Scalpers or traders who are into short-term trading need to use the best indicators to get an edge. Traders will rely on these indicators to make sense of the direction the market is trending. In this article we’ll be comparing scalping trading with trend trading.
DynoTrading aims to make day trading easier by only using the method of Price Action and Trendlines. Price action is a trading technique where a trader decides based on the price movement in the chart, while trendlines are one of the most useful tools in trading. These indicators give the trader an outlook of the direction of a price over a period of time. These two are the only factors that are important when it comes to trading. DynoTrading offers DynoBars which is an intense custom bar type which filters out noise and removes the price distortions in the market, making it easier to see the trend in the prices and allows a trader to decide when to buy and sell.
Short-term traders will greatly benefit from the clean and organized data which DynoBars promises. However, is scalping the better trading strategy or the suitable strategy for you?
Before discussing trend trading further, let us talk about what scalping is and what are its pros and cons as a trading strategy.
What is scalping?
Scalping is a short-term trading style wherein traders make profits from small price changes. In using this strategy, traders would often place tens to hundreds of bids multiple times in a day. Scalpers aim to make profits with these small trades throughout the day and that these profits will add up to big numbers at the end of it. Usually, traders using this strategy are only in the market for a few minutes at a time.
In scalping, it is required to have high leverage and high trading volumes in order to have reasonable profits. It is a risky strategy since one loss can erase all the other profits collected.
Is scalping profitable?
The success of scalping lies in the ability of the trader to spot the strengths and weaknesses in the market in order to execute a strategy that would result in profits. Even if it is a short-term investment, it can still be profitable as long as the trader earns more pips than what the broker charges. Coordinating and discussing terms about the commission and spread. Having a strict exit strategy will also help a trader to limit their losses.
The key to scalping is that the trader needs to be alert at all times and make quick decisions in executing the trade. The profit in scalping stems on how a trader follows his trading system dutifully.
Is scalping a good strategy?
One should only use scalping as a trading strategy if they are willing to put their time in analyzing the market and monitor any price changes for the whole day. Beginners who would like to try scalping for the first time should learn the one-minute scalping technique. However, discipline and patience is highly needed for this trading strategy. It may sound like it is easy, but great concentration is required since it is a demanding trading style. If spending hours in front of the computer does not sound appealing, scalping might not be a suitable trading strategy since it requires continuous attention to all price fluctuations in the market.
Is scalping Illegal?
Technically, scalping is not illegal, but there are brokers who don’t support this type of strategy. Why? Because it makes it hard for them to make profit if they go against a trader in a market. Traders have the upper hand against brokers since they control when to get out of the market or when to cut their losses.
However, there are still brokers who allow scalping so it is better to ask them first. Take note that a scalper should choose a broker who has the lowest trading spreads and has no restrictions. A good broker also needs to provide fast price feeds due to the fast-paced environment of scalping.
Why do traders fail despite using the best scalping indicator?
Traders fail at scalping because they think that this strategy is the easiest way to make a profit in trading. They think that it does not require too much thinking when in fact, it needs speed, accuracy, and intensive planning. Decision making plays an important role for scalpers or day traders. A lot of people, mostly those who are new to trading, often mistake scalping as easy due to its short period of time.
People who mostly use scalping as their primary trading strategy are those who are impatient in long-term trading. This might be another reason why traders fail at scalping because they tend to think that patience is not required. On the contrary, patience is greatly needed when it comes to this trading style. Another reason is failing to set a stop loss or stop limit. Traders who don’t set a limit would often find themselves chasing their losses.
Scalping Indicators vs DynoBars: The Math
Now that scalping has been defined, did it answer the question if it is the suitable strategy for you? Since it is trading style that requires executing many trades in a day, it requires intense concentration.
Trend trading on the other hand requires the trader to execute a few trades to try and catch the trend for the day. Unlike in scalp trading where trades are only done in a matter of minutes, trend trading lets you establish position along price movements moving in a particular direction whether upward or downward.
But how can you make profit in trend trading?
- Trend trading win rates are low…but Dollar moves are gigantic
Ex. if you have the following 5 trades during the week:
- Monday -50
- Tuesday -70
- Wed -20
- Thur -60
- Friday +1800
Then your win rate is only 20%. But you still made a HUGE profit from trend trending.
So you can see that trend traders still win…even though their win % is small.
Price Action images of DynoBars
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Trading sounds intimidating especially for a beginner. It also confuses some people because of the several factors that are needed to read the price movements and the market itself. Not to mention, there are also psychological factors when it comes to trading. DynoTrading believes that trading can be simply understood even by beginners. With the help of DynoBars, there will be only two signals that will help a trader make a trade. No more of those indicators that only confuses traders and adds to the delay of making a decision.
Even if trading is a hobby or a full-time job, it still pays to learn more about it. If you are interested in knowing more about day trading and trend trading strategies, then click here for more information. We will help you with the basics of trading and how to use the simplest approach in having successful trades using DynoBars.