Forex Scalping Explained
Primarily there are two trading styles in forex trading: Short term and long term. Short term trading is done when positions are opened and closed on an intraday basis. Long term trading positions may span a few weeks or a few months.
Most of the day traders are short term traders. Day traders love scalping. A position is opened and closed within minutes making a few pips per trade.
Scalping takes advantage of the fact that most of the time the market is ranging. Ranging means there is no significant price movements or volatility. The aim of a scalper is to make 2-5 pips per trade.
When the market is consolidating and ranging best suits the scalpers. For example between the close of the US market and the open of the European market, forex markets tend to be ranging for hours. This is the best time for scalpers.
However, the more you trade, the higher your trading cost becomes. For example if the broker is giving a 4 pips spread to you than this 4 pip is your trading cost per trade. You will have to make more than 4 pips per trade to start making profits.
In order to become successful at scalping you need thorough understanding of technical analysis. You should have an idea of how to determine over/under brought, support and resistance levels, trendlines, trading channels etc before entering into a trade.
Most of the forex brokers hate scalpers. Since the brokers are most of the time trading against you, a successful scalper can take profits away from the brokers. No doubt many brokers try to ban scalper from trading.
Scalping can be profitable if done many times every day and if the number of pips made each day is more than the number of pips lost.
In order to make good profit with scalping you will have to use high leverage. Is it a good thing?
Is leverage dangerous? Yeah, it is like a double edged sword that cuts both ways. Leverage works in your favor as long as you are on the right side of the markets. But it will wipe you out if you ever get caught on the wrong side of the market. Understand leverage before you use it.
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Forex Scalping Explained | Retirement Club « The Forex News said,
June 26, 2009 @ 11:27 am
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