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Thread: Is Scalping as a Trading Strategy Suited for Everyone??

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    Is Scalping as a Trading Strategy Suited for Everyone??

    Is Scalping as a Trading Strategy Suited for Everyone??

    There is a great deal of confusion when it comes to the topic of scalping. The allure of fast paced trades, and even faster money is a great pull to new and experienced Forex traders alike. To determine whether we should be scalping or not we must first define what scalping really means. Scalping is the action of taking many short term intra-day trades with the intention of only holding the trade for a few minutes. Those who scalp the forex market may only look for a very small take profit, capitalizing on moves smaller than 20 pips more often than not. While this forex trading strategy may present many viable trading opportunities, is it really in our best interest to scalp the forex market?

    The Stress Of Forex Scalping Strategies

    Often a traders mental ability is the determination between a successful forex trader and one that ends up never mastering the art of forex trading. With this in mind it is important to eradicate as much stress from your trading as possible. One very simple way to do this is to take less trades by using slightly longer time frames. Taking fewer trades will allow you more time to process fully your reason for entering the trade, your trade management and finally your exit strategy.

    Forex scalping strategies at their very core rely on executing many trades per day. This fast paced trading style increases the level of stress a trader will experience exponentially. Not only are you forced to enter many trades per day, you are also in a position where these trades need to be closed quickly as well. For someone new to the forex market this is a recipe for disaster. This fast paced style leads to chasing markets, missing signals, and more often than not revenge trading.

    The Effect Of Spread On The Forex Scalper

    There is always a difference between the price you can buy a currency pair and the price at which you can sell it…this is called the spread. More often than not spread is never even a thought in the mind of aspiring forex traders. I use the word “aspiring”, as already profitable forex traders always take into account the effect spread has on their overall profit or loss. Let’s use an example to better illustrate the effect of spread.

    5 Trades Per Day X 3 Pip Spread = 15 Pips Paid In Spread Per Day!

    15 Pips Per Day X 5 Trading Days = 75 Pips Paid In Spread Per Week!

    75 Pips Per Week X 50 Trading Weeks = 3,750 Pips Paid In Spread Per Year!

    If we use 20 pip stops and risk 1% per trade that means every 20 pips we make or lose we will have gained or lost 1%.

    3,750/20 = 187.5% Paid In Spread!!!

    Is spread starting to become a little more important in your eyes? If you simply cut the amount of trades you take in half you will save yourself +93.75% or 1,875 pips! Now this is a very broad example of how spread can accumulate and cut into your overall profit but it illustrates a clear point of how spread can accumulate over the course of time. Spread is the cost of doing business as a forex trader, but like any other business we can cut costs and become a more streamlined business. Some companies use energy efficient light bulbs, as traders we “cut the light bill” by becoming more selective with the trades we take.

    Controlling Your Risk

    Our single job as a forex trader is to control risk. If you think about anything and everything we do it is done to control risk and eliminate it to the best of our ability. With that being said lets examine spread in relation to scalping. As an example lets say we bought the GBP/USD from 1.6000 with a 10 pip stop loss and a 7 pip take profit. If we are trading the Pound that means there is usually a 3 pip spread. Therefore in order for us to get filled at 1.6000 we would have had to have bought when the price (the bid) was at 1.5997 As a result the market would have had to only move 7 more pips down to hit our 10 pip stop loss. On the other side of the trade the market would have to move a full 10 pips to hit our 7 pip take profit!

    This is a very important point to think about. With the example above we are risking 10 pips to make 7. Not only that but the market only has to move 7 pips to hit our stop loss, while it has to move a full 10 pips to hit our take profit! The spread works against you all the time, but as you can see the smaller your take profit and stop loss the more of an effect a pairs spread will tend to have. Another way to look at that is the spread is actually 30% of the entire profit target. That’s like running a business with a flat 30% fee on top of every sale! No one in their right mind would open a business that operated like this, but yet many jump into scalping without giving it a second thought.

    One of the most simplistic ways of controlling risk is with a positive risk to reward ratio. Plain and simple, if you risk more than you look to receive on your trades you will eventually wipe out your account. There is no exception to this rule, it always comes true! A positive Risk/Reward ratio is something that is very difficult to achieve when scalping in the forex market because of spread.

    Breaking Your Scalping Addiction

    If you love to trade short term how can you still fill that desire but yet avoid the main pitfalls of scalping. First you need to understand that the satisfaction of turning a consistent profit far out weighs any rush you will ever experience from scalping. Our goal is to turn a profit and if the trading strategy we put to use is failing us, then its time to put it aside. I urge you to step back away from the charts and stop trading for a few days or a week. Give some consideration to the points brought forth here especially if you scalping is resulting in consistent loses.

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  2. #1001
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    Scalping usually means making faster trades that will result into making fast profits in a very short period of time. It's very risky and not all traders can handle the pressure with scalping trading method. You have to practice and work with it first before you could determine if it's the best system for you or not. Forex is good and a more better plans in trading is enough to improve us to become better.

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  3. #1002
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    Quote Originally Posted by Ulthred View Post
    Scalping usually means making faster trades that will result into making fast profits in a very short period of time. It's very risky and not all traders can handle the pressure with scalping trading method. You have to practice and work with it first before you could determine if it's the best system for you or not. Forex is good and a more better plans in trading is enough to improve us to become better.
    Scalping will always risky for all trader sometime we gain positive results and sometime we fail we have to manege our trade perfectly only when we learn it properly that will give us good results we should make trade plan by them once we understand our way to perform our task well we get good results from them to get used .

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  4. #1003
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    If you must scalp, you have to be very much wise and make sure you do not allow your emotions guide you on this trade. Traders who do their best to practice well will surely know what is likely to work for them and what won't also work out. Forex is good and there are many system traders can always use to trade forex. We just have to be patient and know the best system that we can depend on as we look to make the best trade for ourselves.

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  5. #1004
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    Quote Originally Posted by fahaddd View Post
    Scalping will always risky for all trader sometime we gain positive results and sometime we fail we have to manege our trade perfectly only when we learn it properly that will give us good results we should make trade plan by them once we understand our way to perform our task well we get good results from them to get used .
    Well, every aspect of the market trading is very risky, so it is not strange that scalping is risky. Only that the scalping is riskier than any other means of trading the market, and the scalpers will need to be extremely careful when they are trading that risky style. And I am sure that scalping can give trader more money if they know how to use it well.

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    Last edited by cozard007; 09-09-2017 at 04:23 PM.

  6. #1005
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    Quote Originally Posted by cozard007 View Post
    Well, every aspect of the market trading is vey risky, so it is not strange that scalping is risky. Only that the scalping is riskier than any other means of trading the market, and the scalpers will need to be extremely careful when they are trading that risky style. And I am sure that scalping can give trader more money if they know how to use it well.
    I do agree with you because in this market if we want safe thing to do make trade everytime in this market there are lot of thing we should work for them and chose best one if we have a good learning behind our trade that will give us stronger results and we gain success accordingly and we make perfect trade with any way .

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  7. #1006
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    Quote Originally Posted by cozard007 View Post
    Well, every aspect of the market trading is very risky, so it is not strange that scalping is risky. Only that the scalping is riskier than any other means of trading the market, and the scalpers will need to be extremely careful when they are trading that risky style. And I am sure that scalping can give trader more money if they know how to use it well.
    Yes, i believe that the market is risky, and all aspect of the market is what is risky without leaving anything out. I am certain that i can be successful in trading too, it is a matter of choosing the good trading way you can fully trust, and this can either be scalping or anything, they will surely give traders the best with time.

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  8. #1007
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    Quote Originally Posted by bilal786 View Post
    I do agree with you because in this market if we want safe thing to do make trade everytime in this market there are lot of thing we should work for them and chose best one if we have a good learning behind our trade that will give us stronger results and we gain success accordingly and we make perfect trade with any way .
    I think you should forget about the same trading in the market, there is nothing that is totally safe for traders. But the fact still remains that traders can be safe, but they will still lose, it is only that they will not lose too much. If traders want the best in the riskiest trading system like the scalping too, they can get it, but they will have to dedicate their time to learn it and build a solid management with it.

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  9. #1008
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    Every trading strategy have their bad times and for scalping, it's one of those risky strategy that we have to be careful with and manage well enough if really we must make it we have to know how to manage this system and see if we can make progress with it or not. Scalping won't suit every trader but we must be careful with this system and be ready to handle risk and trade with the very right patience.

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  10. #1009
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    It is not possible that the scalping suites all traders, and many traders will tell you that they hate the scalping, but i do no hate anything in the market. The only indicator i can say i hate in the market is the zigzag, and it is because of the issues i have faced with it. It is good to also working in the market with your management when you trade scalping, this will protect you.

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  11. #1010
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    I don't think it is suitable for every one but before any one should think about trying it they have to learn it on the demo trading account first. However did learned it and I observed that is is not that kind of trading strategy which a serious trader will think of making use of because simply it deals on more of gambling and has no discipline method.

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