Cost of forex scalping versus swing trading
Why Tflow® is not a forex scalping technique
We don’t scalp the forex market with Tflow® Forex Strategy. In fact, we have always emphasised on ‘Stress Free Forex Trading‘, ‘Earn While U Sleep‘ and so on. Of course we said things like, why we should take time off trading to take care of our family or even to do nothing from time to time. But Binni puts it across most appropriately:
Imagine a trader is a machine. This machine trades 10 times in an hour. Will machine wear out faster than another machine that trades once in a day? I trade once a day. I aim for 100 pips each time. Definitely I feel happier than another trader who trades 10 times an hour who make the same amount.
Sitting down to ‘click click click’ is definitely costly in terms of happiness and stress but there is another way to look at it.
Which is more expensive: scalping or swing trading?
Lets do this simple exercise. First let’s target 250 pips of profits per week. Works out to 50 pips per day and is a reasonable achievement. Second, let’s reach 250 pips with 1 trade or as many as we like but each trade will cost 2 pips.
|# of trades to reach profit 250 pips||# of pips profit per trade||Cost of trading in pips||*Actual achievement in pips||Cost as percent of actual achievement|
* Actual achievement = 250 gains + cost of trade
This table shows that:
- Profiting 250 pips on 1 trade is the least costly.
- A trader who wants to make 250 pips profit over 25 trades has to deliver actual performance of 300 pips gain (50 pips go to the spread).
- If we turn the logic around, when making many small scalping trades, cost of trading makes losses higher too.