After you enter Forex, you will come across various trading strategies people use in the currency trading market. Each one has a different timeframe, outcome, and risk. One of these strategies is predominantly practiced – scalping. Traders use this strategy consistently on a large number of trades and reap small profits. Employing one or the Forex trading strategy is necessary, without which you’ll be a wanderer traversing through the risky roads of foreign exchange, aimlessly.
What is Scalping Forex Strategy?
This is a trading strategy employed on short timeframes, to profit from smaller price movements. The idea is to profit from multiple small trades and compound them into a big winning! Traders who practice this are called scalpers. Scalpers place up to 100 trades every day, aiming to catch smaller price moves and profit from them, rather than spend hours-weeks trying to catch large ones. Given the volatility of Forex, scalping strategy is a really good start for beginners.
Typically performed in the intraday time period, traders buy assets at a price and sell it for a marginally higher one, mostly a few cents more. Doing this over multiple trades will add up to a decent profit! Though it sounds simple and riskless, scalpers need to be highly precise and spot-on with their entries, exits, and positions. Done on frequent intervals, these trades focus predominantly on minute-scale candlestick charts. Moving averages, parabolic SAR, and Bollinger bands are some of the commonly used chart indicators.
Is Scalping Meant for You?
To consecutively participate in small trades and make minimal profits isn’t something all traders prefer. Satisfying yourself with a maximum of 5-10 pips per scalped trade takes persistence to pull through! On one hand, there are longer trades that reward in thousands, on the other; there are smaller ones with nominal profits – so why employ Forex scalping strategy?
The monotone and unprofitable environment of scalping is a misguided belief. Several traders mint good money following a well-drafted Forex trading strategy, and it is as intense and gripping as the other genre of trades! Scalping requires traders to have an undivided focus on the markets and perform constant analysis to place consecutive orders. In fact, predicting longer trends is easier when compared to short-term hikes. Over a span of a few hours, the market can rise and fall evidently. However, observing a market over a few minutes and capitalizing on minimal price movements is difficult!
If you are an adept trader with immaculate focus, this can serve as an immensely lucrative platform for you! Though scalping revolves around shorter periods, you will have to spend long hours at a stretch, making it a full-time job.
Demo Trading and Stop-Losses
Two key and frequent terms you will hear while scalping. Being a very hectic field, traders often wonder how to master the art of making precise calls in seconds. This can be perfected on demo accounts. Though not wholly accurate, they provide an adequate platform to practice and implement scalping strategies on simulated environments. Know more about the advantages of demo accounts.
Once demo sessions are done, learning the importance of stop-losses is crucial. Since scalpers work on such short spans, controlling risks and losses is impossible! Hence, stop-losses are kept in place to ensure no matter how awry a trade goes they remain safe.
Advantages and Disadvantages of Forex Scalping Strategy
Like every coin, there are two sides to the scalping strategy too. While some believe scalping to be an incredibly profitable venture, some feel more comfortable with long-term plans.
1) Shorter trade durations enable traders to be safe from large-scale losses due to abrupt price movements.
2) Ideally, smaller moves are easier to capture and capitalize on than larger trends.
3) Slow-moving markets can be equally profitable to a scalper, whereas others might find them ineffective.
4) Sudden trend reversals leave you unscathed.
5) Potential for risk is very minimal.
1) Requires constant focus on the charts, failing to do so will lead you to miss out on profitable trends.
2) Scalping needs a large amount of investment capital to begin with. Since each small trade carries a certain capital requirement, consistent ones will add up to a relatively heavy amount!
3) A large number of traders are required to make a significant profit.
4) Unlike contrary beliefs, scalping is very time-consuming and can result in stress.
That being said, you now have a list of boxes to check before deciding what’s best for you! To be a successful scalper requires an abundance of patience and unparalleled market knowledge. To be able to predict small price movements in the chaotic domain of Forex requires a lot of focus, which several traders’ lack. Typically, scalpers use technical analysis to govern each trade’s outcome. By understanding price movements and past trends, speculating becomes a lot easier!
Am I a Scalper?
Precise, persistent and perceptive – the 3 P’s of a good scalper. Being able to make unhindered decisions in the nick of time, monitoring each twitch in asset price and knowing when to hold on/let go of a trade is what makes a successful Forex scalping trader.
A point to note is that a Forex scalping strategy houses risks enough to wipe out a day’s earnings! Conducted on a leveraged ground, and in swift environments, erring is easy. To be able to nimbly dodge the pitfalls and come out profitable, in a matter of minutes requires a meticulous skill-set. Successful scalpers practice tirelessly and ensure they are accustomed to market conditions and mentally synced with minute price movements.
With an impeccable Forex trading strategy, you can go a long way! Get yourself the assistance of expert scalpers today, call WesternFX! We house some of the world’s best Forex brokers, knowledgeable from head to toe. Take your trading venture to the zenith, hire our stellar brokerage today!