All About Scalping Forex Trading Strategies
There are hundreds of forex trading strategies available to traders; however one of the most commonly used is that of scalping. This strategy is not advised for all traders, truthfully many experienced traders warn new traders to avoid it. This is due to its intensity and the analysis required in order to use it effectively. However, there are new traders who choose to adopt scalping and often find themselves overwhelmed. It is only when one understands the scalping strategy that you will know how to manage it and whether it is best suited to your personality.
What is the scalping forex trading strategy?
Scalping is a forex trading strategy that operates on a very short time frame. When using this strategy one will note that trades last little more than 5 minutes. As this is the case, traders are required on the market and highly attentive at all times. Scalping also requires a large amount of trades to be completed each day. If not, you will not make any profit above 1-3 pips per trade.
What to consider when using scalping forex trading strategies
When you are using the scalping strategy, you will be working with market trends. In order to work with a trend, you will have to see a trend in motion. Unlike swing traders, a scalp trader does not ride the trend for long periods of time. He will use it to gain a few pips and then close the trend just as quickly as it was opened.
The most effective time to place a trade using the scalping strategy is when a trade is happening. If placed during this period one is sure to make a profit. However, smaller movements can make profits as well when scalping. As the time frame of the trades is so short, fluctuations is the market can be used as well. However, it is experienced traders who benefit most during this period as they have more practical knowledge of picking up the trade when small fluctuations take place.
The risk of the scalping trading strategies
When choosing a forex trading strategy, one must always consider the risks involved. Scalping is generally considered too risky because of the amounts of leverage used. In order to make a trade worthwhile traders will use large amounts of leverage during a trade. This increased amount is a very risky factor, for if anything were to go wrong with the trade the leverage could eliminate all capital in the traders account.
The amount of capital needed
When a trader chooses to use scalping as a trading strategy he must be aware of the capital requirements. Many traders trade the forex market using a minimal amount of capital; however with scalping you will require large amounts as a trading base. The reason for this is linked to the large amounts of leverage you will be using. The greater the capital in your account, the lower the risks of leverage are and the more leverage you can use.