Hi Alan,
Of course scalping is highly dangerous to beginners. Market swings and their nature is one of the most complicated forms of knowledge. Newbies don't understand the nature of price movement without a long period of observation and commitment of their own funds. That's why I say it is "advanced".
I agree completely, but you might as well have said this:
Of course swing-trading is highly dangerous to beginners. Market swings and their nature is one of the most complicated forms of knowledge. Newbies don't understand the nature of price movement or the charts they produce without a long period of observation and commitment of their own funds. That's why I say it is "advanced".
I may be simplifying (actually I know I am) but I see the problem that newbies need to overcome is not so much one of "knowledge" but rather of experience. Perhaps you meant to say experience instead of knowledge with the idea that experience leads to knowledge, but even that doesn't capture for me the subtle distinction of this knowledge being highly personal to that trader. It's not, IMO, knowledge that can be disseminated to ALL others, but only to others who share many of that traders emotional and psychological traits. So the "experience" newbies need to gain is not only of the market but also of their own psychological and emotional reaction to it.
Broadly speaking, scalpers must learn how to reduce risk to a bare minimum while swing-traders must learn how to maximize their gains. It's a cut-your-losses versus a let-your-winners run mentality. The maxim is that both are necessary to trading success but I dissent, a little. I think it's much easier for swing-traders to learn to keep the stops they set than it is for them to develop the instinct to let their winners run to full or nearly-full fruition. Likewise it's easier for scalpers to take their profit as soon as they sense resistance than it is for them to ruthlessly cut their losses as short as they can.
The most important thing for newbie traders to learn is: which of these styles suits their personality? That takes some experience, some actual trading and probably some painful losses, to discover.
Could it be that because you teach swing-trading and understand it so intimately, and have such faith in your abilities, that you have come to believe it's less than terribly difficult to master? Especially the part about maximizing gains?
Most aspiring daytraders IMO don't give enough thought to their own disposition and how THAT should lead them to a particular trading style. They just want to make trades and make money and they look outside themselves for strategies. "Mental" preparation is too broad to have any meaning, and money management should be a given, so I guess I want to say that at heart I'm just squarely in the camp of those traders who believe that the psychological and emotional aspects of preparation should supersede all preparation based on numbers and charts.
So the difference in our psychological and emotional relation to the market (how about PERM for an acronym) is why you see scalping as "advanced" and I see swing-trading as "advanced" and it makes sense to me to advise newbies to know their PERM before they commit to a trading style.
But let me further my agreement with you that brokers who push newbies into scalping are scoundrels because IMO the percentage of people whose PERM is suitable for scalping is probably quite low. |
