Thread: Forex scalping

A typical Forex scalping method will often involve the execution of orders that occur in a planned sequence, often no more than one, three, or five minutes apart. Between each order or trade, the Forex scalper will watch the foreign exchange market closely, looking for any clues that may point to a need to amend the strategy in some manner, perhaps by expediting the next trade in the sequence or holding off for another minute or two.

If you wish to survive in trading game you must scalp the market only when is safe to scalp! It is all about drawdowns!

Here is not a question about WHEN is safe for scalping but mathematics about draw-downs?

You must be mathematician to understand what are you betting against!
I am betting against money managment and i don't have large draw-downs as money managment has!
----------------------------------------------------------------------------------------------------------
Example:

Let's say that we gonna use same leverage in both cases! (1PIP = 1USD)


Scalping
If I take 3pips of profit for 5 times in a row then I have 15 pips of profit!
But if I lose 20 pips at sixth try then I will have -5pips altogether!
Draw-Down in this case is -5pips.

Money Management
If I lose 3 time in a row for 20 pips I will have -60 pips draw-down!
And suppose that I take 60 pips of profit (MM 1:3)on a forth time my balance is zero!
Draw-Down in this case is -60pips.
Question is:

Which case has a larger Draw-Down?
----------------------------------------
scalping only 5 pips of DD
MM 60 pips of DD
--------------------------------------------------------------------------------------------------------------
Who will first touch the zero sum balance????


What are the odds for taking 3pips against 60 pips?????

-------------------------------------------------------------------------------------------------------------

One question for the end :
Which Money managment will have larger Draw-Down 1:2 or 1:3 ???
(Little help: what is harder to take: 3pips,30pips or 100pips???)
-----------------------------------------------------------------------------------------------------------
I hope that I have explain this so everybody can understand!
-----------------------------------------------------------------------------------------------------------
Conclusion:
Money managment mustn't use large leverage as scalping system because of large DD!!!
So MM can not benefit from large leverage as scalping system with low DD!!!

Text is taken from here:http://trade-forex-questions-answers...managment.html