I think a majority of traders, specifically Foreign Exchange traders, start off with some sort of strategy that looks like scalping.
For those that don’t know, see the definition below from Investopedia.com –
A trading strategy that attempts to make many profits on small price changes. Traders who implement this strategy will place anywhere from 10 to a couple hundred trades in a single day in the belief that small moves in stock price are easier to catch than large ones.
Several reasons for this are because 1. it’s fun, 2. you get the most action, 3. it satisfies your initial desire to be in front of a chart 24/7, and 4. you think it will make you $$.
How this differs from actually trading 1. I hate scalping, it’s miserable, 2. too much action is usually not a good sign or trading strategy, 3. I don’t want to be in front of a chart more than 15 mins/every 2 or 3 hours, and 4. the realization that you can make money 1000 different ways in the markets.
I will say that scalping gave me the desire to learn how to trade. It also let me make 1000 mistakes and not damage my account too much, so long as I kept my trades size small (which I didn’t always and it resulted in me blowing up a few or 5 accounts.) But even looking back, I wouldn’t trade (no pun intended) blowing up those accounts. I learned so much, perhaps more, from loosing money, I actually recommend it to new traders. If I have someone who asks me to show them how I trade, I have a few questions I ask and then a challenge.
Question 1. “Are you trading live or demo?” (I think trading demo is a waste of time unless you are still learning what a pip is.)
Question 2. “How much have you lost/gained?” (This is to give me a gauge of their pain/pleasure tolerance)
Question 3. “How long have you been trading?” (This question is last because I don’t think that time is too relevant, but shows dedication)
Challenge. “Take $500, using no more than .050 lots ($0.50/pip)/trade, and trade to lose every penny of it. Really TRY to lose $500. I will show you how I trade once you lose all of it intentionally, and if you can’t lose it intentionally, then you don’t need me.”
“WHAT?”, you may say. The reason/answer to that question is another blog post. Enjoy for now! Happy Trading.