Forex Scalping

One of the most popular strategies in the Forex market recently is the practice of scalping. Forex scalping is very similar to day trading in that it takes place over short periods of time. Also, rather than make a huge profit with each trade, scalping only looks to make a profit of 5-15 pips per transaction.

Despite all the talk about how volatile the Forex market is, the fact remains that 60-80% of the time it’s in consolidation mode where it stays within a narrow range and hours can pass before there’s another major trend. It is during these times that the opportunity is best for scalping.

There are three factors on which Forex trading is based:

1) The more liquid the market the better. Liquidity means there are a lot of trades and when you are only making 5-15 pips per trade you need a lot of them for it to be worth your while.

2) The intensity of the volatile periods overshadows the more settled period (the 60-80% mentioned above) and it is easier to get trades through in these circumstances.

3) The timing of the trade is critical. Since you won’t be at your computer all day you need to determine which time of day is best for scalping.

You also need to keep in mind that just because you’re scalping and not expecting a large increase in pips, that doesn’t mean you should be careless with your trades. This is still money after all. You still need to pay attention to trends and indicators just as you would if you were doing more traditional trading.

There is also a variety of both manual and automatic systems for scalping. The system you end up choosing is actually more important than if you were doing regular trading because you will be significantly more leveraged in your accounts due to the low amount of pips in play.

One final thing to be aware of is the fact that Forex brokers are not fond of scalpers because they cut into their profit margin.

As you can see there are pros and cons to scalping as there is with most everything in the Forex market. You just need to decide if the rewards outweigh the risks before you begin.