Scalp trading for beginners: Everything You Need To Know

in this video you will learn everything you need to know about scalping and the scalping strategies you will find out if this type of trading is suitable for you and also what are the pros and cons when scalping but mainly you will learn how to build your own scalping strategy so make sure to watch this video until the end to find out more first things first what exactly is scalping maybe most of you already know or have tried scalping but it's quite important to know what exactly is this type of trading basically scalping means trading based on technical analysis that we do on the lower time frames all trades last for a few minutes and profits tend to be just a few pips and i would say this is the most simplest explanation for scalping what you have to pay attention to is that this is again a method of trading based on a technical analysis and not trying to catch a few pips in a matter of a few minutes and obviously expecting to make consistent profits that way you should have a trading plan based on which you make your entries or you exit your trades but before you start sculpting well you have to decide if this is even suitable for you is this your style of trading so let's go into details the majority of newbie traders begin with trading on the lower time frames and the main reason for that is because they can't wait for their trades to play out they're impatient and insecure in their trades and so that's why they can't let them fully develop but as soon as they see that their position goes into say 10 20 pips of profit they close it immediately but i would say that this is one of the biggest mistakes because it's all good when you make profits no matter what the time frame is but when their position goes against them well then instead of closing out this trade after a few minutes again now they turn it into a long term trade because no one wants to take a loss right and so that should make you think if scalping is even suitable for your style of trading okay let's carry on i would say the first thing to decide is how much time have you got to spend looking at the screens because although a lot of people would think that scalping takes less time than swing trading well that's not necessarily true and also most people think that if they have let's say a couple of hours each day to spend trading they can do that on the lower time frames where they can find more opportunities enter more trades and make more money but that's where most people get it wrong because what you should do is if you have limited time for trading then it will be better to spend that time analyzing the higher time frames therefore to know what to expect in the long term rather than trading on the lower time frames and look for trades only in those couple of hours that you have available why am i saying that the main reason is that you can't tell the market when you're available to trade right if you have an hour or two in the middle of the day you would expect that you can trade in those two hours but that doesn't mean there will be any opportunities at that time therefore any positions that you will be looking at most probably won't give you the expected results that's why you need to have free time if you want to be trading on the lower time frames normally if you're trading throughout the european session then that means being active from around 7 8 am gmt time well actually a little bit before that since you have to prepare your analysis for the day ahead and then basically spend a whole working day on the charts and most of that time won't be trading but actually waiting for the right moment to get a valid entry signal also the second important thing that you need to know before you start scoping is what are you gonna do after entering a trade are you able to take quick decisions and that's why you need a strictly built trading strategy that tells you when exactly to enter a trade and when to exit one i mean what are they gonna do if price goes in your favor and also what if it doesn't you have to be prepared for those moments and to know what to do because when that happens while on a smaller time frame that means in the matter of a few minutes your trade could be closed that's why in most cases scalping isn't the best option for new traders because they don't have that much experience to make quick decisions while in a trade that could work better with someone who's already been trading for a while on the higher time frames and someone who's used to making those decisions i mean experienced traders that have a profitable trading plan and last but not least they have the confidence to take the right decisions because that's pretty much what you need to achieve consistency in the markets plus of course patience and that takes us back to what i said earlier you must have enough time when scalping because if you only have a couple of hours a day you can't expect to find decent opportunities during those couple of hours only because once the training session begins there will be times where you will have to wait for a couple of hours before you get an entry signal then you need more time to let this trade reach your target and then start looking for another one because you will be trading on the lower time frames that doesn't mean you will be entering a trade as soon as you open up the chart what i see over and over again is people who have a full-time job and let's say they only got one day off during the week and that's exactly when they want to trade now you can imagine at this point they're just entering trades because they feel like they must be active as it is their only available time during the week and most of the time those trades are not profitable so before you start scalping you should be aware of all this information and then make a decision whether you want to do it or not we're gonna move on now to what are the pros and cons when scalping before that though make sure to subscribe to this channel so you don't miss out any of our future videos and also comment down below how much time do you spend analyzing before you actually enter a trade so more people can understand how this actually works so let's begin with all the advantages that scalping presents to us those are the reasons that more people look to get involved in this type of trading and most probably the reason why you're now watching this video the first thing is that you tend to spend less time in a trade again back to what i said earlier we don't have the patience to stay in a trade for a longer period of time and why is that well because like i said the reason is lacking confidence in our trading and instead of us letting our trades run for a few days and collect as much profit as possible we prefer to close it after a few minutes and make significantly less profit this way we don't make as much money on a trade but we have a winning trades more often which gives us more satisfaction the second one is having a tight stop loss on each trade and that's something that i don't understand because our stop loss doesn't determine our risk exposure our risk is determined by the loss size that we use on each trade but still the majority of new traders won't place their stop loss 100 pips away from current price levels but only up to 10 15 pips let's say but again that doesn't reduce their risk and in fact more often than not stops that are 10 15 20 pips are more risky than a stop of 100 pips but anyways i've noticed that more people prefer to use tight stop losses and so that's why they look at scalping the third advantage according to some is that you will be entering a few trades per day when someone starts trading they want to get involved in as many trades as possible because that makes them think that's how you make more profits right when the reality is that you can make the same amount of profit when trading on the higher time frames as well then you will be entering less trades but at least they won't be as risky and that desire to enter more trades makes us think that trading on the smaller time frames is better for us moving on we are looking at potentially more profits but that's not always the case like i said most people that are looking to trade the lower time frames are using tight stop loss but then expecting to gain a lot more in profit so basically using a 15 pips of stop loss and looking for a one to four one to five race to reward ratio and even more well that sounds great but when they're in a position and price starts going in their favor the first thing they do is to close their trade while they're in profit and then also the flexibility to choose your own working hours that depends on the trading session that we've chosen to trade during this trading hours you can be active and outside of this trading session you might not have to spend time doing any analysis but again you can't just pick a couple of hours when you want to trade and do that you have to be actively looking at the chart and wait for the right opportunities and the last one is the possibility to make profits on small market moves there are days where the market isn't making any big moves and it's mostly trading sideways that means on the higher time frames you won't be able to find any entries and that could last for a long period of time especially if there will be any big news or elections for example but this is a period of time where you can find trading opportunities on the lower time frames so basically all of those things that we just mentioned are what attracts new traders to scoping now if there is something else that you can think of something that i forgot to mention then leave a comment so i can give you my point of view now let's see what are the disadvantages with this type of trading the first one is that it takes a lot of time and this goes against the expectations of most new traders but is the truth they think they can trade for an hour each day make some good trades and therefore make some profits well like i said it actually takes a lot more time than that you have to be looking at the market at the same time every day for a few hours wait for those good opportunities and once you've made an entry then you have to patiently wait for this trades progress the second one is the negative race to reward ratio i mean if we're gonna be looking for targets of 10 15 pips then there's no way we can place a stop loss which will be in positive risk to reward ratio compared to our take profit for example if our take profit is 10 pips then we can't place a stop loss of 3 pips right because as soon as we open and trade them we are negative 1 1-2 pips because of the spread and obviously if price goes against our entry with another couple of pips then our trade will be closed this is different when it comes to swing trading however it doesn't mean that you can't be profitable if you're scalping but it just means that we have to have a greater winning ratio something like 70 80 and maybe even 90 percent of our trades must be profitable the third point here are the high costs and that's something that a lot of people underestimate what i mean is the spread and the commission that we pay to our broker even if there is no commission charges to your brokerage then that means it's already included in the spread so when we make more trades that means we are being charged more often if you enter a trade to gain 10 pips and then you pay one pip spread that means you pay 10 of this position to your broker but if you enter a hundred pips trade and you pay one pip to your broker then that's only one percent charge that's what i mean when i say that there are higher costs when trading on these smaller time frames also when you're building your scoping strategy you should wisely choose which instrument you're going to be trading and what broker you're going to be using so you don't have to pay such a higher charge depending on what instrument you want to be trading and also what leverage you're going to be using we can help you out with the right choice of a broker [Music] okay the next thing that we'd like to talk about is the strong effect that news have on the smaller time frames this problem could be avoided if those news are from the economic calendar and we are prepared for them basically we can have our stopwalls at break even if there will be any news later on that day or maybe we don't want to trade at all until we have a clear situation again but as you probably know there are also unexpected news or even tweets that can move the market with let's say 40 to 50 pips and what happens then is market usually continues in its main direction and those kind of news won't affect price that much on the higher time frames compared to the 5 and 15 minute chart for example also something else that you should be aware of is the stress the stress to be participating in many positions on a daily basis of course that depends on your own character on the strategy that you're using on your capital and so on but that's also something that you have to consider and not underestimate and i'm telling you this from my own experience the stress that i go through when i'm trading on the lower time frames is much more than if i'm trading on the higher time frames and that's also one of the main reasons for traders to give up on scoping at the end of the day the profit that you make when scalping you can also make with a little bit bigger account and less risk on the higher time frames as well and last point here is the higher unpredictability i think that a certain move which is on the one hour or the four hour chart is easier to analyze than the ones that are only five and fifteen minute time frames because sometimes price action on the lower time frames doesn't make any sense and it's just what we call a market noise again if you think we've missed something here don't hesitate to put it in the comments down below now let's have a look as to how to build our own scoping strategy now since you know what are the pros and cons with scalping what is the next step choosing what instrument you're going to be trading we suggest that you only choose one instrument so you can practice your strategy and find the best settings that you can later on apply to other instruments as well and like you already know scoping takes a lot of your time and if you're not used to making quick decisions then you won't be able to do it across a few pairs at the same time right and also you should look up at the costs of this instrument basically currency pairs with high spread are not preferable when doing scalping normally a good choice would be the major pairs like euro dollar pound dollar dollar yen gold and some others as well but all of them will have different costs depending on the broker and that's why i'm saying you could speak to us in order to find the best broker and instrument that you can choose once you've chosen a certain instrument then you have to decide when you will be trading and you have to do a little bug test and see when you have bigger moves for this currency pair that you've chosen normally it would be on london market open and then u.s market open and the best time not to trade is when both these sessions aren't active i mean after 5 6 pm gmt time that's when spreads are wider and during the night or even worse so if you're scalping that's when you will have higher costs on your positions so like i said on london open at 8 am there are moves that could set up the market direction for the rest of the day and then on u.s open around 2 3 p.m there's more volatility as well but that will mostly depend on your trading strategy so let's carry on now something that you have to do no matter what time frame you're trading on is to identify what is the main trend on the higher time frames that way you can be trading in the direction of the trend therefore to have a higher winning ratio and so usually you have to know what is the trend on the two higher time frames above the one that you're trading on for example if you're entering trades on the five minute chart then you want to be looking at the 15 and 30 minute charts as well me personally i think you should know what is the trend on the one and the four hour time frames but at least the two time frames above the one that you're trading on once you've identified the trend on the higher time frames then you are looking for your significant levels those are the basics of trading you have to know what is the trend and where are the support and resistance levels as well basically those levels of which you expect to see price next and that's why looking at the higher time frames will give you a broader picture of the market and you will know what is the potential in a certain situation that way you will filter out a lot of your trades possibly not entering most of your losing positions which then will improve your results and once you know what is the main trend where are the support and resistance levels then you can move on to adding an indicator to help you out with your entry point if you're not confident enough that you can take a decision based on trend and support and resistance levels only then you can use an indicator that will give you an entry signal then later on when you become more experienced you can switch it off and not use it anymore but at least in the beginning is something that will give you some extra confirmation before you enter the trade the one that i've used the most while scalping is called stochastic it's an indicator that i've used to confirm my entry but it was also used together with levels and trend from the higher time frames on this indicator like many others you can change the settings so it fits perfectly with the instrument that you're trading as well as the time frame and also everything that we just mentioned only works if you have the patience to wait for a decent setup let's say you are up at 8 00 am you've done your analysis then a couple of hours goes by and there is still no trading opportunity that means you will be looking at the charts for two hours without entering a trade and you must have the patience and the discipline to wait for that right moment and not open up a chart at 8 a.m

and then by half 8 you've already got 5 trades on and now you're panicking because you don't know what to do especially if they're going against your expectations you have to do your job before the entry and if everything is done properly then there will be nothing to worry about and of course something else very important to avoid stress when trading you should always use proper money management with your strategy and not expose yourself to too much risk i mean money management is crucial part in trading and when you're scoping i would say it's even more important because the mistakes that you do when calculating your lot size will cost you a lot more considering that you will be entering multiple trades per day like i said it's not just trading strategy that you need but money management on first place because we should consider what is the risk before considering how much we can potentially make on a certain trade then let's say you've made an entry at 10 am now you have to wait and see what is the trade progress at half 10 11 o'clock depending on market conditions but you have to be prepared to make a decision by looking at what size does price action give you then at one point your trade will either hit stop loss or take profit or maybe there's no point in being in that trade anymore and you can close it manually it doesn't end here though now you have to analyze your results which could be done outside of the trading session but it has to be done some people actually prefer to do it at the end of every week when they're not looking for trades but have all the time to analyze the trades they've taken throughout the week that's why you can add comments to your trades or write down somewhere why exactly did you enter this trade and so on this way you will see if you're doing any systematic mistakes and if you're not missing any of those steps that we went through in this video if you want to find out more about building a trading strategy based on everything i talked about including risk management and trading psychology you can have a look at our courses in the description down below in this video we went through what exactly is calping is it suitable for everybody what are the pros and cons and how to build our own scoping strategy if you found this video helpful give us a like and leave a comment telling us why scalping is or isn't suitable for you we wish you all a successful trading thanks for watching please don't forget to watch our last two videos where you can find more valuable information check out our channel for more trading related videos i wish you all a successful trading and i'll see you next time

2021-05-31 13:42

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