Some Advantages and Disadvantages of Scalping and E-Mini Trading

While many investment “experts” claim that it is difficult to make a living scalping stocks or futures, there are legions of successful e-mini scalping traders who can prove otherwise. On the other hand, for every 100 new traders on the e-mini marketplaces, only 20 will be present after three months. Those are some pretty grim statistics. I have long held that there is a correlation between a trader’s personality and his trading style, and a certain type of individual thrives when trading in the scalping style and others never seem to master the technique.

Scalping is known for a variety of features. Years ago, a lot of money was made from a trading style that took advantage of disparities in bid and ask prices; These days, a scalper is more likely to be a trader looking to make 5-7 trades (or more, if the opportunity arises) and make a small profit of 6-10 per trade. It should be noted that even scalpers get a broker from time to time. Some features of scalping are:

– Scalpers are in cash every night; all trades are completed during a certain trading period chosen by the traders.

– Scalping takes advantage of the leverage offered by the futures market.

– Scalpers look to make small profits on high probability setups when they trade.

– Scalpers are interested in general trends, but they mainly focus on individual movements in the market to make their profits.

– Scalpers use narrower stops than most traders (although there are some scalpers who feel that wider stops generate a better profit percentage).

However, there are some clear disadvantages to scalping, and some consider scalping to be an inappropriate trading style. Some disadvantages can be:

– A merchant spends an excessive amount of time in front of the computer when scalping.

– It is very easy for an untrained trader to lose a lot of money if they do not have a good idea of ​​how they define their trading goals.

– This style of trading can be simply tedious. I can personally attest to this point, in fact, the traders in my trading room often get together at 4pm EST and have a celebratory beer on our winning days. It is indicative of the causes of stress in trading, of course, there is never anything wrong with a cold beer after the trade (just my opinion on the last point, superfluous though it was).

– In order to trade desirable markets, some e-mini scalpers operate some very unorthodox hours, sometimes trading all night and sleeping for part of the day.

– Sometimes, no matter how reliable the setup you use, things just don’t turn out the way you expect, and that can be very discouraging.

Is scalping for everyone? No, I don’t think it is. Several students have told me that the pace is too fast for them to feel comfortable with; and sitting in front of a computer all day is some people’s idea of ​​pure torture. The point is simple: if you are not cut out for fast trading action and lots of computer time, scalping is not for you.

My personality is impatient and seeks immediate gratification. Speculation is a perfect place for me to trade. This may not be true for a pragmatic and systems oriented trader. He or she may find the scalp equivalent of a 100-yard dash, rather than the marathon style of trading they’re used to.

In short, we have listed some features of modern scalp trading and the advantages and disadvantages of scalp trading. Also, I think scalp trading is especially suited for certain personality types. Finally, I guess the only way to find out if this trading style is your “cup of tea” is to research this interesting and exciting trading style.