Should You be a Forex Scalper?
In this video:
00:27 – Is scalping a good idea?
01:22 – The reality is different
02:22 – Having small stops is not important
03:09 – Can be affected by news and emotions
03:26 – Sustainable and enjoyable trading
04:26 – Don’t get glued to the charts
05:30 – Don’t forget the US clocks change this weekend
06:13 – Email me your questions
Should you consider being a Forex scalper? Let's talk about that and more right now.
Hey traders, Andrew Mitchem here at the Forex Trading Coach with video and podcast number 342.
Is scalping a good idea?
I want to talk all about scalping. You see, I've received an email this week from somebody that said, “Look Andrew I'm new to trading but I've heard about scalping. It looks really, really good. Should I be a scalper?” They said the advantage is that they saw is that your stop/loss needs to be smaller, it's quicker to make profits, to make your pips. You can actually be in and out of a trade really, really quickly. They thought it was just a fantastic way of trading.
Now, the part to take from that is the person who wrote the email hadn't really traded yet. But it just sounds good in theory, doesn't it? The difference is that in reality, to me in my opinion, scalping is not the way to go. Now, I'm not saying it doesn't work and of course it can work. It's like anything. It can work if you want it to and if it suits you as a trader with your personality. However, I would strongly suggest that for most people you don't look at scalping.
The reality is different
You see the thing is your stop/loss being smaller, that doesn't matter if you control your risk properly. Making more pips and making pips quickly, well you're making pips it doesn't matter really to you if you're making a trade in like sort of two minutes or whether it's two hours or 12 hours. It shouldn't really matter. The aim is to actually make the profit, not how quickly you can do it. Also the thought process of scalping of being in and out of the market really, really quickly, the problem is is that reality is that you have things called spreads. Every time you take a trade, the spread or the commission is paid to your broker and if you imagine you're taking, let's say for example a 10 pip profit target, but your spread is two or three pips, that really cuts into the trade. Of course, to make 10 pips you've really got to make 12 or 13 because of your bid and ask differences. So it becomes a real issue. Having small stops is not a great thing.
Having small stops is not important
It might sound good because you think you're losing less, but the thing is that if you actually use correct money management, your position size is what effects the outcome of the trade. It shouldn't really matter whether the stop is 10 pips or 100 pips. It doesn't matter.
So the other hard thing I've always found in the past is that reward to risk out of scalping trades is very, very difficult. If you think you're going to have a small stop/loss of let's say call it 10 pips, and reality is therefore you're only sort of seven or eight pips away from being stopped out as soon as you place the trade, because again the spread, you've got to get yourself like 20 to 30 pips out of that trade to get yourself a two or a three to one reward to risk trade. Now that's all the technical trading side of it.
Can be affected by news and emotions
You get news and events, you get spikes in the spreads, et cetera. All those type of things that really if you have a small stop/loss or you're in and out of a trade real quickly, emotions come into it. All those things come into it that are a bigger picture of reality than the theory.
Sustainable and enjoyable trading
Also, is it sustainable? So here at the Forex Trading Coach, I've been posting on our membership site for nearly 11 years, every single day without fail, the daily trade suggestions that we post to our members. So after 11 years of doing this, I can promise you the only reason that I'm still doing it now and still enjoying doing it is because it's manageable and sustainable because it's looking at the daily charts once a day. By the way, every single year to date, including this current year 2019, we have been profitable every single year on our daily trades, without fail. So the reality is most people out there when they start trading they think they want to become full time traders straight away. The reality is that's not going to happen. For the vast majority of people, that's not going to happen. You can become a full time trader but it will take time, dedication, effort, commitment to get to that stage. Like with anything.
Don’t get glued to the charts
So think of it this way: if you've gone into trading, most likely you've got yourself a normal 9-to-5 job or some form of self-employment, some form of job. If you're retired you've probably got other things going on. The reality is that for most people you don't want to sit there at your computer, either for a set number of hours or all day, every day just watching charts going up and down, scalping the market. It's just not enjoyable, it's not sustainable. As someone who's been trading for 16 years I can tell you it will lead to burn out. You have to trade, in my opinion, with high quality trades, less trades and have something that's enjoyable, sustainable that you can do day after day, month after month, year after year, and be profitable and enjoy it. Because that's the way you're going to last as a Forex trader. Not only actually enjoying it, to want to do it, but to make money out of it.
So the harsh reality is that in my opinion, is that scalping is probably not the way to go forward for most people despite all the things that look good about it.
Don’t forget the US clocks change this weekend
So one more thing, we have the US clocks changing this weekend, on Sunday 3 November. We've just turned to November today. That means that the 5:00 PM Eastern Standard Time open and close chart time, which is New York time, if you're outside of America or Canada, your 5:00 PM New York time and your local time will be one hour different starting on Monday of next week when you get to watch this video. So the good thing is that once you're settled in, everything stays consistent through to about March or April of 2020 when the clocks all change again.
So that's it for this week. Hope you've enjoyed the video and podcast.
Email me your questions
Any questions that you have, please feel free to email me [email protected] I'll see you this time next week for more trading tips and information. Bye for now.