Forex Scalping is a strategy used in forex trading, aimed at making huge profits from small changes in price. Traders who implement this strategy, also known as scalpers, place several trades, up to a couple of hundreds in one day. These traders believe that it is easier to catch small changes in stock prices than large ones.
Forex Scalping basically entails buying or selling a number of shares at the bid, or ask price, and then selling them at a profit for a few cents higher or lower within the shortest holding period. It requires correct timing and execution to maximize profits. However, the intensity of scalping requires one to have enough liquidity to ensure the trades are executed quickly.
Scalpers aim at grabbing little amounts of pips as much as they can during the busiest hours of the day. However, scalping requires one to be glued to the charts, which basically means spending quite a few hours of full attention to the trading. To succeed in forex scalping, one has to be quick thinking, have fast fingers, and possess intense focus. If by any chance an individual feels like their attention is divided for whatever reason, they should not scalp.
On the other hand, scalping may not fit those looking to make huge profits all the time. However, it is perfect for those willing and ready to rake in smaller profits that add up to a big win in the long run. For those who cannot commit several hours of undivided attention to the charts, or who like taking their time to analyze the overall market picture, then scalping is not their thing.
Nevertheless, if anyone decides to become a forex scalper, there are important things to consider.
- Trade over the busiest hours
- The busiest times of the day are the most liquid hours. This is usually through the session overlaps from 2:00 to 4:00 am and from 8:00 am to 12:00 noon Eastern Time.
- Concentrate on one pair first
Considering how intense scalping can get, one will have a higher likelihood of succeeding if they focus all their energy on one pair. With time, one may become accustomed to the intensity of things and start by adding on another pair to see how things work out.
Trade the most Liquid pairs
The most liquid pairs such as the USD/CHF, EUR/USD, USD/JPY, GBP/USD offer the tightest spreads as a result of their high trading volume. Since one will be entering the market often, it is particularly important to have their spreads as tight as possible.
Accounting for the spread
Spreads are a big factor in the overall profit of an individual because they frequently enter the market. It is important for a scalper to have their targets at least double their spread so that they can account for those times the market shifts against them.
Overall, it is also important to have a trading strategy such as the Forex price action. Forex price action is the analysis of price and it assists a trader to predict with a higher degree of accuracy the next prices expected to do.