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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. #6931
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    Scalping isn't a suitable strategy for all forex traders. This is a very risky method of trading trader without proper understanding about this market won't be able to handle the risk involve in scalping, it will take experience, skills and time to be able to scalp very well, and not every trader have this basics quality.

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  3. #6932
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    Learning how to trade is the major thing we need as a newbie you should learn and practice in the demo account and understand how to trade forex very well before trading this will make it easy for you to scalp or swing in the market but scalping doesn't suit everyone so it's better some traders don't scalp at all if they want to survive in trading.

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  4. #6933
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    There are various trading strategies and styles traders in the Forex market adopted in trading. Scalping is one of them, scalper stay in the market for a short term trading, but he need to wait till the end o the trading activities as he takes many trades within a very short time, scalping is profitable if trader learn the way to do it well. Every trader can use the strategy but knowledge of it is needed.

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  5. #6934
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    Quote Originally Posted by missphat View Post
    There are various trading strategies and styles traders in the Forex market adopted in trading. Scalping is one of them, scalper stay in the market for a short term trading, but he need to wait till the end o the trading activities as he takes many trades within a very short time, scalping is profitable if trader learn the way to do it well. Every trader can use the strategy but knowledge of it is needed.
    scalpers actually stays longer in market because they are trading continuously for couple hours in a day to open and close their trades with little profits. scalper's main target is to catch every small trading opportunities and one more thing, it is to open as many trades as they can no matter if the amount of profit they make is small. we all know that small earning can get bigger once gathered after some period of time. suitable or not, let us just see through our ability to trade with this strategy and no need to learn it if it is not useful.

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  6. #6935
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    Scalping is good but risky trading strategy but it can not be suitable for every trader as not every trader likes to trade with big risk. Traders find the best way to trade and scalping is not the only strategy in forex market. There are many trading strategies and all are good and profitable and trader is free to choose any of available strategies.

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  7. #6936
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    A trader if done scalping with best of his knowledge and skill so there is noting hard for trader to get success i suggest to trade with the proper plan in market i love to work hard in market this is possible for trader to trade with the best plan i must use his ideas in shape of proper trading it will give chances of wining .

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  8. #6937
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    Quote Originally Posted by Giedra View Post
    Scalping is good but risky trading strategy but it can not be suitable for every trader as not every trader likes to trade with big risk. Traders find the best way to trade and scalping is not the only strategy in forex market. There are many trading strategies and all are good and profitable and trader is free to choose any of available strategies.
    there are a lot of strategies no doubt but all are not good because when we try to earn from every strategy its wrong, strategies vary from person to person, if i try to earn from trend way and my target is small so its wrong, we should use right strategy for right way then we can use that strategy into right way otherwise losing will be easy

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  9. #6938
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    We have long term traders who don't like to scalp forex because they know how risky this market can be like when it comes to making fast money. Scalping is highly risky and you only get to manage your trade if you can build up a perfect skills that would be helpful. For me it's good we seek learning and know how to improve our chances of making profits from forex. Not everyone can scalp here because not everyone can handle the emotions to easily loose their capital

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  10. #6939
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    Not everyone can scalp and make stable income with it and the cause of this is lack of discipline before you can scalp and make money you need to be very discipline to trade. Due to lack of discipline many people find it very difficult to trade and make money with the scalping strategy, if you can be discipline to trade scalping will be suitable for you.

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  11. #6940
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    No, scalping can't be suitable for all of us here, there are traders that don't really buy the idea of making use of scalping in forex market while some traders really depends on scalping as their only way to earn from this business. However i does not really see scalping to be that risky, it is like some other trading strategy that we make use in forex market.

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