There are numerous different types of forex trading strategies available for use, one of them being scalping. This strategy can be highly beneficial however it is not recommended for all traders. Due to the need for quick decisions, intense analysis and highly stressful situation, it is not advised for the beginner trader. While many new traders feel they are prepared for this type of trading condition, they may find themselves incredibly aghast when using this strategy.
Scalping forex trading strategies defined
The scalping forex trading strategy may be placed in the category of short-term trading strategies. It operates on a very short time frame with the average trade lasting approximately five minutes or less. This means a trader must be on the market during trading and must be fully focused on the trade. The scalping strategy also requires multiple trading to be completed daily as one does not incur much profit from the different trades. In fact, the different trades have been known to bring profits of only 1 to 3 pips each.
How to place a trade with a scalping strategy
When trading with a scalping strategy you are required to take note of different market trends. This must be done as scalpers will use the trend to determine which trades to enter. Unlike the swing trader, the scalper will not ‘ride’ a trend of a length of time, but rather will gain a number of pips and then exit. It should be noted that trends can be identified using forex signals specific to scalpers.
The most effective time to position a trade when scalping is once the trend has begun. This will ensure a profitable trade. As the scalping time frame is so short small fluctuations can be used to ones advantage. However, it is the experienced traders who will be best at this behaviour as new traders are usually unable to identify the small fluctuations in a trend.
What is required to start scalping?
If one is considering the forex trading strategy of scalping you will need to be aware of certain factors such as the start-up requirements. The majority of people are looking to earn money on the forex market with a minimal capital amount. If you are hoping to do so with scalping, you will be deeply disappointed as a greater trading capital is the safer option when scalping. This is due to the amount of leverage associated part of this forex strategy. The greater your trading capital the lower the level of risk when using leverage. Also, more capital allows for a greater amount of leverage to be used.
What are the risks of the scalping forex strategy?
The forex market is a highly volatile one thus making forex trading an incredibly risky occupation. All forex trading strategies involve a level of risk and when choosing your strategy you must consider what these risks are. The majority of traders utilise scalping in order to use large leverage amounts and it is this behaviour which increases the risk of scalping. Leverage can be very beneficial in producing great profits, however if the market swings against you leverage can cause devastating losses. Many traders have experienced trading account depletion due to this risk.