Views on Day Trading or Scalping.
Published by strudy1 May 15th, 2008 in Daily Diary, Getting Started, Options,CFD'S, ETC.This article was contributed by “Ingot54.” a regular contributor to“Topstocks.
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Let me answer a few questions which have come up recently.
First of all, I want to point out that I believe day trading or scalping is part science and part intuition. Thus a trading plan is only a frame work; intuition plays a large part in scalping.
I am only using EMA as indicators, too many indicators are too confusing for day trades and I have found EMA to be quite sufficient.
Risk management:
Always protect your capital, your risk purely depends on the percentage of capital you are prepared to risk on each trade. Obviously the risk differs from trader to trader.
CFD trading is no more risky than trading the actual stock as long as your money management is in place.
As far as trading the ASX20 is concerned,
I have found that the average daily ATR on the ASX20 is about 2%, big enough to give you a small profit. You are also assured of enough volume to get in and out easily.
More volatile stocks pose more risk.
I do not believe that you can forecast a risk/reward ratio when scalping. You simply have no way of guessing what the likely profit will be, although with an average ATR of 2% you could expect a profit of ½ % of your position.
I don’t make many day trades at this stage as I am fairly busy all day and scalping takes your undivided attention. However all my trades are on my web page, but I do have bigger positions than $10000. I only use that figure as it is generally the position demanding minimum brokerage.
Nevertheless, it is still a nice little side income, as I am sitting on the computer all day anyway. Also please note that I have stated that brokerage is NOT included in my results. Brokerage depends on the individual arrangements as well as position size.
My day trading is not emotional, but to a large extent intuitive within a good frame work.