The Truth About Daily Price Action Trading vs Scalping Price Action
In the video I will add my personal opinion and understanding of trading price action on the daily chart compared to scalping price action on the lower time-frames.
I started my price action journey trading the higher time-frames, the only info out there was for the daily and 4hour charts. But became despondent with the results I was getting and began to question it’s viability at that stage in my learning path. I felt that it didn’t really suit my personality and thought there must be other ways to use Price Action. So I went about learning and developing my abilities to implement price action trading on the lower time-frames which suited my personality much better.
Two sides to a coin
I should add to this blog that longer term price action trading is definitely a great way to trade and is a very viable trading strategy. Is also a great starting point for those new to price action and also for those that are time poor. There is plenty of opportunity to make good rewards and your ability to pick winners will get better over time.
Trading the lower time-frames is not without additional risk as there are more opportunities to mess it up (more human error) and some people just wont be suited to sitting in front of their charts making decisions on a 5 min chart. There is never a right or wrong in this scenario, just what suits the individual circumstances and personality.
Why I scalp price action
- Limits my exposure to the mentality of carrying risk for longer periods of time (days or weeks).
- Realization of profit and loss quickly means I get immediate feedback.
- Allows for plenty of trading opportunities to pick and choose from during each trading session. This is great for learning and developing trading skills.
- Not being exposed overnight to news, political, economic events, natural disasters…
- Opportunity cost: So I don’t have my capital tied into positions that were going nowhere while missing other opportunities
- More profit potential. Not trading on the edge of profitability like the daily where one mistake turned a profitable week into a losing week.
What is your take on trading price action on different time-frames? Have you tried to trade off the daily and become despondent? Please use the comments section at the bottom of this page to further the discussion.
You make some excellent points Aaron. One negative point you forgot to mention is if you scalp your trading costs (spread/commission) become much larger a % of each trade. But that’s only 1 negative compared to all the other positives.
What do you recommend for traders who are unable to trade the EU or US opens due to work commitments?
Hey Pete. I understand what you are saying. It’s true that your costs (spread and commission) become a bigger % of the overall outcome of each trade. But if your system covers this aspect by having risk to reward ratios that cover your costs then, yes you are paying more costs, but only because you are taking more trades and therefore more opportunities to play out your edge and profit from it. You just need each trade to go a bit further to cover costs. E.g. My style means I risk 5 pips per trade + commission 0.7 pips = 5.7 pips. Therefore 1:1 risk to reward means I need to get 6.4 pips profit to cover each loss.
If you can’t trade during the open but can trade sometime during the Euro or US session (maybe US close?) then that is better than nothing or trading the Asian session. You don’t need a lot of time, just a 2-3 hours should do it.
Your thoughts on tradings costs are spot on. Thanks for the heads up about the US close – I never considered that an option. I leave for work at the UK open (8am UK time), so I could trade most of the EU open, but it’s a short session from the EU open to the UK open. I’ll look at the US close – see how that goes.
You don’t have to trade either. You trade patterns found at every 4hr. Trust me. Many people think that you need to get some screen time to get profits.
But sometimes those range bound price or when it is channeling is the best time to make decision. The quiet the market the better. Obviously this means less screen time. Better work management.
Alot of movement at the lower time frame means less time to think and fingers start to get itchy. Big long candlestick up and down is not a good way to stay sane. Long term.
But maybe I’m old. Better gratification threshold.
David, there is no one strategy for everyone. Some people have the mentality to trade on the lower timeframes and some are just not suited to it. It sounds like you are better off trading the higher timeframes. If a trader can master themselves and the lower timeframes then as per my reasons in the video I believe that there is greater reward for reduced stress and risk.
Good video Aaron. I have traded the longer time frames for about 3 years now, and I am making slow, steady profits. I do indeed spend many days laying on the beach making money, but I should also point out that I spend more days on the beach losing money. However, this is to be expected with my win/loss ratio. I trade 28 currency pairs on the daily/weekly time frame and risk 1% per trade. My max risk is also 1%, but this doesn’t stop me from having 4 or 5 open trades, it’s just that I will only have one “at risk” trade open (all others will be stops at B/E). I win about 40% of my trades. Each year when I review my trades, I see that the good old 80/20 rule applies (i.e. 80% of my profits come from 20% of my trades).
Price action scalping must be the holy grail of trading for all the reasons you mentioned in your video. I can only dream of multiple-R days. My work commitment does actually allow me to trade the European/London open for a few hours, and for this reason alone I did give scalping a go a while back, but I found it to be a completely different ball game which I struggled with on a number of levels. You make a convincing argument for me to at least give it another try.
Hi Dave, thanks for your comments and insights into your trading, much appreciated. Sounds like you have it nicely ticking over.
I should add to this blog that longer term price action trading is definitely a great way to trade and very viable. Is also a great starting point for those new to price action and also for those that don’t have lots of time. There’s plenty of opportunity to make handsome rewards. Also trading the lower time-frames is not without additional risk as there is more opportunity to mess it up (more human error) and some people just wont be suited to sitting in front of their charts making decisions on a 5 min chart. There is never a right or wrong in this scenario, just what suits the individual circumstances and personality.
Nice video Aaron. One additional advantage i found with intra-day trading over long term trading was the immediate feedback and as a result found my price action trading learning curve was traveled relatively faster. I could have 3 trades a day to analyse and journal vs. 3 trades a week or month, depending on entry signals.
Hey Steve, yes you are absolutely right. Funny you should mention this as I was thinking about that exact same point today! You definitely learn a lot from trading this way.
Really liking this site Aaron so keep up the good work! Have gone from the 5 mins to the daily and back again and one major preference I have now for the 5 minute charts, is that once my trading day is done I have zero positions and can completely relax. I switch of the computer and mentally that helps me to switch off as well. I found this hard with the daily time frame as there seemed to always be a position open and I would carry the position on my mind and relate it to news etc. Now when I finish sometime at 4-5GMT then that’s me completely done for the day until I wake up and start again. This shouldn’t be underestimated as my sleep quality has improved no end.
Hey Jack, thanks for the feedback and insights. I know where you are coming from, so much better waking up in the morning not anticipating what happened to your positions overnight! Overtime you come to realise that less is more and it’s all about pinpoint, short and sharp, stress free trading.
Funny but I got better result trading the higher time frame then 15mins and lower.
It made me think better and the risk to reward is better. The s&r is not frequently ponder upon.
Al Brooks does that but I more interested to know how to get better entry level.
Hey David, trading PA on the lower timeframes for beginners is a challenge, you need to commit to it and know that it will all come together over the longer term. The whole reason I started price action was to get a better entry, felt like I was always getting in too late previously. Higher timeframe allows you to think longer and really make good decisions.
Glad to see this post! This was like what I experienced, so now trying to switch to lower time frames instead. I was having troubles with trading higher time frames, despite reading alot on why we should stick to hourly or daily charts.