By the penny or why it is harmful to pips

First, let's understand what is scalping и piping. This method of trading is used to profit from intraday fluctuations. In this case the lifetime of an open position can reach only a few minutes. Naturally, the profit on each individual transaction will not be significant, but the main income is achieved due to the large volume of performed operations.

Some traders make up to 200 trades a day. You should not expect all of them to be profitable. The main goal becomes have a total profit from operations at the end of the day. To do this, the level of stop-loss is placed as close as possible to the price at which the position is opened, to ensure minimal loss in the event of an unfavorable movement.

Marketplace is the most liquid market. Even a person who has just begun to learn the basics of trading has heard this phrase more than once. The price even within a day has cyclicalityThat is, there are periods of ups and downs. In this case if on the whole during the day the price has passed about 50 points, then the difference between the maximum and minimum prices for the day will reach a much larger value. If you catch smaller fluctuations, for example, max-min hours, then the possibility to increase your capital greatly increases. Hence the desire to use such a trading strategy.

Newcomers may get an impression of a fabulous capital increase, and if the possibility of reinvestment is added, the number of supposed zeros in the supposed deposit can make your eyes glaze over. However, this impression is deceptive, despite the abundance of stories about lightning-fast capital increases many times over, this trading system is doomed to failure. Let us try to consider why.

First of all, the staging is very close level of loss limitationThe probability of catching a loss just on the market noise is high, even if the direction of the trend is correct, but having underestimated the quite opposite forces of bulls and bears. It is very easy to make a mistake determining the direction for the next hour. It's much harder than determining the direction of the day.

The easiest solution from the triggering of an order fixing the loss seems to be the absence of the order itself, but then you risk losing even more money after a strong movement against you, when the price has gone so far that it is not possible to roll it back to the original levels in the next minutes or hours. When trading a large portion of the deposit, the absence of loss limits can lead to margin call, that is, the downgrading of the entire deposit.

The second reason is nervous tensionThe strategy is not a real one, but a real one. As a rule, such a strategy is first used on demo accountThe price of the order is virtual, so there is no fear of losing it, and the processing of orders is automatic, i.e. instantaneous. Thus, there are factors such as speed of order processing and nervous tension, which increases with each point of price change in the opposite direction. Pipsing implies being in the market permanently, which implies a permanent stress, and it is impossible to take rational actions under stress.

It is also worth adding the fact that Brokers do not like clients who make a huge number of transactions. There are limits on the number of orders per unit time and clients who are too persistent and give orders almost every second may be asked to close the account.