By Steve Rising
Priority number one for the Forex trader is to preserve his capital. Priority number two is then to grow that capital.
These two priorities are often overlooked. Most traders believe their first priority is to just fire off trades hoping the end result is a profit.
The novice trader believes he should always be in the market. Meanwhile the professional waits for high probability conditions to develop before placing a trade, understanding that a day without a trade simply means he has opted to preserve his capital.
Fundamentally there are two styles of trading: trend following and scalping. The trader who opts to use a trend following technique typically will have more losing trades than winning trades with the idea that the winning trade will cancel out the losing trades and ultimately the trader ends the year with a profit. The problem for most traders is keeping a positive attitude during the losing trades waiting for that positive trade to happen.
With a scalping technique, the trader learns to trade with a high level of accuracy, meaning you do not trade as frequently, but the trades you make end in a profit.
The scalp trader spends more time on the sidelines waiting for a planned solid trading setup. When the setup develops, price action moves in a positive direction quickly. Price rarely turns against him after entry. Achieving a profit is simple and quick. The key difference is, the scalp trader prefers to wait for an exact condition to develop before trading.
An added benefit for the scalp trader is that he can use a very tight stop, unlike the trend following trader. In a solid scalping technique the trader can use a 10-pip stop, whereas in trend following he will have to risk 100 pips or more with his stop.
The bottom line is, most folks prefer scalping because they enjoy the process of achieving a number of profitable trades in a row.
Here are 3 simple steps to becoming a solid scalp trader.
Step 1: Learn the common characteristics of Forex price action. The characteristic at the top of the list is that price action changes direction frequently.
Step 2: Learn to plan all of your trades. The plan includes both entry point and exit point. Remember the trader that learns to determine their profit target on a planned set up prior to taking the trade makes 10 times more over the same period of time than the "let it ride trader".
Step 3: Focus on the quality of your trade, not the quantity of your trades. One solid net 10-pip trade can equal virtually any profit target simply by trading more lots.
The reality is, it defies common sense why one would want to trade with greater risk using a large stop while enduring the pain of frequent losing trades waiting for that big winner to happen.
Meanwhile the scalp trader may trade less often but the trades he makes are high probability trades that result in consistent profits.
Another way to look at it is which is easier, finding a profitable 10 pip trade or a profitable 50 pip trade? Obviously a net 10 pip profit is easier.
Here is a simple winning formula: 1 net 10 pip trade with 5 lots equals $500. Do that once a day 4 days a week and that equals $2,000. Spread over 50 weeks and that equals 6 figures.
The benefits of trading only high probability conditions with a scalping technique far outweigh trading more frequently with a trend following technique hoping that you end the year with more money in your trading account than you started with.
Learn to trade with the preserve and grow capital mindset as opposed to the lose capital, now try and get it back mindset.
To learn more about scalp trading visit http://www.TheForexTradingInstitute.com
These two priorities are often overlooked. Most traders believe their first priority is to just fire off trades hoping the end result is a profit.
The novice trader believes he should always be in the market. Meanwhile the professional waits for high probability conditions to develop before placing a trade, understanding that a day without a trade simply means he has opted to preserve his capital.
Fundamentally there are two styles of trading: trend following and scalping. The trader who opts to use a trend following technique typically will have more losing trades than winning trades with the idea that the winning trade will cancel out the losing trades and ultimately the trader ends the year with a profit. The problem for most traders is keeping a positive attitude during the losing trades waiting for that positive trade to happen.
With a scalping technique, the trader learns to trade with a high level of accuracy, meaning you do not trade as frequently, but the trades you make end in a profit.
The scalp trader spends more time on the sidelines waiting for a planned solid trading setup. When the setup develops, price action moves in a positive direction quickly. Price rarely turns against him after entry. Achieving a profit is simple and quick. The key difference is, the scalp trader prefers to wait for an exact condition to develop before trading.
An added benefit for the scalp trader is that he can use a very tight stop, unlike the trend following trader. In a solid scalping technique the trader can use a 10-pip stop, whereas in trend following he will have to risk 100 pips or more with his stop.
The bottom line is, most folks prefer scalping because they enjoy the process of achieving a number of profitable trades in a row.
Here are 3 simple steps to becoming a solid scalp trader.
Step 1: Learn the common characteristics of Forex price action. The characteristic at the top of the list is that price action changes direction frequently.
Step 2: Learn to plan all of your trades. The plan includes both entry point and exit point. Remember the trader that learns to determine their profit target on a planned set up prior to taking the trade makes 10 times more over the same period of time than the "let it ride trader".
Step 3: Focus on the quality of your trade, not the quantity of your trades. One solid net 10-pip trade can equal virtually any profit target simply by trading more lots.
The reality is, it defies common sense why one would want to trade with greater risk using a large stop while enduring the pain of frequent losing trades waiting for that big winner to happen.
Meanwhile the scalp trader may trade less often but the trades he makes are high probability trades that result in consistent profits.
Another way to look at it is which is easier, finding a profitable 10 pip trade or a profitable 50 pip trade? Obviously a net 10 pip profit is easier.
Here is a simple winning formula: 1 net 10 pip trade with 5 lots equals $500. Do that once a day 4 days a week and that equals $2,000. Spread over 50 weeks and that equals 6 figures.
The benefits of trading only high probability conditions with a scalping technique far outweigh trading more frequently with a trend following technique hoping that you end the year with more money in your trading account than you started with.
Learn to trade with the preserve and grow capital mindset as opposed to the lose capital, now try and get it back mindset.
To learn more about scalp trading visit http://www.TheForexTradingInstitute.com
Steve is a seasoned professional trader and trainer with over twenty-five years of experience in the equities, futures and FOREX markets.
Article Source: http://EzineArticles.com/?expert=Steve_Rising 
0 comments:
Post a Comment