Is Scalping as a Trading Strategy Suited for Everyone?? - Page 695
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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. #6941
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    It's not an easy system so we should not come here thinking it's can be that easy making profits with scalping. Scalping wills be difficult here only when you have studied this system with proper experience that you can sure look to earn from this market. Everyone here must be careful with this method of trade and know how they can build a promising system in forex. Everyone here should learn and know that this system can be risky if not well managed.

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  3. #6942
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    Many of us not be happy to trade while using the scalping strategy and through the power of experience we can love with any method and help in suitability also so in case of scalping strategy only experience and power of learning are greatly important in functions that helpful to work well and earn from it securely .

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  4. #6943
    Trader Azis Muslim's Avatar
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    Quote Originally Posted by Tonycee View Post
    It's not an easy system so we should not come here thinking it's can be that easy making profits with scalping. Scalping wills be difficult here only when you have studied this system with proper experience that you can sure look to earn from this market. Everyone here must be careful with this method of trade and know how they can build a promising system in forex. Everyone here should learn and know that this system can be risky if not well managed.
    Scalping is too little to be called a system because it is just a strategy, method of trading we can choose to learn or ignore. Many traders almost had this experience of trading with scalping and at the same time they no longer use it anymore because it did not give them good trading. I also had the experience as well and it was not so good either, so I chose to learn trading with better and suitable strategy in swing and this has giving me what I need to know about trading and earning.

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  5. #6944
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    Quote Originally Posted by alisaim View Post
    This strategy could not suit every trader of forex however he can take qood trading experience and knowledge about this business. Without experience and skills if anyone make this strategy for trading then almost he have loss own strategy and big money in it. I love scalping trading strategy but always use in lower risk and lower volume to get easily success.
    I am agree with you , to get suitable winning powers from the scalping is not an easy game and all the traders including the newcomers could never use it well without having the enough experience so this is better for us to use the suitable strategies which can give us the satisfying results and earning from them is also easy with getting learning properly .

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  6. #6945
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    usama aziz, Yes scalping is not easy thats why this is not useful and helpful in way of earning success so getting the suitable results from the scalping is a big challenge for all of us and earning success not easy thing so we have to give value to the best strategies that important to get the satisfying results from this market .

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  7. #6946
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    Scalping as a trading method is very proficient if only you you understand it well because scalping is in every trading strategy of all traders that's the irony of it all.yoi can scalp for few pips or decided to stay long in a trade that is the difference .Not every one scalping is suited for office we have long and short time trader. Some one have the patient to stay on a trade obviously can't scalp to settled for few pips.

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  8. #6947
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    Actually, no trading style is universally good or bad neither is there any good or bad time to trade, the trader needs to recognize what is good or bad for himself. If traders want to earn a profit on this market then they must need to use a trading way which is suitable for their trading skills. Scalping needs specific skills and to avoid it totally can also be a good decision, because one can be in nice profits with swing or long term trading solely.

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  9. #6948
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    Quote Originally Posted by Osas Lugard View Post
    Scalping as a trading method is very proficient if only you you understand it well because scalping is in every trading strategy of all traders that's the irony of it all.yoi can scalp for few pips or decided to stay long in a trade that is the difference .Not every one scalping is suited for office we have long and short time trader. Some one have the patient to stay on a trade obviously can't scalp to settled for few pips.
    It depends on traders mentality if he likes or dislikes scalping. Not everyone can scalp and it is for sure. I see nothing bad in scalping and making 10 trades with 10 pips earning can bring very good profit but there are many work and traders should monitor market all day. On the other hand traders should have very good experience.

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  10. #6949
    Trader Toyen's Avatar
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    Quote Originally Posted by Osas Lugard View Post
    Scalping as a trading method is very proficient if only you you understand it well because scalping is in every trading strategy of all traders that's the irony of it all.yoi can scalp for few pips or decided to stay long in a trade that is the difference .Not every one scalping is suited for office we have long and short time trader. Some one have the patient to stay on a trade obviously can't scalp to settled for few pips.
    To scalp the market is to do the smart work, it is what many traders are doing, some traders will not dare to scalp likewise. What i can say about the scalping is that we have to forget the scalping when we know it is not good for us, it can never be good to every trader, especially the traders that are trading without much time. They can switch to long term trading instead of that.

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  11. #6950
    Trader famousfx's Avatar
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    Scalping is a short term trading strategy and it is one of the strategies the successful traders love to be using especially when they have small account,Scalpers are usually spend much time with the computer unlike the long term traders, anyone can use the strategy provided he or she has the knowledge.

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