The scalping strategy involves opening trades with small take profit (TP) and stop loss (SL) levels and closing them within a few minutes, aiming to gain small profits per trade.
For example, let’s say I make a trade with TP of 1 pip and SL of 1 pip (equal risk), or TP of 1 pip and SL of 2 pips (higher risk), or TP of 2 pips and SL of 1 pip (higher profit).
What guarantees that the market will move in a favorable direction maximum time and hit TP instead of SL? How does this work, and why is scalping one of the most loved trading strategies among traders?
Because one could think that it is the most profitable trading style. The faster the timeframe, the more trades you can take and the more profit you can make. However, if you don’t have a real edge, reality strikes really fast and you can lose a lot of money in a very short time.
I can open 50+ Trade every min with small SL and TP. If it move more than 50% in favorable direction i will be profitable else i will be in super loss.
While it can be lucrative, making consistent money through scalping is incredibly hard for several reasons:
High Transaction Costs: Each trade incurs a spread or commission, and when you’re making dozens or even hundreds of trades a day, these costs can eat significantly into profits. For scalping to be profitable, you must win a high percentage of trades to cover these costs.
Market Volatility: Scalping relies on small price movements, and market volatility can turn a profitable trade into a loss very quickly. You need to be very reactive to market changes, which requires constant market monitoring. Figure out your trading personality, took me a long time to figure out longer term price movements were more ‘my thing’.
Leverage Risks: Many scalpers use leverage to amplify their profits from small price movements. However, leverage is a double-edged sword; it can also amplify losses. A few bad trades can result in significant financial loss, especially if risk management practices are not strictly followed.
Competition with High-Frequency Traders (HFTs): The forex market is competitive, and many participants are high-frequency traders who use sophisticated algorithms and supercomputers to execute trades at speeds impossible for human traders. These entities can exploit price movements much quicker than human scalpers, it’s so hard for you to compete against this, you have to remember you need an EDGE to profit long term.
Psychological Stress: Scalping requires constant attention, quick decision-making, and the ability to remain calm under pressure. The high stress and emotional toll can lead to burnout or decision fatigue, affecting performance and the ability to make consistent profits. Ever had that, dammit I know I’m right I’ll just leave this one for 3 pips instead of 1, poor decisions like these are amplified when scalping.
Difficulty in Predicting Market Movements: You need to make quick decisions based on short-term market movements. However, the forex market is influenced by a myriad of factors, including economic indicators, political events, and central bank policies, making it difficult to predict short-term price movements accurately.
Slippage: In fast-moving markets, there can be a difference between the expected price of a trade and the price at which the trade is executed. Slippage can erode your profits faster than you imagine!
Over-reliance on Technical Analysis: While technical analysis is a crucial tool, over-reliance on it without considering the broader market context or news events can lead to trades that don’t perform as expected.
To be successful at scalping, you need not only to be highly skilled and disciplined but also to have a well-thought-out strategy that includes stringent risk management rules. Even with all these in place, the challenges mentioned make consistent profitability a difficult goal to achieve.
Write your trading plan down, stick to it, have it on a post it note on your monitor if needs be, refer to it all the time
My thoughts are the following possible reasons why many people like scalping (or what I would prefer to call day trading)
And I would suggest there could be many strategies people use from things like risking $10 to make $1 or even less through to people who use futures market as a proxy so they can benefit from order flow and risk $1 to make $10
Scalping can be exciting especially during highly anticipated fundamental data releases.
Some people sleep better knowing their trades are all closed before sleeping.
Others may be profitable enough to use scalping (or day trading) as their only source of income and hence have more time to spend in front of a screen than a part time trader.
Some strategies (especially trading fundamental data releases) are much better suited to scalping.
Then due to small account size yet others may see scalping as a solution to build profit on an account with as little as $100.
There are probably many more reasons why scalping is popular.
I know you use the terminology “For example” here. But let’s look into this in reality.
Trying to make a profitable retail strategy like this using MQL4 or MQL5 (which I know from other threads you have created is what you are doing) is never going to work.
Sure there are extremely complex institutional high frequency trading bots out there but they have so many advantages over what anyone like you are trying to do. Added to the fact that the retail spot markets don’t have an open order book and the statistical chances that at any given price level you have approximately a 50/50 chance of earning one pip compared to loosing one pip. Then one last part of the equation is your lack of understanding that there is no such thing as a “zero spread” account!!!
I notice you have many unanswered questions on this forum.
Maybe people are getting frustrated with your threads and lack of basic understanding even though you have been on here a while now.
Hello, scalping is a very interesting method for traders. We can get profits in a short time, and of course we can also experience risks. To become a scalper, we must understand the ins and outs of the market, and it is better to focus on one or two pairs that have high volatility. I recommend the GBPUSD or NZDUSD currency, or also the USDJPY pair. Cross pairs such as GBPJPY, EURJPY, and NZDJPY can be traded.
Regarding the TP and SL values, this is different for each trader. I prefer manual TP and also SL manual on market. Next, for trading hours, please adjust them to the currency we are trading.
basically, I am short - term trader, I close all trades before weekend right now, with long - term mindset, there is no such thing like “set and forget”, the market consistantly evolving, that is why I do research every day, and adjust to new market conditions.