If you wish to survive in trading game you must scalp the market only when is safe to scalp! It is all about draw-down's!
Here is not a question about WHEN is safe for scalping but mathematics about draw-down's?
You must be mathematician to understand what are you betting against!
I am betting against money managment and i don't have large draw-down's as money managment has!
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Example:
Let's say that we gonna use same leverage in both cases! (1PIP = 1USD)
Scalping
If I take 3pip's of profit for 5 times in a row then I have 15 pip's of profit!
But if I lose 20 pip's at sixth try then I will have -5pip's altogether!
Draw-Down in this case is -5pip's.
Money Management
If I lose 3 time in a row for 20 pip's I will have -60 pip's draw-down!
And suppose that I take 60 pip's of profit (MM 1:3)on a forth time my balance is zero!
Draw-Down in this case is -60pip's.
Question is:
Which case has a larger Draw-Down?
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Scalping only 5 pip's of DD
MM 60 pip's of DD
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Who will first touch the zero sum balance????
What are the odds for taking 3pip's against 60 pip's?????
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One question for the end :
Which Money managment will have larger Draw-Down 1:2 or 1:3 ???
(Little help: what is harder to take: 3pip's,30pip's or 100pip's???)
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I hope that I have explain this so everybody can understand!
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Conclusion:
Money managment mustn't use large leverage as scalping system because of large DD!!!
So MM can not benefit from large leverage as scalping system with low DD!!!
