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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. #7131
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    The scalping is suitable way for earning if we have the good knowledge on it so we have to attain lot of trade skills to manage the trade through the scalping in the right forms and through the skills of learning proper and having the knowledge on this strategy will favor us to approve success by using the scalping and get suitable earning ratios from it .

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  3. #7132
    Trader Azis Muslim's Avatar
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    Quote Originally Posted by fahaddd View Post
    I agree with you because i have experience of use scalping trade strategy , it is very easier for trader to understand but to take decision is tough for trader we must always have to build our strategies and with learning enough and with the practice we learn alot about it so easily we have used to make successful plan .
    Scalping is tough for you and yet you can do it well. That is a nice experience to share with us because most traders commonly failed after they are practicing with scalping. Similar cases also happened to me when I tried to learn scalping. My whole trades mostly went in long term and I held my trades in long time until market followed my orders and give me multiple trades. That was long time ago when I was scalping, now I do not use it anymore and focus to market trend.

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  4. #7133
    Trader Toyen's Avatar
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    Quote Originally Posted by Giedra View Post
    Of course, scalping can not be suitable for every trader because it is very hard trading strategy and it requires good experien, market knowledge and concentration. There should be constant market monitoring and it is very time consuming trading strategy. It is easie to use any other trading strategy where trader has not to monitor the market so much.
    The scalping can not be suitable for all traders in the market, the scalping may not be bad to some traders, but to some other traders, the scalping is the worst. I have being reading many reviewing and comments on this forum, and i know that the numbers of traders that will scalp the market are low. That might be towards the experience they have in the bad way about the scalping.

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  5. #7134
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    Scalping is not suitable for each trader due to the fact this is an exceptional form of approach in which our danger is large and we ought to need to alternate with very speedy. Investors are open and close their trades with very quick time this is cause by and large traders are fail to earn with this approach. So we are not need to sue this method in our trades if we want high earning from this business.

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  6. #7135
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    Quote Originally Posted by Toyen View Post
    The scalping can not be suitable for all traders in the market, the scalping may not be bad to some traders, but to some other traders, the scalping is the worst. I have being reading many reviewing and comments on this forum, and i know that the numbers of traders that will scalp the market are low. That might be towards the experience they have in the bad way about the scalping.
    Yes I have been reading the posts of almost all the members in the forum and I can clearly see that many dont like scalping way of trading. If we talk about something that can suit everyone then its the trend trading, because scalping can be a wrong decisions if one lacks experience or discipline. All decisions are the sole responsibility of a trader and so a trader should use his awareness and experience to take meaningful decisions.

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  7. #7136
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    I think to me, it depends on the mindset and what a trader wants from the market. Because if you are such a real trader that wants to make constant long term profits from the market then you need not to think in such a way that you will make money with such scalping that uses the little time frame. It is actually not suitable to me.

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  8. #7137
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    Scalping as a trading method is not suitable for all traders,only traders who have the skills and the experience can really be able to scalp very well and earn well too,the reason a lot of traders do not scalp is because of the intensity involved in scalping it requires a lot of hard work and dedication to be a successful scalper.

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  9. #7138
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    Scalping is very risky and tough strategy and making money by the use of scalping is not easy.In Forex every trader has freedom to choose any strategy for trading therefor trader should spend his good time for learning then he would be able to realize that which strategy will work for him.scalping is suitable only for the experienced traders for making fast capital.

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  10. #7139
    Trader J_C_Anderson's Avatar
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    It is important to understant that scalping requires special mindset. It would be wrong to say that scalping is suitable for any trader, because scalper has to think and act very quickly, executing dozens of trades during trading session while any minor mistake or mistype may lead to losses. He also has to deal with the lack of time and information. It is also necessary fro the scalper to act strictly in accordance with the rules prescribed by trading system, otherwise the final outcomes would differ substantially from those calculated before trading or provided by backtesting software.
    At the same time, scalpers are one of the most consistent traders, because they can find setups that fit their trading system almost in all market conditions. Actually, they do not need to pay attention to current fundamental situation (but they also have to be aware of the news that could cause elevated volatility that could influence the performance of their trading system). Almost all scalping strategies are based on technical analysis and include such elements like candlestick patterns and indicators, so it would be quite easy to get familiar with them even for newbie traders without previous trading experience or strong background in finance.
    Nowadays many scalpers make attempts to use their strategies to build automated trading systems and EAs to simplify their working process and improve the results while many institutional market participants already use scalping bots and HFT no just to execute large orders, as it was before, but as independent approach to trading.

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  11. #7140
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    Scalping is good and profitable strategy for trading but trading with scalping require good knowledge and trading skills.In Forex every trader has freedom to choose any strategy for trading.Demo accounts are very helpful for trader for testing the strategy.Scalping is suitable only for those trader who has good knowledge and trading skills.

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