Graduating from Scalping
Transitioning to Longer Term Trading
If done right scalping can be awesome. You pick your spot, wait for the right opportunity, enter the market, and you’re out within seconds or minutes with a profit. There’s a certain feel-good that comes from such a quick profit. But it’s not all roses. There are a few things you must have locked down to even stand a chance.
Nothing amplifies poor discipline like scalping. You hesitate to take that loss and things can turn nasty very very quickly.
Scalping can become addictive. You get a free good rush from making money so quickly and you want to repeat it. So you trade more and more, even when you have no edge which can turn into gambling.
Commissions and spread hurt
A scalper might trade 20-100 times per day. Even if we’re just looking at the spread here, that could be 100pts depending on what you trade just in costs! You need a decent edge to overcome that tailwind.
Scalpers usually trade bigger size too. Even at £5pp that’s £500 per day, £2.5k per week, £10k per month just in spread/coms.
So scalping is a tough game to play consistently for a long period of time. I believe that if you are scalping now you should have an exit plan. A ‘graduation’ if you will.
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Make Your Money and Then Pivot
Pivot to what? Start looking for trades that start out as scalps but could turn into longer-term holds. (Winners only of course…)
Consider planning for when you’d hold a trade.
Eg: If I get long and I think this could be the low of the day, I’ll hold the trade for 15 minutes and then review.
Anything to help you stretch that holding time a bit. No need to bite off more than you can chew right away, just stretch that hold time on certain winners first. Then over time you’ll start to be more comfortable holding trades longer and can morph into a more sustainable strategy.
Because there’s certainly nothing wrong with scalping (Heck who cares what strategy you deploy if it makes money and the risk is managed!) but know it’s super tough to sustain, is very condition dependent, and you want to bulletproof your trading business.
Building more effective strategies is a good way to do it.