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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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    Quote Originally Posted by cozard007 View Post
    I think that scalping is good for some set of traders only, and not all traders could be satisfied with the scalping because of the risk associated with the scalping, this is why it is of great importance to locate what you can have affinity for as system to trade before trying to give in the best in it, the scalping is never an option for almost all forex traders.
    Scalping is good to me too, i scalps many times with good profits, but the pressure i see with scalping is my fear, the scalping is very good for the ones who know its ways out. Trading for making money in scalping is not a bad thing, it is system of making money in risky way though, this is a reason for being careful in doing it.

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    the decision on running of plan with the ecn account should helps on securing of beginning entries with the returns of signals by the analytics on referring of points with the trading with the scalping strategy on haunting of the less on pips target with the projection.
    as trader might consider of works on focusing the use with the risks management strategy on defining calculation with the funding and distributing risks with the work on managing of the scalping plan.

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  4. #23
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    Quote Originally Posted by silverlady View Post
    Scalping is good to me too, i scalps many times with good profits, but the pressure i see with scalping is my fear, the scalping is very good for the ones who know its ways out. Trading for making money in scalping is not a bad thing, it is system of making money in risky way though, this is a reason for being careful in doing it.
    Trading with proper management will give you a very good result with scalping strategy in trading. Big risk trading is not suitable with scalping so trader's have to be careful about their lot size. I also believe that scalping is a good trading strategy for those trader's who knows well about its use. Scalping is one of the quick money making strategy in forex.

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    yes the plan is to close of the less on pips with the decision on occupying use of indy and system as the returns of the series of terms on evaluation.
    as the better plan those had with the basics on commons as trader to prepare of one with the inauguration as defining use of options as referring precise of accuracy on expending of risks with the order.

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  6. #25
    Registered user Quid's Avatar
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    It is not suitable for everyone from scalping there are many things can happen.Traders can know about the market but the liquidity changes from time to time.They can see the higher liquidity and lower liquidity come to the market without they know.If traders are wrong they can decide to make the trading with the preparation and lose because the increasing liquidity.They know about that and can fail becaise of that.

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  7. #26
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    Quote Originally Posted by Khimi234 View Post
    Trading with proper management will give you a very good result with scalping strategy in trading. Big risk trading is not suitable with scalping so trader's have to be careful about their lot size. I also believe that scalping is a good trading strategy for those trader's who knows well about its use. Scalping is one of the quick money making strategy in forex.
    Well, permit me to start by saying scalping can never be good for everyone, no matter how they are trying to plan the trading rules as you have specified, they will not still get success out of their scalping, because it is not just their trading style. I think that forex traders should first discover themselves before opting for any trading system.

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  8. #27
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    Quote Originally Posted by Quid View Post
    It is not suitable for everyone from scalping there are many things can happen.Traders can know about the market but the liquidity changes from time to time.They can see the higher liquidity and lower liquidity come to the market without they know.If traders are wrong they can decide to make the trading with the preparation and lose because the increasing liquidity.They know about that and can fail becaise of that.
    Yes, you're right. Scalping is not good strategy for everyone or every trader because different person could be different consideration in making good analysis and it can be different in psychology control. For me personally, scalping is not easy style for me because it makes me to decide entry or exit point quickly and from my experience, I oftenly got losses than profits. It's not easy to make quick decision to take advantage in certain condition (cut profit or cut loss) soon.

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  9. #28
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    Quote Originally Posted by Hukam View Post
    Yes mate scalping strategy is not a good strategy at all for trader's its depend upon totally a trader's choice because many trader's don't like this strategy much as a long term trader I never use this strategy to make money its a good strategy but little bit risky also for me long term trading is much better than scalping
    those works with the good chance as good trader manages with the supports as having of good possession of system. on running of works with the analytics and more to gains of exchange with the decision on occupying choice with the strategy on expending risks and the good resources.

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  10. #29
    Registered user Quid's Avatar
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    It is not because the trading of scalping can make traders lose and win at that time too because the market can even be volatile or moves to the wrong trading direction.I think trading way like that is not benefit for them.I think it can even be wrong for them.Traders need to see about that can make them more trading profitable and winning trading chances increase.Traders need to understand about the trading knowledge of that.

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  11. #30
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    Nice topic dear. Forex trading scalping is give the benefit to many trader. You exlain more that trading scalping also give the plus benefit to broker that broker can get the more spread by using scalping. Trader who use scalping as primary trading type can even pay more spread than any long trader.

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