excuse my newb expectations, but what if you get really good at scalping 3-5 pips and your broker offers low spreads to make that profitable, assuming you have good money management, and sl, do people do this to make money or is this a bad way to go?
newb…
You better be REALLY good…
I’ve never seen anyone make money in the long term. Money management includes a good risk reward ratio, so if your using a stop, you’d be risking like 2 pips to make 5. Your trade would probably close as soon as you opened it most times.
+1 with master tang. You need to be better than really good. The pros do this but you have to remember they have one vital bit of info we dont. Orderflow.
Who wants 5 pips anyways… go for 500.
A lot of fives can add up to 500…
Is scalping possible yes. Can some traders make a significant return doing so, absolutely. As you mentioned trading costs is going to be a significant thing to consider. If you make 5 pips but your paying a 1.5 pip spread, your paying up 30% of your profits. It doesn’t seem like you are in spot cause it never actually debits from your account, but the price and spread need to trade through. So its movement you are unable to capitalize on, so its the same thing as paying a straight up commission fee if it were like stocks or futures or options. Now take your losers into consideration, assuming a 1:1 RRR your risking 5 pips to make 5. your losers are now 30% larger as well, since you get taken out “early” because of spread.
So it hurts you on both sides, winners and losers. But if you take larger trades say 50 pip 1:1 RRR then now its only 3%, and 500 pips its .3%. You catch my drift. Basically the larger targets you go for the smaller your spread/commissions become in relation.
It also boils down to the effect on how much win % increase you need to over come, if your winners are 30% smaller, and your losers are 30% larger. Your going to need to have a MUCH MUCH higher winning percentage to over come that, something like 85% off the top of my head. Which is probably an unreasonably high if you consider that you need to maintain that to be break even over your entire trading career.
thanks for the info! based on harmonics I had a pretty good winning streak on the demo, but I figured I ask around before I practice that with real money and learn the hard way
No better way to learn than the “hard way”.
Open a very small live account, and do what you did what you did on the demo. There’s no reason it shouldn’t work, and there’s no better way to prove or disprove your success. Just don’t put all your eggs in that first live basket. Use money management for opening your accounts too.
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I’ve been trying to do this for the last month in a micro account. Amazingly I did make money… but when I added broker fees, I went into the red.
Your biggest obstacle will be transaction costs (commission and/or spread). Suppose your transaction cost is the equivalent of 1 pip. Your reward is 5 pips. Every time you win, you give up 20% of your reward to your broker. If your stop loss is 2 pips, then your losses expand by 50% everytime you lose. It’s ridiculous.
edit: MeiHua explained it well. :35:
newbie scalpers never stop to ask the most obvious question… why am I scalping in the first place?
not surprising considering the answer is usually a lack of patience, experience, skill, and the wisdom needed to identify and ride out the larger swings in price.
generally though, the answer is even more simple. gamblers be gamblin’
thanks for the words guys! after reviewing my idea of 3-5 pip scalping, I realized that im burning up gains towards commision fees, i.e if I make 10 trades for 10 pips, I have 100 pips and 10 fees, if I wait out a trade for 100 pips with 1 fee, talk about dem gains…
not to mention the time and stress saved…
you got that right!! thats the issue with scalping, i did start as ascalper but ended up doing swings instead, less fees bigger gain but takes longer. and in my opinion its safer, scalping might burn more… happy trading everyone.