while adjusting your exit point
Of course, some of these are not relevant or need to be adjusted depending on the fantasy finance platform you are competing on.
Some fantasy contests, like StockBattle, ask you to draft a team of stocks at the start of a match and you can’t change your picks after that. Timing is a major part of most scalping strategies, and this needs to be taken into consideration if you are participating in fantasy contests that start at fixed times.
For example, in this scenario, players have two days to watch the list of stocks and learn about their behavior before they have to finalize their choices.
While day traders can watch their list for the right conditions to execute their strategy, to apply this strategy in a fantasy contest you would need to make a last-minute decision about the hottest stock at the moment the match begins. Alternatively, you could watch the markets for the right time to use your scalping strategy and quickly try to join a fantasy contest when they occur. However, this adds an extra layer of prediction to a strategy that already relies on tight timing. If you can’t make a good snap assessment of the market under pressure, this style of scalping may not be for you.
Predicting a breakout of a stock’s price is hardly a tactic unique to scalping strategies. However, scalping day traders have an approach to spotting profitable breakouts that is more in line with fantasy trading contestants than other trading strategies. Scalpers do not need breakouts to turn into major price rises to make their profits. A few seconds or minutes of upward movement are enough. This means scalpers can trade on minor or uncertain breakouts and be profitable.
This is one of the reasons that if you want to bring a scalping strategy to your upcoming fantasy contests, becoming an expert in how your watch list of stocks behaves is vital to spotting and utilizing these smaller breakouts that don’t get the attention of competitors using other tactics.
Large Numbers of Small Wins
Besides their approach to entering and exiting trades, another lesson fantasy contest participants can learn from scalping day traders is their approach to winning and collecting profits. While many people who are interested in the stock markets want to score some big wins that they can brag about to their friends, scalpers are looking for the opposite.
Scalping strategies can rack up a lot of wins, but they only take a small profit from each one. This might not have the allure of winning big, but settling for a consistent stream of minor profits has its benefits too.
This approach of sacrificing the scale of your winnings in order to win more often can also be applied to choosing which fantasy contests to compete in, as well as which stocks to draft. For example, a match with fewer contestants might have a smaller prize pool, but you also have a higher chance of being the one to walk away with it. Watching your fantasy finance platform for those low-risk, low-reward matches can help you maximize your win rate.
Maximizing win rates is a key part of scalping strategies since they don’t take a lot of profit from each trade. While many other tactics aim for win rates well below 50%, most scalping strategies need to win more than half of the time to be profitable. The average day trader using a scalping strategy aims for a win rate of around 80%. This means that their individual wins only need to be slightly bigger than each of their losses.
This approach works for people who want to compete in fantasy contests throughout the day, racking up lots of small wins over time. It also works for people who are only able to compete at times when the market is quiet or want to be able to keep competing despite a choppy market. In fact, a quieter market can be beneficial in some ways, as fewer competitors entering matches means less competition for smaller profits, the ideal conditions for scalping.
Scalping As a Secondary Strategy
The fact that scalping works when there are no big prizes up for grabs can make it a good go-to strategy when the market’s condition isn’t right to use your main tactic. For example, if you usually aim to take part in longer matches, you can switch to scalping in shorter matches when you aren’t able to spot any long-term trends you can make use of.
Scalping Effectively Can Lead to Consistent Fantasy Finance Profits
Consistent profits are one of the main benefits of scalping for day traders, and the same is true for fantasy finance platform users. While they lack the glory of taking big prizes, they can often pay off in the long run for those who have the patience. They have other advantages too, such as enabling you to compete in fantasy finance contests more frequently.
Written by Ruben Denton