I know most people… if not all are already saying no.
But hear me out and if you still don’t think so can you explain why to me?
If we are risking a certain percentage each trade… 2% for example.
The money you get per pip is going to be a lot greater on a small time frame with a short SL.
If you trade on a higher time frame you’re going to use a larger SL which means you’re going to get a lot less $$ per pip.
So let’s compare a swing traders and a scalper… Their both going to go long during an uptrend.
The swing trader take profit at each elliot wave and goes long again at fibbonaci retracement.
The scalper uses MA’s to make 1:2 risk:reward trades the entire uptrend.
So they both ride the entire uptrend… the scalper made a lot trades during it while swing trader made maybe 2 trades.
Which means they both caught about as many pips each but the scalper had a lot higher value per pip.
So am I wrong or right?
If I’m right does that mean that scalpers make a lot more money than other traders?
or
Does it mean we need to increase risk in higher time frames?
Trade frequency should be a factor in determining how much you risk per trade. Shorter term traders should risk less per trade than longer term ones, generally, because they have a higher probability of experiencing a long run of negative results. Also, at a certain low % risk per trade it starts to make little sense for a long-term trader because the reward won’t be worth it. For example, risking only 1% if you just trade a handful of times a year probably doesn’t make a lot of sense unless your R/R is quite big.
What if you perceived the market as a swing trader AND a scalper? Then you could look at all the timeframes, and work on a more comprehensive approach to the market. Take what’s available, and keep risk in the parameters you pre-determined.
But you are on to something I would think… I do take less risk on my scalp trades, haha
I guess you could say you take more risk on your swing trades, but to me it’s about taking less on the scalps. I can tell you why too. Scalps don’t give you a lot of room to neutralize risk… it’s kind of like it gets your target or not. But on a swing trade, there is generally some space to reduce your risk and even put yourself in a guaranteed winning trade with no risk on the table (stops at B/E)
The problem is just that… It’s not easy to increase risk a lot more than day traders.
I know there’s a lot of successful day traders using a risk amount of 2.5% - 3%… And there’s some that are successful with even more than that.
The higher your risk is the higher the max drawdown will become.
Reason most people use risk of 1-2% is because it’s rare for the drawdown to go below 20%
But people who can handle higher drawdown could use a higher risk% and be prepared for 40% or even higher drawdowns.
What I’m getting is that… You can’t really get a lot higher risk% than a day trader can get.
Unless you’re a position trader who risks maybe 10% - 30% on a trade… which is gonna result in some mad drawdowns and unless you are extremely good and know what you’re doing… even account blow up.
This leads to something along what Akeakamai said…
Take any trades you can find on any of time frames you can… using same amount of risk on all TF.
The more time you have for trading = the more money you can make (Because you can trade lower time frames)… because day trading requires the most time and therefore the most ROI.
Well actually I said less risk on scalps… generally the most profitable department of your trading would be your swing trading. But if the week sets up more scalp trades, you might see weeks dominated by scalp trade profits. That make more sense?
and I wouldn’t trade more than 2% on any trade. I know 3% is okay too, but I’m not ready to take that on yet. Above 3%… I dunno… I think the risk is unnecessary. You can bring in ridiculous returns with 2 or 3% risk on your max bets
Scalping to me involves targets of about 20-30pips, and I wouldn’t expect to find more than 2 or 3 of those a day (if you’ve got time to trade every session). It’s not that big a donation to your broker
Agree with this completely! And even though I have been studying forex for about 4 years now I only came to this realization recently. Many of the trading books recommend no more than 1-2% on trades but I think if you are longer term trader with only a few trades a month or year (which I fall into because I still have a job and can’t day trade) you have to use higher risk to make it worth your time basically.
Consider a day trader and a swing trader with a 2:1 risk reward. The day trader will earn 4% if his trade his successful in a day but for swing traders they may earn the same 4% but over weeks!
So to make the same number of pips you need approximately 25x as many trades as I do. At a 2 pip spread you need to make another 2 profitable trades just to pay your broker.
Your 30 pips goal is a good one though. People who post about 5 pip targets are insane. 100x as many trades, and then need another 120 to pay the broker!
