Christmas Edition: The Scalping Strategy to Trade on Bursa Malaysia

Scalping, a widely recognised trading approach, focuses on capitalising on minor price movements. By engaging in frequent trades, traders aim to achieve consistent profits from small fluctuations in stock prices.

This strategy is particularly effective in trading penny stocks with tight bid-ask spreads. In this article, we explore the application of a scalping strategy using a practical example involving TWL Holdings Berhad, a stock trading within a narrow range of 2.5 sen to 3.0 sen.

Scalping relies on rapid execution and high liquidity. Traders aim to buy at the bid price and sell at the ask price, taking advantage of the minimal spread between these prices. Stocks like TWL Holdings, which exhibit predictable price behaviour and significant trading volumes, present an excellent opportunity for this approach.

Their low price volatility and consistent trading range make them a preferred choice for scalpers aiming to profit from small but frequent price changes.

To implement this scalping strategy effectively, a Good-Till-Date (GTD) order proves invaluable. The GTD order allows traders to specify a time frame for their orders, ensuring that buy and sell instructions remain active until either filled or the time period expires. This reduces the need for constant market monitoring, enabling traders to execute their strategy with greater efficiency.

To illustrate, consider a trader employing a GTD order for TWL Holdings. The trader places a buy order at 2.5 sen, setting it to remain valid until the desired price is reached. Once the purchase is executed, the trader immediately places a GTD sell order at 3.0 sen. This step ensures that the shares are sold at the targeted profit level without requiring manual intervention.

Let us delve into the profit calculation for this strategy.

Suppose a trader allocates RM10,000 to this trade. At a purchase price of 2.5 sen per share, the trader acquires 400,000 shares. When the price reaches 3.0 sen, the sale of these shares generates RM12,000, resulting in a gross profit of RM2,000. However, transaction costs must be factored into the calculation to determine the net profit.

Assuming standard fees, including brokerage at 0.1% of the trade value with a minimum charge of RM12, clearing fees at 0.03%, and stamp duty of RM1 per RM1,000 trade value, the costs for buying the shares would amount to RM25.

Selling the shares would incur a slightly higher cost of RM27.60 due to the increased trade value. These combined fees total RM52.60, leaving a net profit of RM1,947.40 after deducting transaction costs from the gross profit.

The use of GTD orders adds significant value to this strategy. By automating the execution of trades at predefined price levels, traders can focus on analysing market conditions rather than constantly monitoring their positions. This efficiency not only saves time but also enhances the likelihood of capturing profitable opportunities within the target range.

In conclusion, scalping with a one-tick profit strategy, as demonstrated through TWL Holdings, presents a compelling opportunity for traders willing to adopt a meticulous and disciplined approach. By leveraging GTD orders and focusing on high-liquidity stocks with tight spreads, traders can maximise their potential for incremental gains. However, success in scalping requires not only technical proficiency but also a keen awareness of market dynamics and transaction costs. With careful planning and execution, this strategy can serve as a viable method for achieving consistent returns in the financial markets.