Scalping

Scalping is a trading strategy that the trader try to make many small profits with small price changes, the Scalper will place from dozens to hundreds trades in a single day because it’s believed that the small price moves are easier to catch than larger moves. It based on an observation that the most of the price movements goes in the trader direction for a while of time before it goes in its trend direction! In the Forex world a lot scalpers say “If I make a 20-25 pips per day by scalping the market and with a proper money management I might double my account balance every month”.Theoretically, true! But what about the risks? What about the risk of scalping the market? Scalping risk While it seems profitable method when scalping the price movements,however the spread you pay when you open a trade makes the method more risky than the long term trading (trend trading). For example if your broker charges you 5 pips spread for opening EUR/USD position and your target is 10 pips and 10 pips stop loss; the price have to move 15 pips (5 pips of spread + 10 pips your target) to take the profit while it have to move only 5 pips (10 pips your stoploss - 5 pips of spread) and stop loss level will be reached.So, the risk-reward ratio in this case is 2-1 which means a very dangerous and risky method to scalp! Another risk in the Scalp is that one large loss could eliminate the many small gains that the trader has worked to obtain. So it needs a very good exit strategy to decrease this risk! Rules for Scalping In order to scalp the markets effectively, you must apply certain rules which do not necessarily apply to other forms of day trading. You will need to know and observe these rules carefully and consistently if you plan to become a successful scalper: 1-To compensate for the relatively small size of moves which you will attempt to be capturing as a scalper, you will need to trade considerably larger position. 2-If you are willing to accept the risk of trading larger position, and then you cannot scalp the markets in a fashion which makes trading worth your while. 3-To be a successful scalper, you will need to take your losses as well as your profits very quickly. Summary No matter what method you use for scalping the forex markets,remember that the scalper attempts to achieve the following important goals: 1-To trade as often as possible to accumulate as much profits as possible by taking advantage of small but reliable moves within the day time frame 2-To exit positions very quickly either at a profit or at a loss 3-To avoid having a strong opinion as to market direction in order to limit the possibility of being influenced to act on opinion as opposed to market fact Go Back to The Forex