When trading on Forex or any other financial market, the biggest concern for a trader is taking an excessive risk.
While high profit is something we all expect from a trade, you will have to employ strategies that can lead to a great loss for this to happen. Your second option is to outperform other traders by having good instincts and superior knowledge.
This is precisely how scalping on Forex works.
What is Forex scalping?
Scalping is one of the fastest trading strategies on Forex.
Scalper performs a series of day trades where he will open and close a position during a small time window (from one minute to few minutes). Person will try to discover a trend or better yet, the best price to buy or sell currency pairs.
During daily Forex trading scalper will enter more than 100 new positions. This is precisely why you have to choose a broker who takes small commissions and has small spread.
Have in mind that this method is not ideal for maximizing profits; instead trader uses it to minimize risks. Even if difference is one pip or several pips in favor of your account, you should close the position and take the profits.
Please have in mind that as you start to scalp, it’s easy to get excited when things go well. You might start thinking that your system is flawless and that you’re able to read charts better than others. Don’t be tempted by this and avoid holding an asset for a long time!
Who can benefit from scalping?
Everyone should feel free get into action. You can quickly learn the basics and start trading in no time. However, that doesn’t mean Forex scalping is good for everyone.
Here are some top indicators that you can be good at it. You:
- Don’t like or can’t take excessive risks
- Prefer micromanaging your account
- Don’t support big, volatile trades
- Just started trading on Forex
- Have a lot of time
Forex scalping is a full-time job; there is no shortcuts or ways around it.
Trader will have to be persistent in following the news, have a chart nearby at all times and consider every indicator. Scalping requires a lot of dedication, attention and concentration but at the same time, if you’re good at it, it can return great profits with limited risks.
It is a perfect methods for people who just started trading on financial markets and don’t have a lot capital to begin with. Scalping on Forex gives you the opportunity to learn and start a lucrative career.
What about the drawbacks?
Next thing you need to know is that this system is not perfect.
Here are some main drawbacks:
- You need to have a large deposit
- You have to be attentive throughout the day which can be hard to accomplish
- It can be really unhealthy
- Even though risks are really low, profit may not be good enough to compensate for that risk
Based on all of this, you can make a decision whether this type of a trade is the right thing for you.
Like any type of trading, Forex scalping has its advantages and disadvantages.
In theory, it can be very profitable if you know what you’re doing. But you have to consider all the health risks – this system can be great for young investors but is harder to keep on as you get older.
What are your thoughts on Forex scalping? Have you ever tried it and with what results?
Share your thoughts in the comments below!