Last Updated on: 16th January 2021, 11:19 pm
In forex trading, making money in a short time is called scalping. The scalpers accumulate money by doing a large number of trades in a day, and it may vary up to 200 trades. And trading time varies from a few seconds to several minutes.
Forex scalping is a good method to make high profits in the forex market, and scalpers should be skillful to study and use many factors: the trading behavior of the instrument, market expectations, news, and other statistics. Moreover, they should have a high level of concentration and discipline.
Whether scalping is good for beginners remains a debatable question. As there is no need for global market technical and fundamental analysis, scalping would offer good practice to the beginners. But some people think that it needs a certain knowledge and an action plan.
Advantages of scalping
The most important benefit is the ability to make large profits in a quick time. Within minutes you can make some dollars from trade, and if you have several tens of positions, you will get a significant amount.
By doing scalping, the traders get quick training in using short time frames and technical analysis.
The trader needs only a small amount, and he can build his capital quickly as there is an opportunity to earn daily.
Disadvantages of scalping
It involves huge risk as the traders go with the trend, and predicting it right on short time frames turns out to be difficult sometimes.
Brokers also don’t encourage scalping, and most of the brokers tend to limit the scalpers by fixing the time limit for a transaction or the number of transactions in a session.
Scalping is suitable for minimum size spread, and so the scalpers have to limit the choice of the currency pair, as many currency pairs have high spread value.
As the scalpers make numerous trades in a day, they have to spend a lot of time before the monitor.
When the trader uses the leverage for short term trades, even one or two failed trades would affect the capital amount significantly.
Favorable conditions for scalping
Before starting scalping, make sure the choice of the right broker who supports scalping.
Then the trader has to know the quote, and for scalping, the five-digit quote is considered optimal.
The size of the spread is an important factor in scalping. In general, it is considered that floating spread is more suitable for short timeframes, and fixed spreads for large ones.
In the case of order types, instant and pending orders are used.
Choosing the session when the market is more active enables scalping. Usually, during the intersection of two sessions, the number of players gets doubled, and the activity increases.
To sum up, scalping yields good earnings. But it’s not suitable for all traders, and everyone who wants to do scalping should check the skills for it. They should have a high concentration, keen observation to know the micro changes, quick reaction to the market stimuli, and the ability to follow the monitor all through the day.
Some brokers don’t accept Forex scalping but we highly reccommend XM Global since the accept the scalping strategy.
Vincent Nyagaka is a Professional Trader, Analyst & Author. He has been actively engaged in market analysis for the past 7 years. He has a monthly readership of 100,000+ traders and has taught over 1,000 students since 2014. Vincent is also an experienced instructor and public speaker. Check out Vincent’s Professional Trading Course here.