Posts Tagged ‘Forex Scalping’
Scalping the Forex market is one of the fastest growing methods for trading Forex in the modern day world. In Forex scalping trading is performed over much shorter periods than other forms of trading and income is often generated even from relatively small fluctuations in a currencies price.
The main reason people trade via scalping is often that due to the quick nature of the method, profits can be built up fairly quickly. What’s more it also makes market movements far less likely to cause a large differential in the buy and sell prices.
Other methods of trading such as technical and fundamental analysis rely on analysing trends and predicting movements based on past performance or current news. Forex scalping offers a much quicker turn of events and traders using this method are simply looking for lots of small movements in currencies in any trading day.
Due to this difference in speed of trading, Forex scalping often means that traders run a much tighter ship as the risk is spread short time over a large number of currencies. In other methods of trading losses can often run a bit loose as the trader searches for that one trade that will return a big profit.
When scalping a trader will often only hold a currency for a matter of minutes before they resell at a profit. What is basically happening is that the Forex trader is playing with the spreads to bring in money where others fail to spot such a small market move.
Almost all successful Forex scalpers base their strategy on absorbing masses of information about the market they are trading in. You will not find many new traders adopting scalping methods simply because of the level of knowledge and nerve you need to succeed.
It is also rare that a Forex scalper will hold their position overnight. Most will close all trades before finally turning their computer off. If they do not then the trade they leave running is not really following the Forex scalping method.
The scalping method is usually based on three factors:
Liquidity – The more liquidity in a market then the more attractive it becomes to a Forex scalper as they can make more profitable trades in any given period.
Volatility – Only the most stable of markets are attractive to scalpers as a big movement is not what they are looking for. A stable market offers the chance to gain lots of small profits from many many trades
Time – A successful Forex scalper will not always begin trading at the start of a day. True, the longer they have to trade then the more they can make but patience is the key since it is pointless trying to scalp the Forex if market conditions are not right, for example in a period of large economic uncertainty.
As you can see, providing you have taken the time to learn as much as possible about market conditions then Forex scalping methods are not that difficult to implement. In many ways they are much more secure than other methods and this is why the method is becoming so popular.
By: Paul Bryan
Forex scalping cheatsheets give five different forex scalping method plus the best times for scalping. Primarily, there are two trading styles in Forex trading: Short term and long term. Short term trading is done when positions are opened and closed on an intraday basis. Long term trading positions may span a few weeks or a few months.
Most of the day traders are short term traders. Day traders love scalping. A position is opened and closed within minutes making a few pips per trade. Forex scalping is a low risk Forex trading strategy where gains as well losses are both small.
Scalping means making 2-5 pips per trade; it is based on the fact that most of the time the markets are consolidating. In other words most of the time there are no significant movement in the markets.
Scalpers look for the period when the market is consolidating and ranging like between the closing of the US currency markets and the opening of the European currency markets. During this period Forex markets tend to range for hours without much movement. This is the time when scalpers like to trade.
However, the more you trade, the higher your trading cost becomes. For example if the broker is giving a 4 pips spread to you than this 4 pips are your trading cost per trade. You will have to make more than 4 pips per trade to start making profits.
You cannot become a successful scalper without understanding technical analysis well. You should have clear concept of over-under brought, support and resistance levels, trendlines, trading channels etc before trading any position.
Most of the Forex brokers hate scalpers. Since the brokers are most of the time trading against you, a successful scalper can take profits away from the brokers. No doubt many brokers try to ban scalper from trading.
Since scalping means a few pips per trade, in order to make 20-50 pips per day, you will have to trade many times. Don’t forget these 20-50 pips are after you have subtracted the trading cost.
Since scalpers are looking for capitalizing on very small gains like a few pips per trade, the profits obtained per trade are small. So scalping requires you to use high leverage.
Leverage is dangerous. It is a double edged sword that cuts both ways. Leverage helps you if market favors you but it will destroy you if the market does not favor you. So beware of using too much leverage while trading.
By: Ahmad A Hassam
