Hey guys, I have a sort of weird question. I went through babypips and now I am in the common stage of looking for a good system, tweaking, making my own and demoing. (Actually I have a live account with [B]10 dollars[/B] which is IMHO way better than a demo).
Until now I have only made intraday trades. I want to move to long-term trading tho, because I want to spend less time in front of the charts. I have applied some simple math and realized that I just won’t be able to trade anything else than scalps.
WHY?
Ok, let’s say I open a scalp trade with 15 pips SL and 15 pips TP. Risk-reward ratio is 1. I need to win only a little bit over 50%. I risk 2% of my account. I make one trade a day.
[B]My position size is:
133 units. (Using BP size calculator.)
My max gain for the day is 2% in case I hit TP.[/B]
I want to be a long-term trader. I open a long-term trade with 200 pips SL and 200 pips TP. Risk-reward ratio is 1. I risk 2% of my account. I make one trade every two weeks.
[B]My position size is
10 units.
My max gain for the two weeks is 2% in case I hit TP.[/B]
Do you see my issue here? By trading long-term I make the same money in two weeks while by scalping I could make it in one day. What’s wrong with my math? How do long-term traders survive? Please help :eek:
As you rightly point out its a question of what kind of a trader you consider yourself to be. Obviously if you are making a living primarily by other means than forex you might feel more comfortable taking the longer trades. If your typically leaving your trades to run over several days to possibly weeks they will perhaps only need the odd look see once or twice a day (24 hours). In contrast, short term (interday trading) requires screen time.
If you ask around the traders on here who have been around a good while, most will tell you they favour longer trades. I can see your point about starting with $10 and a 2% gain in a day v 2% gain in two weeks. :21: But when you consider you have a workable system with a good win rate then perhaps you’ll consider upping your account seed money. A 2.5% gain weekly with a starting bal of $1000 as an example, will compound your account to very large numbers in a few years. The experienced traders on here state they average 10-30% gain monthly.
He doesn’t need to hit 15 trades in a row. Considering 1 trade per day, he only needs more than 7 wins to keep his profits, and they don’t even have to be in a row.
Also in my opinion it is easier to target a R:R of better than 1:1 with a more medium-term trade. I regularly see trades with a R:R of 1:2 to 1:5, as the idea is to capture bigger moves. So I don’t need as many of those to balance out the rewards of scalping, while at the same time taking higher probability trades. Even just a couple of those a week would do someone very well over a year. This is not a case against scalping - each style has its advocates, as each can make money - but more a clarification of the original assumption on slightly longer-term trading. I still often enter and exit a position within the same week. The return for me is much better than when I tried scalping, but then it is possible that I am just a terrible scalper!!
With all due respect, I believe this to be a myth. I used to think this was true myself, until I tried to look at things differently.
My experience has been that scalping works MUCH better around my fulltime slave job, and requires far LESS screentime than I used to invest when I was swing trading. Short-term allows me to put trading into a very small box with very sharp edges. My life is built on compartments and this is also one way I can reinforce consistency. (My wife apparently doesn’t grasp this compartmentalizing thing, so it might just be a man-thing.)
With that said, I do hope that one day I will be able to apply what I’m learning to a longer term swing- or position-trading method. Why? Because, presumably then I can just flip on the trading platform once every few DAYS instead of once per day on a regimen (is that a myth too? I guess only time will tell…)
I can only speak from my own experience started out with 15m charts and now rarely look at anything less than a daily chart. Original goal was 10% a week… it’s working out more like 2% a week to 5% on a real good week. I can get buy just looking at charts once or twice in a day but I look at them more often because it’s addictive
I think it just comes down to which style we each prefer. I place end of day trades off the Daily chart, it takes me around 30 minutes each evening to scan for setups and place any trades I see. I set a Stop and a Limit at that point and just let them play out. I also trade intraday off the Hourly chart, which takes a little more maintenance but not a great deal more as my entry style is very similar and I am a largely technical trader. Around two thirds of my income comes from the end of day trading, so I could actually just drop the intraday and get by on the end of day trading. So it is possible for longer-term trading to equate to less screen time.
I do a scan of the Weekly and Daily charts for each pair I trade on a Sunday, to scope things for the week. Then scanning for setups and placing trades does not need to take a lot of time. One of the reasons I started trading was to free up some time for other things, and it is working out that way, so far.
But granted, this [I]is[/I] my full time job, so I don’t have the distraction of a separate career.
Perception and reality are two very different things. When you speak of a 15 pip / 15 pip limit, is that a hard limit both ways or is it a judgement call once it gets there? If there is a moment of hesitation as a scalper, even the 1-3 pips can cut into profits a great deal. Then, think about slippage. If for any reason you lose 3 pips due to slippage, technical issue, self-related issue, etc…that is 20% of the bacon. And when you say 15 pips, does that include spread?
With longer trades, the probability is likely much greater per trade than short-term due to a number of obvious factors. They also provide that cushion should something go awry. If random/bad news strikes and you lose 200 pips for some unfathomable reason, it’s not as big a deal because that’s only a single trade (maybe you make 1 more trade that week). If you lost that while scalping, you cost yourself say 2-3 weeks of work and it wouldn’t be as easy to makeup. Also, with scalping, you are very much either going hit the TP or SL. With longer trades, you have more flexibility to work the position and thereby increasing your odds should a bump in the road occur.
Systems are great for idea generation, but at the end of the day you have to make your own call. I’ve personally been using software for some time as an idea generator and guide while trading to keep my own sentiment/ego in check. I’m actually beta-testing something right now that incorporates both predictive technology and analysis of trends via accumulation and distribution. It helped me nail the move from 1.4235 (my cost) to 1.41 in EURUSD earlier this week. I saw something developing and the software confirmed exactly that. I’m not sure if that’s something that will help you (or others) but I’ve found it invaluable thus far. They’re suppose to be releasing it to the public soon, so if i hear anymore I will make mention.
This is true. And for this reason, a scalper should demand more from his yield. More risk taken should equate to more profit on the whole. Otherwise, it’s just not working.
When you’re a scalper, you need to consider spread as a cost of business. As long as you’re making profits, what’s the problem? I’m currently aiming for a 1% equity grow per day trading as a scalper… it just requires some discipline and hard rules. It’s not for everyone, but for me it seems to be working :). I hope to go full-time with this soon, but I was inspired by the “Steroid Scalping” thread over at the free trading systems section of the forums.
:eek: