How much money do you need for scalping?
This is one of the most important questions beginners who just get into scalping can ask themselves. But the answer is not so simple and depends on a number of factors.
In this article I will help you to understand this issue and at the end you will be able to decide for yourself whether scalping is a right choice for you.
Each of us has different goals and different appetites, let's say you have a lot of free time and would like to earn a living by scalping. Let's aim for $1,000 a month.
To see if it's realistic, you need to gather statistics:
- What's your success rate?
- What is your average risk/reward ratio?
- How many trades per month do you open?
You can manually record all the trades and calculate the numbers, but most traders use the tradermakesmoney service that does it all for you.
My results for the week on boosting $100
Your success rate depends directly on your risk-to-profit ratio. The higher it is, the lower your success rate will be.
My ratio is at least 1:3. That means that it's enough for me to be right in only one of the 3 cases, in order not to lose money. Let's use this ratio and 50% win rate as a starting point. In order to calculate how many trades we need to open each month to earn $1000, let's use the formula:
1000/(risk per trade) * (risk/reward ratio) * (percentage of unsuccessful trades)
If we had a deposit of $100 and we would risk $1 per trade, the required number of trades would be as follows:
1000/(1 * 3 * 0.5) = 666,6
Hell of a result, I even crossed myself.
667 trades is a huge amount, more than 20 trades a day. Even experienced financial market sharks do not have enough discipline to open so many trades according to their algorithm.
And how many trades would we need if our deposit was $500 and the risk was $5?
1000/(5*3* 0.5) = 300
It's already better, it's 10 trades a day, but it's still too much to be in the resource and not burn out.
2000$ and 20$ risk?
1000/20*3*0.5 = 75
75 trades a month is 2-3 trades a day. That's more than realistic, even if you don't have much free time. You don't have to come up with trading ideas and look for water in the desert. $2,000 looks like a good amount to live off of trading entirely, but suppose you don't have the same percentage of successful trades as I do, but let's say 40%?
1000/20*3*0,4 = 90
3 trades a day. More than realistic, I would even say comfortable.
That's the answer to your question. If you have other financial goals, just use the formula to find out. Be sure to keep statistics and know the path to your goals. Only by seeing the path ahead can you be confident about your trading path.
Good luck and see you at the DOM✌️