Today I want to talk about scalping.
What is the scalp?
Scalping is the style of buying or selling currency pairs for a short period of time in an attempt to make a series of quick profits. A forex scalper aims to make a large number of trades using the small price movements that are common throughout the day.
Understanding Forex scalping
Forex speculation risks
Like all trading styles, Forex scalping carries risks. Even if you risk a small amount on a trade, taking a lot of trades can mean significant drawdown if a lot of those trades end up losing money.
This is a viable system, but sometimes a trader cannot exit due to a five pip loss. The market can drop through the stop loss point and end up with a 20 pip loss. Therefore, they lose four times as much as they expected. Some of these slippage scenarios can quickly deplete an account.
Forex scalpers require a trading account with tight spreads, low commissions, and the ability to place orders at any price.
If the spread or commissions are too high, or the price at which a trader can trade is too limited, the chances of a forex scalper being successful are greatly reduced.
Who is scalping for?
Scalping may not be suitable for all traders. The profitability of each position opened by the scalper is usually small, and the profit is achieved by adding the profit of each small position closed. The reseller must be able to wait until his work is profitable. To become a successful Forex scalper, you need stamina, focus, and discipline.
Scalping requires much more time and attention from the trader compared to other trading styles such as swing trading or trend following. A typical scalper opens and closes dozens of positions during a typical trading day. For some, this can be a daunting task, creating too much psychological stress.
Advantages and disadvantages of scalping
The main advantages of scalping
The potential return of the strategy, both within a trading day and over the long term.
There is no need to wait for the next market trend to form. You can scalp in any situation: with the trend, against the trend, sideways (Flat).
Simplified market analysis. With the help of technical analysis and indicators, a short-term trend is evaluated, fundamental factors are selectively taken into account.
Suitable for trading with small deposits. Thanks to leverage, even on a small account, you can open significant positions and make a profit.
The disadvantages of scalping are
Difficulty choosing the right broker. Speculation requires favorable trading conditions: minimal spreads and commissions, no critical slippage. Not all brokers will be able to provide such conditions.
Higher risk associated with the use of high leverage. When using leverage, even a small market movement against a trader can lead to serious losses, so in order not to deplete the deposit, it is necessary to apply risk control rules.
Large expenditures of time and constant psycho-emotional stress during the trading day. The scalper carries out a large number of transactions and this requires constant monitoring of the market. Such active trading consumes a lot of energy and is fraught with potential “burnout” of the trader.
Limitation on the number of trading instruments used. Not all trading tools are suitable for resale. To reduce costs with a large number of transactions, assets with minimal margins are selected.
Scalping is perhaps the most difficult type of trading that requires maximum concentration and self-control.
This is because it is difficult to predict the future movement of the market, especially the Forex market.
It is worth spending a lot of time to gain enough experience and constantly trade with the plus.
Learn, test and you will succeed!
Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I’ll be happy