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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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    No doubt scalping is one of the tough and very risky method for use and making the profits a lot from the scalping is not easy for every trader so scalping making as suitable choice is a time taken process but its not impossible if we try best we will definitely approve our success even from the small time frames strategies .

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    Quote Originally Posted by mudassor View Post
    No doubt scalping is one of the tough and very risky method for use and making the profits a lot from the scalping is not easy for every trader so scalping making as suitable choice is a time taken process but its not impossible if we try best we will definitely approve our success even from the small time frames strategies .
    no scalping strategy is not suitable for every trader. for a newbie trader it is more risky and complicated to follow scalping strategy because he has no enough experience that is required to be gain positive results from the market so try to be make yourself best for following every type of strategy with adopting good risk to reward ratio to minimize your risk and stable your position in the market with more success rate.

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    Scalping as a trading method is not suitable for every trader at all,there is no single trading method that we can confidently say is suitable for all traders,what you like might not just be working for the other traders and vice versa,so it is pertinent that traders go for what works well for them so that they can trade with ease.

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    Quote Originally Posted by mudassor View Post
    No doubt scalping is one of the tough and very risky method for use and making the profits a lot from the scalping is not easy for every trader so scalping making as suitable choice is a time taken process but its not impossible if we try best we will definitely approve our success even from the small time frames strategies .
    With small time frame period strategy getting good profit or loss in market are very simple of trader but to make time if trader any mistake and misunderstanding then you should destroys our simple or strong strategy easily in forex market. Our strong trading skills and knowledge always prove that helpful to everyday success on market.

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    Quote Originally Posted by BOSST View Post
    Scalping as a trading method is not suitable for every trader at all,there is no single trading method that we can confidently say is suitable for all traders,what you like might not just be working for the other traders and vice versa,so it is pertinent that traders go for what works well for them so that they can trade with ease.
    Yes, it is not suitable for every trader which are working on this business if scalping strategy suitable for everyone then everyday beginner are became millionaire in this business in some days. So those trader prefer this strategy for trading he could most of time time make it with good learning and planning toward success on market.

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    Quote Originally Posted by yimu View Post
    Yes, it is not suitable for every trader which are working on this business if scalping strategy suitable for everyone then everyday beginner are became millionaire in this business in some days. So those trader prefer this strategy for trading he could most of time time make it with good learning and planning toward success on market.
    Scalping is not at all suitable to me either and what all I have found out about scalping till now is that it is worst kind of trading. Instead of scalping there are many more reliable forms of trading like the trend, breakout or I say even news is better than scalping. We can trade with any system but to make profits we should know our trading style and our strategy of trading well.

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    Quote Originally Posted by geddam View Post
    Scalping is not at all suitable to me either and what all I have found out about scalping till now is that it is worst kind of trading. Instead of scalping there are many more reliable forms of trading like the trend, breakout or I say even news is better than scalping. We can trade with any system but to make profits we should know our trading style and our strategy of trading well.
    compared to other trading strategies, scalping is less used by most traders because of its small profitability and less period of holding the trade. usually, scalpers are trading only for couple minutes and earn very small pips per trade. which this is really less favorable by traders especially those who wants to make big money through patience in waiting for trend. everyone got a choice to make and maybe scalping is the last thing in every list.

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    Quote Originally Posted by mao View Post
    no scalping strategy is not suitable for every trader. for a newbie trader it is more risky and complicated to follow scalping strategy because he has no enough experience that is required to be gain positive results from the market so try to be make yourself best for following every type of strategy with adopting good risk to reward ratio to minimize your risk and stable your position in the market with more success rate.
    I know that it is not possible that the scalping will suite every trader, there are traders that will like it, some traders will dislike the scalping likewise. Not that the scalping can not be providing money for traders, but the issue of trading it is beyond that, we have to get ready to spend more time with our trading chart when we want to be trading the scalping. That is the main discouragement i have with this trading style.

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    Quote Originally Posted by Toyen View Post
    I know that it is not possible that the scalping will suite every trader, there are traders that will like it, some traders will dislike the scalping likewise. Not that the scalping can not be providing money for traders, but the issue of trading it is beyond that, we have to get ready to spend more time with our trading chart when we want to be trading the scalping. That is the main discouragement i have with this trading style.
    Yes, scalping is not suited for every trader because scalping is very risky and stressful strategy. I have caught myself that I have had a stress when I have scalped GBPUSD today. But there are many other good and profitable strategies and they are less risky and less stressful. Traders can use them and they will trade slowly and profitably.

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    Scalping is not for everyone because not all the people are willing to sit in front of their trading desk all day long and it is not everyone is willing to start investing so much time into learning and mastering the way of approaching the forex market using this method because most times it is very stressful and not all of us con handle this pressures. I think we should start learning about other trading methods than the scalping systems because it is very hard for most time to use it to make money due to the fact that it requires a great deal of understanding the market and acting very fast.

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