The Differences between Scalping and Trading

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Video Transcription:

Hello traders welcome to the scalping course and the first module, Introduction to Scalping. In this lesson we’re going to go through the very wide difference between scalping and trading. And when we’re talking about trading, it doesn’t matter if we’re talking about day trading, medium-term trading, or swing trading. Because we are going to talk about the psychology differences between a trader and a scalper. And we’re not going to go through many details into the difference between trading styles but what a scalper needs as psychological background in order for him or her to be profitable in this game.

So we’re going to start by just doing a simple difference chart between scalping and trading. And we’re going to innumerate the main difference between the two. So the first difference that we can think of, and it’s the more obvious, is that scalping involves a fixed short-term move in position. This means that whenever we take a position we are focusing on the short-term moves. And we have a fixed risk and a fixed profit taking level. Whereas in trading, the positions go from medium to long-term. This means that when we take a trade and we are focusing on a medium to long-term trends our profits– even though our profit taking levels can be fixed, we are not focusing on short-term moves. And we are not going to be ticks out or stops out on trading stops on corrective moves. We are going to trade through the actual daily noise.

Scalping vs. Trading

When you are scalping, you are mostly following the trend. And this is because it is much easier just to trade with a trend and because we are looking for fast and important moves we are going to find them when the market actually pulls back before continuing with a trend. So we’re basically going to be buying dips and selling rallies when we are scalping, and when we are trading, or when we are swing trading, or medium-term trading we are going to take various steps of positions. And the positions we are going to take depends from trader to trader. But we are not only going to take our trade following positions, we are going to take stop and reverse positions, end of cycle positions, and mid-reversal positions. And I mean we could do the same when we are scalping but in this course you are going to learn that it is very hard to control your feelings when you have three or four losing trades in a row. That’s why we are only going to be looking to trade the better setups, the highest probability to give us a profit.

Now the third thing that we can think of is the hold time of a trade. When we are scalping, you hold your trades from a few seconds to minutes. And that’s it because we are looking for a few ticks to the upper to the downside. Maybe a few pips if you’re trading Forex but that’s it. We are not looking for that 100 pip winner. And when you are medium-term trading or swing trading, you are looking for that trade. So your hold time will be from hours to days. Now when you’re scalping you are focusing on the tick charts or on the range charts. And sometimes the one to five minute chart. And in this course you’re going to learn how to use all of these tools. But for the purposes of this lesson, we are just going to point them out. So when you’re scalping you are trading from the tick charts or the range charts and sometimes the one to five minute charts. Okay? And when you are trading, normally you trade from the 50 minute to the daily charts and it depends of course on your trading style if you are just day trading or if you’re swing trading.

The trading personality or the trader personality for scalpers should be a person that is alert and precise. And when we’re talking about traders or long-term traders, the most common or the most important feature of a trader personality is patience. Why? Because when you are scalping, I mean, you are not going to be getting in and out at random spots in the market. Yes, you’re going to be patient for a price to get to your spots. But you need to be alert and precise because the seconds matter and the ticks matter. If you miss the move by a few ticks, you are already too late. And when you are trading, well price takes longer to get to your spots or your entry areas. But if you miss the trade by maybe 20 pips it doesn’t matter, you can still get in. You’re just going to be adjusting your position size. But that doesn’t happen when you’re scalping. When you’re scalping, you have to be very precise on your entries because you want to get always the better risk to reward ratio possible.

Now, the stress level when scalping is medium to high. This is because when you’re scalping you spend less time in front of your computer. Okay? But the time you spend in front of your computer is a little bit more stressful than when you are day trading or swing trading. And the reason is because you have to be very precise and sometimes you are going to miss those entries by a few ticks and you have to be very disciplined not to take those trades. And maybe you are going to have three trades lose or you are going to lose three trades in a row. And that is going to stress you a little bit. But as a scalper you need to learn how to control that.

And on the other hand, a trader’s stress level is low to medium. And this is because you don’t take as many positions. You do spend more time in front of your computer because the price takes longer to get to your spots. But once you get on a trade it’s either win or lose. And you don’t have to worry about having too many losing trades in a row because you don’t take as many positions as a scalper.

And the profit taking mentality when you are scalping is small, multiple, and fast. This means that you are looking for small moves, for small and fast moves, and multiple taking profit levels. We are going to teach you how to set your positions in order to acquire the profit taking mentality of a scalper in this course. But when you’re trading, the profit taking mentality is few with longer holds. This means that you are going to hold your trade until it’s no longer valid. Okay? When you’re scalping, the validity of the trade doesn’t matter as much when you take it because you are looking just to hit those targets. But when you’re trading, you are looking to hit those targets, but you are also looking to hold your trade because if your trade idea is still valid, you want to make money out of it.

Scalper Psychology

Okay, so these are the main differences between scalping and trading. Now let’s go to the actual scalper psychology. And there’s a myth. New trader thinks that scalpers make many small trades in rapid succession. New traders think that scalpers are trigger happy and can be in and out of the same market on the same move numerous times. This is wrong. Okay? Short-term trading does not equal smaller trades. Smaller trades means smaller positions means smaller profits. And this is not what we’re looking here. The frequency of trades is a result of the market and its setups, not the system used to scalp. This means that if you have a setup, you’re going to take it and you’re going to be taken out on your profit levels, or on your trading stops. That’s it. It doesn’t mean that you are going to get in again once you are taken out.

Let’s go through the scalper psychology after everything we have learned so far. Of course, a scalper needs to be cool-headed and patient. A scalper needs to be precise with it’s entries. And a scalper needs to be disciplined in following his or her daily routine and rules. And discipline is key here because most of you scalpers out there that just jump into this style don’t understand the psychology needed behind this style. And they end up revenge trading and blowing a very large percentage of their account. And revenge trading means, for instance, when we take a long position and we get stopped out on a loss. Then because we got stopped out on a loss, we think that the market is going to go down and we go short immediately. That is revenge trading. And we are going to learn how to avoid that in this course.

And a scalper must have a defined daily stop-loss and targets to be profitable. This is how you’re going to be able to avoid the dangers when scalping. We are going to teach you how and when to quit whether you are at a loss on the day or at a profit.


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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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