STOP FREQUENCY
You’ve probably guessed by now that getting stopped out is common when
scalping. It can get aggravating at times so you need to be mentally prepared
for experiencing frequent stops. Sometimes I swear it’s like I’m psychic or
something for setting my stops to the exact pip to get stopped out just before
the market dramatically turns around and soars into the profit zone. When
you first start scalping you’ll likely find that these stops may drain you
emotionally but after a experiencing them quite a few times you’ll learn to not
get upset by getting stopped out for loss.
You need to develop the skill of ascertaining when to enter a trade that will
likely go in your favor. Then the objective is to quickly move up your stops
to reduce loss and then to secure a profit ASAP. Often you’ll be stopped out
or will voluntarily exit for small 5 pip profits. What you strive to do is to be
cunning and when appropriate leave the trade enough breathing room (not
suffocating it by trailing your stops too closely) to potentially catch some
larger pips (for scalping I consider anything over 20 pips to be a large trade –
scoring 100 pips on a single trade is spectacular).
When looking at risk/reward ratios it soon becomes apparent that on trades
that exit with a 5 pip profit your risk/reward is 2:1. Obviously this isn’t
desirable. If all you feel you can capture is 5 pips (or you simply get stopped
out for 5 pips) then let that be good enough, but what you need to strive for
are sufficient amounts of larger trades (20+ pips) to account for the bulk of
your profits. Needless to say that some days will be better than others (and
some days you’ll even end up a net loser).
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