Psychology makes up about 90% of trading results for certain. The game is hard, not because it is extremely technically difficult(even though we tend to make it that way), but because your decisions result in immediate consequences for better or worse.

Often intraday I will see some momentum in a stock and even though it isn't part of an extremely high odds play, I give it a try. Let's break this down..

Issue 1:

  People often buy the "ask" price as not to miss out on the momentum...You then have to wait for the stock to move up .02 to be profitable because one will most likely try to sell into the "bid" to be out quickly....

Ex. 3.91 x 3.92    I buy at 3.92.

     3.92 x 3.93    Stock had an uptick. I can't get my order executed for 3.93 on the ask

     3.93 x 3.94    Finally I can make a small profit, but commissions are going to eat into it.

Meanwhile if there is a one cent drop, you either sell for a loss and still have to pay the commissions, or hold on for a further loss due to greed/hope....

Issue 2:

If you master the art of quick momentum trading (which is much harder than just waiting for good setups), your trader psychology doesn't change easily when excellent opportunity comes along. It also breeds addiction to the "action of trading", which has its own slew of issue akin to being a degenerate gambler.

Example:

You buy a stock heading to a multi-day breakout level on high volume with a solid catalyst with at least a 2-1 theoretical reward/risk..

Then, the stock starts to fall or consolidate a little within the channel range....you know it is within your risk range, but you feel the need to cut losses very quick because you are still in the scalping frame of mind.

You overcome the urge to sell and trade your plan. You hold the stock as it heads to the top of the channel and then breaks out. The stock moves up quickly and then dips back into the channel to consolidate a little(which happens very very often).

The stock is now about 2% above your entry... You see the profits and sell immediately on an urge...because you are still in a scalping state of mind.

 

In conclusion, my dip buys and breakouts yield about one half to one third of the profits on my scalping days compared to when I just draw on charts and study all day.

The issue isn't necessarily that scalping can't be done with some consistency for tiny profits.

The issue is that scalping can lead to other bad habits and ruin a high reward/risk frame of mind.

Happy trading and mostly waiting everyone!