The Ins and Outs of a Forex Scalping Strategy

A forex scalper KNOWN AS forex scalping strategy is a special type of investor who focuses on incredibly fast trades in order to quickly capture profit. Suffice it to say that forex scalping is not for everyone; it can be a very intense and often stressful experience which demands your constant and continuous attention.

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Nevertheless, it can also be a very profitable and there are certain specific benefits to using a forex scalping strategy that are unique to the foreign exchange market. Here are the ins and outs of this type of trading strategy and what you need to know… Forex scalping is the act of initiating a trade and then closing it very quickly thereafter. Sometimes this can be seconds, though it’s most commonly minutes.

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This takes advantage of the fact that the market does fluctuate and the trade will usually go a little down and a little up just after you’ve initiated it; there is that “wobble” that almost always brings you above a profit margin for some time just before the trade takes its true direction, whether that be profitable or not. Many traders look down upon this strategy because it is considered to be brute force; it does not take into account many of the traditional technical analysis signals because it’s simply focused on capturing profits as soon as possible and taking advantage of the mechanics of the market. But other traders understand that in the world of trading it’s all about what actually works.

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Forex scalping also means that many of the traditional mechanisms used in trading — stop losses and take profits — are used differently. For instance, scalpers will often set their stop losses and take profits very close and they may not set them at all because their strategy requires fine-tuning and control.

What is Scalping ?

The Benefits of a Forex Scalping Strategy?

  • You can capture profit fast. Rather than having to wait on your trades developing, you simply close your trades as quickly as you can once you’ve gotten a profit. This also means that you aren’t keeping any trades open, which leads to…
  • You have peace of mind. You don’t need to worry for hours or overnight regarding whether your trades are doing properly. You never have trades open for considerable amounts of time; you can close your trades out at the end of each night and rest easy. In other words, you never lose control of your accounts.
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What Are the Downsides of Forex Scalping?

  • Brokers don’t like it. In fact, some brokers will actually cancel accounts if they deem a trader to be using a scalping strategy. There are those who look down upon it because it increases fluctuations in the market; other brokers just don’t want to be handling such a high volume of fast and unpredictable trades. On the other end…
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  • It can be expensive. Every time you trade you need to pay the spread, so that does mean that you have a larger percentage of profit the faster you close the trade (or, rather, the less profit you make per trade). This just increases the risk of the strategy because it means you need to be making more profit consistently each time.
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As you can see, a forex scalping strategy is one of benefits and negatives.

In fact, it’s really ideal only for those who are naturally scalpers at heart. If you enjoy the adrenaline of starting trades constantly and managing them quickly, then scalping is for you. But if it seems too high intensity as a trading strategy, it isn’t likely to go well.

Scalping trading is a very unique strategy that is also considered fairly controversial, but it definitely does get results in the right hands.

Try reading: Identifying the Best Times to Trade Forex