Forex scalping is one of the most used and highly demanding forex trading strategies nowadays. In the Forex scalping methods, trading is done over shorter time frames and profits are taken after relatively small moves in the market.
Forex scalping is a Forex strategy in which the trader intends to take profits quickly on very small pip movements. Usually the trade is entered and closed quickly, within minutes.
Forex scalpers make profits on quick 5 to 15 pip movements. After a while, profits claimed on these small movements will add up. Forex scalping method of trading is different from other traditional forex trading methods where the profits are allowed to run and losses are cut shorter.
When somebody is scalping the market he/she is not looking for the big move of the markets; instead he is looking for the small moves in his favour that will result in significant gain without any risk or insecurities involved in waiting for big move.
Forex scalping is nothing but playing with spreads. In the Forex scalping method a currency is bought at the Bid price and sold at the Ask price to gain the bid ask difference.
The name “Forex Scalping” makes the strategy sound like it is risky. But the scalping method can be low risk when scalping strategies are implemented during the best times for scalping in the market.
The best time to implement a scalping forex strategy is during times of market consolidation. Since the market is generally in a consolidation pattern 80% of the time, this suggest that Forex Scalping is a good strategy to choose and use often.
Many new forex traders attempt to scalp the market during times of volatility or of news trading – but these times are much more risky for any strategy, including the forex scalping strategy.
People who are expert in forex scalping methods of trading are the markets makers or specialists who are into maintaining the liquidity and order flow of a product of a market. These forex market makers can have superior execution speed as an insider.
They also have a greater knowledge of trading and actual market situation due to their information gathering capacity.
Scalpers are only exposed in a relatively short period. They do not hold overnights. So, the exposure they get is lower than other trades while the risk is also less in this type of trading.
Factors that affect Forex scalping
- Liquidity: Scalpers like to trade in more liquid market since they can make thousands of trades a day to add up their small profits offered on each trade.
- Volatility: Stable forex market attracts forex scalpers. If the prices don’t move throughout the day, the scalpers can still make profits by placing their orders on same Bid and Ask and can make thousands of trades. They do well in trade, as they don’t have to think about sudden price changes.
- Time frame: The scalping method of Forex trading is done on a very short time frame. People even make profit from the market waves that are too small to be seen even on the one-minute chart. Therefore, the more the number of moves during the day the scalper can make more profits.
Forex scalping is very easy to follow if you know the basics of forex scalping method of trading and have a Forex Scalping Platform to help you scalping various currencies. The whole secret is to get in and get out of the market as quickly as possible. Not many forex brokers allow forex scalping, yet there are a few who do. LMAX is one such forex broker that allow forex scalping.