What is forex scalping?
Scalping at its core is very similar to day trading, only it’s done at an even faster pace. The aim of scalping is to try to skim small amounts of profit off forex trades conducted multiple times a day.
While with both day trading and scalping you will never hold a position overnight, with scalping you may be opening and closing hundreds of trades a day hoping to gain as little as 5 basis points each trade. Analyzing tick charts and one-minute charts, scalpers try to time their trades to profit from market swings.
The key is to predict market movements by studying real-time economic data, analyzing fundamentals, tuning into the latest news and using any other available tool to get a read on the financial impact of what’s happening in the world.
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Is forex scalping a good strategy?
Even though scalpers close trades when they have gained just 5 to 10 basis points, forex scalping can end up being very profitable due to the sheer number of trades scalpers make and the leverage that they have when making them.
Say a pip’s value is $10. If you make 5 to 10 pips per trade, and you trade hundreds of times a day, you can start potentially bring in some serious profits.
However, not every trade will be profitable and, as a scalper, you need to be prepared to cut your loses as soon as you see a trade losing 2 to 3 pips, even if you don’t have time to fully analyze the situation.
Who should do forex scalping?
Due to the high pressure involved with being a forex scalper, it’s a trading method that’s only cut out for certain personalities. If you’re happy to spend hours monitoring data on a screen that’s constantly switched on, then you might enjoy scalping.
The fast-paced nature of forex scalping is perfect for those who enjoy the pressure and excitement of a fast, dynamic trading environment and are able to make quick decisions without much time for analysis.
If you’re someone who is easily stressed or who likes to get a solid overview of the market and delve into the facts and figures before making a decision, then you should probably steer clear of forex scalping.
Where do I trade forex?
Forex scalpers look for the most active markets available. The 3 most traded currency pairs are EUR/USD, USD/JPY and GDP/USD. The best times to trade are when both London and New York forex platforms are open as these are the most active locations for making forex trades.
When looking for a broker, look for platforms that offer low spreads and low commissions. Then you’ll have more room for unanticipated losses than if you have to pay higher fees. Always practice on a test account before investing any real money. Understanding how the system works is crucial. With so little time to make trading decisions, even a small error could prove costly.
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