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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 tradeCost of trading in pips*Actual achievement in pipsCost as percent of actual achievement
125022520.79
212542541.57
1025202707.41
25105030016.67

* Actual achievement = 250 gains + cost of trade

 

This table shows that:

  1. Profiting 250 pips on 1 trade is the least costly.
  2. 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).
  3. If we turn the logic around, when making many small scalping trades, cost of trading makes losses higher too.
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Traders need to weigh getting it right once or taking 3 steps forward 2 steps back

Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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2 thoughts on “Cost of forex scalping versus swing trading”

  1. Kent Wei Chia Cheong says:

    Hi Tiong Hum,
    Actually i feel that Tflow still is also great for scalping but it needs another set of trade managment techniques that is optimised for scalping to be used in conjunction with Tflow.
     
    Yesterday my friend (he’s a scalper) jio jio me to a trading session at night till 3am. Yesterday there was no news release for the night and so i expected a quiet night. I am surprised to see how the market respected the Fib-R, supp/resist levels and the 1234 pattern taught in the class in the 5 mins chart.
     
    However, i wouldn’t want to do scalping as my main style anymore as it is time consuming. I have tried it in the past years and wasted a lot of time. I’ll do it only if i wanted some time alone or wanted to study the market action. But i do think that every trader to at least study the short term market to understand the market better.
     
    Just want to share my thoughts here.

    1. Soh Tiong Hum says:

      Hi Kent, I totally agree with your observation that 1) Tflow® is usable for scalping 2) for scalping, it needs a different set of trade management 3) Fibonacci, support resistance levels as well as the 1-2-3-4 setups work on lower time frames such as 5 minute charts.
       
      However Binni and I feel that scalping is not the right approach to trade forex for someone who is looking at the long term horizon in terms of lifestyle. We realise that there are individuals who are keen to adopt scalping but this is not the position that we want to be associated with.
       
      For learning and self development, yes I agree that you should take a look at price action on lower time frames. The best way to grow is to remove boundaries.

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