Can scalping make you rich?

[GCC]

I think you are asking the wrong questions. Of far greater importance is knowing oneself and deciding whether you are pyschologically better suited to day, swing or position trading. Many, many people are wholly unsuited to day trading. You only have to look at wash-out rates in day trading after 6 months -only 10% survive, let alone turn in a profit. It has a habit of attracting the most impulsive, least-disciplined, get-rich-quick individuals on the planet. If you are any of those, stay away from day-trading.

No I am not asking the wrong question. Go read my previous posts in the thread and you'll realise you are not the first one to accuse me asking the wrong question, and you can also find my reply to such claim. More importantly, you may also find that I do both intraday and swing in two different accounts.

However, thanks for the following advice, it is helpful to many traders:

Assuming you have been trading multiple time frames for a while, then have a look at your trading log. Which are you better at? What are you performance stats? What is the average gain per trade in various styles? How long were you in the trades for? Where have the worst losses been? Analysing these will give you the answer to as to what time period, if any, to specialise in.

The following is more interesting:

I tend to use day trading to cover living expenses and swing/positon trading to increase equity. The relative profits of each depend on your skill. There is no doubt, however, that the hourly pay rate of day trading is much lower than other time periods -it feels more like a job.

I believe this is the right approach is professional trading. The money should be divided into two kinds: 1) the bread and butter money, the essential money for covering expense, and 2) the money for growth of your account. John Carter has mentioned this concept in his book Mastering the Trade.

And back to Gogol:

I think I know what you mean....I had similar problem. Dont worry of the stop outs (if you have daily loss limit set)..just look at your winning trades and see - Did you take you profits too early ? do you see the trend moving in you faour even after you exited the trade. This is very important because. 1 you will be trading less trades when you stick with your winners. Just scale out after a certain target is reached. I know its harder than said but its a key to improve your win/loss ratio.
Also, i am sure you mange your stops actively - as in when the move is in your favour - you move your stops slowly - this reduces your expouser per trade.

Not sure if risk-reward ratio is the answer to his problem, because it depends on what system you are trading. Some systems has a very poor RR ratio yet it is profitable. Scalping, for example! It also depends on the nature of the market. Say, crude oil is very different from AUD/NZD, and the way to trade them is very different.

Instead of giving him advice on the rules of his system, I will simply suggest him to trade with smallest lots possible. Try to fiddle around with your system with money you don't care (NEVER trade with sacred money!). As time goes on, he will come up with a system that works for HIM. I suggest this because everyone's system is different from others and one MUST decide his own way of trading.

For example, I am a bottom/top catcher, and I use bigger stop loss and smaller take profit. Yet I am profitable. Why?

1) I know what I am doing. This system is developed by myself and I know what the odds are.
2) Money management. I never go higher than 10:1 leverage in total. (with 1 quid per point)
3) Psychology. I have learnt not to be panic if the trade draws back or profit "appears and disappears" before hitting target.

So, my advice is: go read a lot of systems and find those which appeal to you, try them out with a real account but with very small lots, feel free to modify it in whatever ways you desire, and finally, always always prevent using high leverage! (10:1, at least for beginners)

 

[AsiF5566]

Instead of real fast scalping, what works for me is short term trading such as 5 minitue chart, cause the market, specially few currency pairs move mostly in short term trends (but offcourse, there r ranges as well). So if u can catch these trends, and just aim around 20+ pips / day, u'll on ur way to the riches..... also note the volatility, for example, when u go long and then suddenly c the market got either stuck or it seems hard for the price to go up, whatever ur indicator might tell u, just get out of the market, don't wait..... cause in a single day, u 'll get plenty of chances...

BTW, avoid news times at all cost.... FOREX is something opened for public only to suck them in so that big banks and institutions get more money to grab, they r unfair..... But if u r carefull, u can gradually bypass all these and slowly work ur way up.

ALSO, use mental stops.

 

[Gogol]

Gogol,

I think I know what you mean....I had similar problem. Dont worry of the stop outs (if you have daily loss limit set)..just look at your winning trades and see - Did you take you profits too early ? do you see the trend moving in you faour even after you exited the trade. This is very important because. 1 you will be trading less trades when you stick with your winners. JUst scale out after a certain target is reached. I know its harder than said but its a key to improve your win/loss ratio.
Also, i am sure you mange your stops actively - as in when the move is in your favour - you move your stops slowly - this reduces your expouser per trade.

Remember daytrading is just like another job -- swing trade or position trade could be a hobby.

If you are getting loosing days in a row.. there must be something that you are doing wrong. This only means you are on the wrong side of the MARKET - MOST of the times... which means against the TREND. make sure you are not trying to FADE the maket moves. In last few weeks market has been really strong- no large retracements.

lemme know if this helps
Guru

Hi,
yeah man, it happen all the time, I take profit to eary, I would say 3 from the 5 trades it keeps going after I exit... And because my PL ratio about 6 to 4 I finish my day most of the time with zero... or even worse if I become angry at the end of the day...

 

[davesona]

Angry is not good at all... I trade ES mostly and my goal is to get 2-3 points a day. My stop loss for the day is set at 3 points. If it accumulates -3, I'm out for that day. This keeps me in balance. Also, I don't pay too much attention on technical characteristics and charting because of limited trading I do.

 

[puregold24carat]

The reason why its called ' Scalping ' is because you keep getting ' scalped ' and are soon broke ?

 

[bennie83]

If scalping, what kind of stop loss, profit target and overall Risk:Reward is preferable for say the emini S&P? I mean surely you want something better than a 1:1 risk reward? And also if stops are tight (as I'd imagine they would be for scalping) you going to have a lot of losses.

 

[puregold24carat]

All depends on method / strategy you use i suppose ?

 

[jiggly]

Angry is not good at all... I trade ES mostly and my goal is to get 2-3 points a day. My stop loss for the day is set at 3 points. If it accumulates -3, I'm out for that day. This keeps me in balance. Also, I don't pay too much attention on technical characteristics and charting because of limited trading I do.

i dont get it,

you are playing for scraps yet you dont pay too much attention to the technicals.

you should set your trading goals higher, if you have limited time, then dont trade so frequently and look at the bigger picture.

make plays that have a longer duration so you can due proper due dilligence for something worth while.

 

[new_trader]

If scalping, what kind of stop loss, profit target and overall Risk:Reward is preferable for say the emini S&P? I mean surely you want something better than a 1:1 risk reward? And also if stops are tight (as I'd imagine they would be for scalping) you going to have a lot of losses.

No. This is an opinion, not a fact. Don't confuse the two.

 

[bennie83]

No. This is an opinion, not a fact. Don't confuse the two.

Hi, I'm not quite following your point, are you saying that you don't need stops or that loose stops can be placed or are you conveying something else entirely? thanks

 

[new_trader]

Hi, I'm not quite following your point, are you saying that you don't need stops or that loose stops can be placed or are you conveying something else entirely? thanks

You said, "if stops are tight (as I'd imagine they would be for scalping) you going to have a lot of losses." I said that this isn't really a fact it is an opinion. There is no reason to believe tight stops means lots of losses.

 

[jokepie]

You said, "if stops are tight (as I'd imagine they would be for scalping) you going to have a lot of losses." I said that this isn't really a fact it is an opinion. There is no reason to believe tight stops means lots of losses.

2nd that ...

 

[bennie83]

You said, "if stops are tight (as I'd imagine they would be for scalping) you going to have a lot of losses." I said that this isn't really a fact it is an opinion. There is no reason to believe tight stops means lots of losses.

Okay, so you mean your entries should be spot on, hence you can keep tight stops?

 

[jokepie]

Okay, so you mean your entries should be spot on, hence you can keep tight stops?

If i may ... I think what u need is enter higher probability set ups. and keep you R/R ratio positive... results will be fulfilling...
ther is no such thing as on the spot....close ya.. gotta be.

 

[bennie83]

If i may ... I think what u need is enter higher probability set ups. and keep you R/R ratio positive... results will be fulfilling...
ther is no such thing as on the spot....close ya.. gotta be.

Cheers Jokepie (and other contributors), I wasn't quite getting the mysterious elements of the previous posts - lol!

 

[trader_dante]

Just my $0.02

Do you think, in the long run, swing/position trading makes more money than intraday trading (including scalping)

In the long, long run, if you have made a huge amount of money, then, I would say that swing/position will make you more money than intraday trading/scalping. I say that because, huge sums of money cannot be moved easily around in many markets but then it does depend on the product you trade I guess. If you are trading 1-5 lots you could scalp the FTSE and make more money, quicker than a swing or position trader. But you get up to 50 lots and you will find that you simply cannot scalp it anymore and the swing/position trader will d*ck all over you. (presuming of course that both employ profitable techniques). Same goes for many of the FX futures markets. You certainly can't scalp Cable with any size in the futures market. In a market like the S&P or the Cash FX then the liquidity is much bigger and you can, no doubt, go on making money for longer. Although this isn't a problem that will affect anyone (I doubt) on here...

Suppose you trade both styles, and you are trading fulltime, which style makes you more profit? Or if you were to quit your job and trade professtionally, which style would you prefer?

I much prefer swing trading. Firstly I'm a lousy scalper but even if I wasn't, the thought of spending even several hours at a time infront of my PC is soul destroying. I'm much happier checking in at regular intervals (e.g. every hour) on the days when I know something may well setup.

Finally, a question for the full-time scalpers: what makes you choose scalping over position/swing?

This won't make me very popular but based on my experience (those that I know that scalp for a living) they do it because:

a) They have accounts that are too low to swing or position trade.
b) They cannot sit there for indefinite periods of time without trading as they lack patience.
c) Their temperament is such that holding a position is not their strong point. Therefore it is more profitable to them to take 5 pips out of 20 trades with each one lasting about 5-10 seconds then 100 pips out of 1 trade that will require them to stay in and watch it from anywhere between 2 to 5 hours.
d) Their attitude to risk is that the longer you are in the market, the more risk you have so they need to get in and get out quickly.
e) They find it fun and exciting.

etc, etc, etc

 

[GCC]

a) They have accounts that are too low to swing or position trade.
b) They cannot sit there for indefinite periods of time without trading as they lack patience.
c) Their temperament is such that holding a position is not their strong point. Therefore it is more profitable to them to take 5 pips out of 20 trades with each one lasting about 5-10 seconds then 100 pips out of 1 trade that will require them to stay in and watch it from anywhere between 2 to 5 hours.
d) Their attitude to risk is that the longer you are in the market, the more risk you have so they need to get in and get out quickly.
e) They find it fun and exciting.

Haha, that's a truly contrasting perspective to all those intrady traders around. Very outstanding comments from a "renegade" indeed.

 

[wackypete2]

This won't make me very popular but based on my experience (those that I know that scalp for a living) they do it because:

a) They have accounts that are too low to swing or position trade.
b) They cannot sit there for indefinite periods of time without trading as they lack patience.
c) Their temperament is such that holding a position is not their strong point. Therefore it is more profitable to them to take 5 pips out of 20 trades with each one lasting about 5-10 seconds then 100 pips out of 1 trade that will require them to stay in and watch it from anywhere between 2 to 5 hours.
d) Their attitude to risk is that the longer you are in the market, the more risk you have so they need to get in and get out quickly.
e) They find it fun and exciting.

etc, etc, etc

Except for "a" This pretty much describes me. I also find that too much idle time between trades keeps it from being fun and exciting. Having the discipline to stick to my rules and exit with small losses makes up for the lack of patience. Not exactly the perfect trader profile but after losing all too often in the beginning this is what I've settled into to be profitable and have peace of mind.

Peter

 

[new_trader]

Okay, so you mean your entries should be spot on, hence you can keep tight stops?

Exactly. But I want to state for the record, as I always do, that I don't consider myself a scalper. I just wanted to clear up the myth about tight/close stops. There are people who will insist that trading with a close stop makes you a scalper when it is not the case at all.

 

[Dinos]

I day trade, I don't consider myself a scalper, I trade 4 markets, all of the 10 min chart, I have the discipline and patience to wait for my set up to confirm the trade, I let the trade come to me, I don't chase or try make a trade, I enter and exit the day flat and in between, make several trades a day with set stops and limits using a sensensible manageable leverage. I sleep well at night knowing I'm not exposed to events I cannot see and wake to trade each day as it comes. Don't consider myself a scalper, but a intraday position trader. 20 trades today off 4 markets, 17 winning trades all in excess of +10 and 3 losing trades, and now flat and happy