Scalping mostly refers to intraday trading. Buying and selling often within minutes and trading the dynamic spread somehow. It can be used to accomplish a cheap entry into a running trend on a micro level. But because the intraday jitters are really small compared to a long-term trend, such a trading system may produce many losers and only few great winners. The bottom line could be still hugely positive, but from a psychological perspective it may be not everyone’s cup with a handle of tea.

One way to better the winner to loser ratio of this trading method could be to implement a trailing stop on the first meters. Raising the stop loss after the price went in the right direction by the margin that the buy limit got set below the then current price to the entry level, would cut the numbers of losers severely. In a second step the stop could be raised again by the same difference, which would yield a fine percentage of small winners. If this is done in an intraday index trend, it could be sort of a trend scalping strategy for day traders on its own.

Still, this scalping the dynamic spread trading system will produce many short running trades and only few long lasting ones. A scalping system for the trend that produces a more balanced winner to loser ratio and that is more efficient with the execution workload, would have to enlarge the stop loss margin.

This trading system could derive the larger stop difference from the trend itself. Analyze the trend for pullbacks, get a standard deviation for the average size of these pullbacks – ah, the trading sign! – and take that as your stop for this trend.

Finetuning this system could be done by multiplying the average down swing by some factor, say 2 or so, in order to adjust the stop loss to the method of finding the pullbacks. Elaborating on this, the question with this kind of calculating the right stop for such a relaxed trading method would be, what is a pullback? Taking every single microdip on an intraday basis would of course result in some awful tiny standard deviation of the pullbacks. Some simplification is needed here.

The most primitive way to calculate the clearness of the pullbacks of a trend would be to take simply the largest pullback of a day bar chart and compute the standard deviation with n=1, meaning the pullback clearness of this trend is equal to the largest pullback. The stop could then be set to this largest pullback perhaps times some factor. Alternatively the two or three largest pullbacks could be taken.

Entering the trend with this trading system would be done immediately after the trend is identified as such and the surrounding data, like fundamentals of a stock or its news situation, look also favorably. There is no entry setup and no waiting for some trigger that perhaps never comes. The outcome is a stressfree trading system – perhaps something for the beach trader?