Often times, traders who are starting out tend to steer more towards scalping. This is due to the obsession with obtaining larger amounts of money, in shorter amounts of time. While there is nothing wrong with pursuing this approach, it can be risky. But once you understand the risks involved, that risk can be greatly mitigated once you have the right Forex strategy.
First of all, it is very important to understand that for those wanting to get into the scalping methodology, you have to make sure it is inline with your personality. If you are a person who thinks and reacts fast, then scalping is for you. However, if you are more patient and prudent, you may want to move on to longer term trading strategies. Both have their pros and cons. But there is something about scalping the markets that I personally find more reliable, and fulfilling. It’s not about trading this way to get rich, because you will get burned. It’s about trading in a way that is effective and requires much less effort, and a fraction of the time invested, even though the risks are higher in theory. Trying to “flip” a small account to achieve financial freedom will leave you an emotional wreck. But trying to “flip” an account as a means of reaping quick, consistent smaller profits is definitely the way to go.
Honestly, trading is not hard. It’s the fact that naturally our brains want to BELIEVE it is a lot harder than it actually is. We believe that if something is too good to be true, it probably is. This creates a false sense of self-doubt and leads us into a continuous cycle of confusion. In actuality, a trade will either hit a stop loss or take profit- and If you have an edge, a system, money management etc, you WILL make money. It’s the trader in you that makes you fail. Staring at your charts makes you unstable, makes you take profit too early, makes you move your stop loss, makes you revenge trade. It doesn’t matter what system you use, you WILL end up doing those things.
It is natural human behavior to seek relief by exiting a trade too early, because by doing that you remove yourself of emotional burden. Or you’ll completely remove your stop-loss, hoping the trade will come back in your favor while you reach stage 2 hypertension.
Forex trading is a numbers game. It all comes down to probability. It requires VERY STRICT DISCIPLINE. As a matter of fact, I don’t know of anything else in this world that requires more discipline than forex trading. 99% of forex traders as of right now, and potential forex traders, won’t have this attribute.
I myself don’t have it. However, that is why I have completely adjusted my trading habits and tools to fit my personality. I have removed myself from easy access to charts during my live trading sessions. When I see a trade opportunity, I set it and FORGET it. I have an alert setup that notifies me via the MT4 app on my phone when a trade opportunity presents itself. This keeps me from watching the charts all day like watching paint dry. I also have a tool that automatically places my take profit and stop loss the instant I enter a new trader. Then I WALK AWAY. I don’t trust myself; I have screwed myself over countless times and have lost my hard earned money. The solution is to follow a strict, trading structure and STICK to it. Do not allow your ego to make you believe that you are better than resorting to such a practice.
Learn the basics of trading, keep a trading journal, find a profitable system and constantly analyze your trades. You are your own Dr.Doom. You trade against yourself more than the market trades against you. Until you understand that simple concept, you will always fall in a downward spiral. With that being said, let me share something with you:]
10 pips a day is all you need
- Yes, yes you read that right. If you want to scalp the markets, 10 damn pips a day is all you need. The market moves hundreds of pips per day, if you cannot catch 10 measly pips a day in the market, I don’t know what to tell you. Create trading plans and work on something that will yield MINIMUM 10 pips a day, 150 pips per week. If you then want to maximize your R:R, simply trail your winners and ride the trend.
- Who the hell wants to sit down and watch their screen all day? There is no fun in that. We live in a beautiful world. For example, in my UFO Forex Strategy, we trade for an INITIAL take profit of 13 pips (10 pips in actuality, +3 pips to cover cost of spread/ECN broker commissions) with an initial stop loss of 20 pips. Although that R:R may seem iffy right off the bat, we maximize our R:R by riding the trend or ‘trailed’ after our initial TP is hit. Which is what we refer to as “trend riding”. It is a scalping strategy that turns into a long-term hold for maximum profit by using key indicators. This is what I refer to as “THE EDGE”.
- Winning trades= Take the damn money and run. Wake up and repeat. I am no expert but I have simply found an EDGE in the market and this works for me with an average win-rate of 84.6%. Once I’ve gained my 10 pips for the day, I immediately exit out of my MT4 trading platform and focus on other things. Like other projects I may need to finish, or going out and enjoying life with my girlfriend and family.
A Hypothetical Example
Let’s say, I trade a .25 lot size. Hypothetically speaking, trading 10 accounts simultaneously it wouldn’t take that many pips per day. If I receive 5.6 pips a day that’ll be $500 a week. 11 pips a day is $1,000 by the end of the week. Now of course, this is if I was the type to lock in my initial take profit and exit as soon as it is hit, and be DONE for the day. I’m not even factoring in riding the trend for max R:R. In this scenario, I’m not in a drag race to catch 100-200+ pips a day like most other people. The most important thing I am focused on is maturing my relationship with the market, and familiarity with a particular pair in which I study it’s moves on a daily basis. It’s important to understand her and remain committed to studying her every move 2 to 3 hours a day, just as you would a partner in a real life relationship.
The greatest asset this market can offer you is to give you the money, but she’s only willing to do it if you spend time with her. If not, she’s going to take your money. If you take the time to really get to know the market, you will be rewarded every time.
Why my UFO Forex Strategy is so simple yet highly effective
With my UFO Forex Strategy, what I do is look at ONE single pair. Yes, just one! That pair is GBP/JPY. Because I have traded this pair religiously for the past 6 years, I know this pair as well as I know the engine in my car. Every day, after 8pm I quickly scan the GBP/JPY pair for possible setups. However, I ultimately wait for my mt4 mobile app to alert and ping me when a trade opportunity persists, so that way I am not glued to my charts for long periods of time. I always use multi time frame analysis to see how the pair is moving in a certain direction. What this does is provide me directional bias for when the asian session ends and the london session occurs (breakout) which accounts for like 90% of my trade entries. If I am notified of a good setup, what I’ll do is check a number of indicators and filters as part of my UFO Forex System to make sure things line up properly. My secret however, is that my entries are always on a lower time frame, while I use the next subsequent 2-3 time-frames to predict trade direction- as the larger time-frames foretell the direction of a swing movement before it appears on the lower time-frame. This enables me to enter a swing or breakout early on.
I also make sure to never trade 20 minutes leading up to a news event, and 20 minutes after a news event has ended to ensure that I am avoiding dangerous market volatility. I also never use trend lines, pivots, resistance, support, etc. because I like to keep things as simple as possible since it’s already brain busting work. What I use is a set of very intricate indicators to help me detect trend strength, correlation and directional bias. These are what I call, “predictive” indicators. As with all predictions, they are normally never exact, but often used to shed light on what is about to occur soon. If you have any more questions about the UFO Forex system, please visit my FAQ here.
This is my trading style. And you know what? IT WORKS.