Scalping : Advantages And Disadvantages!

Discussion in 'General Trading Discussion' started by TraderAnalyst, Sep 10, 2019.

  1. TraderAnalyst

    TraderAnalyst Senior Investor

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    One of the main advantages of scalping is you get to make small profits in a short time span. At the same time the risk factor is less as compared to long term trade. But there are disadvantages also that the transaction cost increases when you make so many trades.
     
  2. longtermbull

    longtermbull Administrator Staff Member

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    The biggest disadvantage is that you sell too soon and miss out on a bigger profit but thats life. Useful way to limit loses if done correctly.
     
  3. J_C_Anderson

    J_C_Anderson Senior Investor

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    Scalping is one of the most popular trading styles due to its advantages that are imporant for newbie traders. The main advantages of scalping are:
    - small capital requirements (you can start scalping evenwith relatively small initial deposit),
    - no need in deep fundamental analysis (for scalper it is enough to understand the fundamental background in general because most of the trading decision would be based on technical analysis),
    - flexibility (experienced scalper could find trading opportunities each day, thus, scalping is the most consistent trading style).

    For sure, scalping seems to be quite time-consuming, but there is an alternative - trading automatization. Scalping strategies could be easily automated because most of them are based on various technical analysis elements, such as patterns or indicators, so they have detailed rules describing each step. In this case, trader needs only to create a bot executing trades strictly in accordance with these rules. At the same time, it is important to check the performance of the strategy first to make sure it is profitable itself. The easiest way to do this is to use special backtesting software like Forex Tester that allows trader to test his strategy or idea on historical data. Such software executes simulated traders on the data for a few years, provided by the broker, and summarizes the results, that provides trader with important understanding of the performance of his strategy in long term perspective. When the strategy has been properly tested, it could be easily automated and transformed into EA that would execute trades instead of trader, who will have enough free time to develop new strategies.
     
  4. longtermbull

    longtermbull Administrator Staff Member

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    One of my concerns is that unless you stay focused, one bad trade could wipe out a number of smaller profits.
     
  5. Phillip Mark

    Phillip Mark Well-Known Member

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    So what do you think are the disadvantages actually?
     
  6. Andris

    Andris Active Member

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    What do you mean by increase in transaction cost. I use a broker that offers fixed commission on each trade, so it does not matter how many trades that you open. The only disadvantage of scalping is the long time you spend sitting and waiting for when to enter the market because you know you'll have to pull out in 120 seconds or less.
     
  7. Duong

    Duong Active Member

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    When scalping it is hard to set SL and TP, knowing you are going to pull away anytime soon. But it is important to set SL and TP when you are not ready to be around to close those threads.
     
  8. Phillip Mark

    Phillip Mark Well-Known Member

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    Actually there is no time to set SL and TP. The use of robots is the best way to scalp. I love scalping EAs
     

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