Hello all. For a long while I have been thinking about many things trading related and ways to improve my trading... I am sure that all of you have heard the phrase that "Day trading and Scalping is not profitable and most day traders lose." So I've decided to do the math and see if it shows anything... I was surprised badly...
Lets check few things out:
Scalpers/Daytraders on average trade 5 trades per day (or 1 trade using 5 lots). I've heard some scalpers may do as many as 30 trades. Lets say that we opened a first account that is 10,000$ (we don't want to risk a lot and since we do only short term trades we do not need a big deposit.)
There are about 20 days in a month X 12 months. How many trades that make? A: 1,200.
What about the spread being paid? 1,200x3pips=3,600 pips. If you open a standard account, then it means that in a year you pay in the ballpark of 3,600x10=36,000$ spread fees!!!
36,000$ of 10,000$ account just for the spread. That means that you have to make MORE than 36k which is 360% on a 10k account just to break even. Nothing to say about the lossess which you WILL have.
Considering how tough it is to REGULARLY make 360%+ ROI, I can see that maybe this is one of the many hurdles why many short term (scalpers) lose.
Any ideas, comments?
Lets check few things out:
Scalpers/Daytraders on average trade 5 trades per day (or 1 trade using 5 lots). I've heard some scalpers may do as many as 30 trades. Lets say that we opened a first account that is 10,000$ (we don't want to risk a lot and since we do only short term trades we do not need a big deposit.)
There are about 20 days in a month X 12 months. How many trades that make? A: 1,200.
What about the spread being paid? 1,200x3pips=3,600 pips. If you open a standard account, then it means that in a year you pay in the ballpark of 3,600x10=36,000$ spread fees!!!
36,000$ of 10,000$ account just for the spread. That means that you have to make MORE than 36k which is 360% on a 10k account just to break even. Nothing to say about the lossess which you WILL have.
Considering how tough it is to REGULARLY make 360%+ ROI, I can see that maybe this is one of the many hurdles why many short term (scalpers) lose.
Any ideas, comments?