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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. #6791
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    Quote Originally Posted by Azeem View Post
    Forex is good and a more better plans in trading is enough to improve us to become better. 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. 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.
    i think not any strategy suited directly to anyone until we learn it, when we learn a system when we give it time and attention we can really make some good orders, so make sure you have good skills you have good learning process then it will make you better, in scalping we can earn easily but we lose because of greed we think scalping is fast track for earning and this is wrong concept so make sure you know about reality here

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  3. #6792
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    Its all about your experience friend without any good experience of forex all trading strategies could be wastage for trader's. Well, as regarding the explanation of scalping, you might use it enlarge the way you view scalping and bring your earnings to more realization. Scalping trading strategy could give you a very quick profit and can give you consistency in your trading.

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  4. #6793
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    Quote Originally Posted by naeem555 View Post
    i think not any strategy suited directly to anyone until we learn it, when we learn a system when we give it time and attention we can really make some good orders, so make sure you have good skills you have good learning process then it will make you better, in scalping we can earn easily but we lose because of greed we think scalping is fast track for earning and this is wrong concept so make sure you know about reality here
    controlling your risk is matter here a lot to be follow any strategy and scalping strategy involves a lot of risk in itself and mostly traders are failed to be handle the trade in such stress because it gives you more burden in your mind as compare to higher time frame strategy. practice can help you to choose your desired strategy according to your skills and ability to be make a successful trade.

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  5. #6794
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    I would not even recommend that every Forex Trader should be scalping because we don't have the discipline for it, sometimes people jump into trading with a strategy because they believe it is the best, but when we look at it critically, we will understand that we have just made a mistake, scalping makes you lose because you cannot trade with a strategy you are not familiar with and be profitable.

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  6. #6795
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    Leonvic, why you are not recommending but from opinion i recommend scalping to all people because its easy and straight way when we do some long term it can make us loser, no one can know in future what will happen but in some pips we can guess easily, long term will work on some fundamental and economy news so its not good but when we do scalping it will work on technical its best

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  7. #6796
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    It won't be safe to depend on scalping alone, because this is a very risky method of trading if you make mistake you can lose all your investment. So relying on this trading method alone is not safe at all beside scalping is not a suitable strategy for many, scalping is suitable for those who understand everything basic of the market. And not for inexperience trader's.

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  8. #6797
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    Scalping is not a strategy that suit everyone only few trader's can scalp and make good money from it but for more than 90 percent of traders they lose their money easily. Scalping doesn't suit many forex trader's but yet they still prefer scalping because they believe that it is the fastest way to trade and become rich over night.

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  9. #6798
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    Scalping as a strategy is not suitable for everyone most people lose their money because they scalp and they don't have a good strategy and patience to do this trading system well, scalping as a strategy is not suitable for many and they need to avoid it if they want to trade and make money in the market because scalping is the reason for most traders failure.

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  10. #6799
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    Trading will be easier for us if we are reducing the risk in our trades, but if we are increasing the size of risk then I would not suggest trader's to do trade in forex. I believe that scalping takes a lot of discipline which can not be attained in one day, this may be difficult, the more reason have it practiced on a demo account before live approach then we can earn according to our target with scalping method.

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  11. #6800
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    Scalping works for someone that understand the rules of money management, for many other forex traders, this might not work, scalping makes sense for people that are always practicing, those who take this for granted will not be profitable. So we cannot affirm that scalping is a strategy to everyone, that would be a wrong assumption to make.

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