When it comes to forex scalping, you’ve probably heard conflicting opinions. We break down the truth behind this practice and whether its worth trying.
Trading at high volumes of up to $80 million per second, the forex, or foreign exchange, market is known as the most liquid in the world. Current trade wars make it tougher, but the market is a resilient one.
Forex scalping is one practice where a trader makes a large number of trades for a small profit. Because it is seemingly not terribly difficult and has the potential to realize large gains, many are jumping into the forex scalping game.
But, how exactly does one do it? And, is forex scalping worth it?
Keep reading, and we’ll separate the truth from the myth. Find out if you — like George Soros and other famous investors — have a future in forex scalping:
What is Forex Scalping?
The term “scalping” in forex markets means currency trading in real-time, and its purpose is to quickly turn small profits after holding for a very short time.
If you’re going to play the forex markets, and especially if you’re going to dip your toe into the scalping waters, it is necessary to have a reliable real-time analysis to work from.
Forex scalpers buy and/or sell currencies and hold their positions for an extremely brief amount of time — sometimes just minutes. They often place many trades before closing bell, using a real-time system based on technical analysis charting and forecasting tools that create a signal set.
This signal set automatically generates a decision to buy or sell when signals point in the identical directions. Every time this happens, a practiced forex scalper seeks to find a large number of currency trades that will turn a small profit.
The Forex Scalper’s System
Some traders use manual systems, where they themselves look for signals in their charting tools and individually decide whether to buy or sell. This method can work for some and maintains the illusion of control.
Increasingly, however, the signal sets are automated. The trader inputs parameters and programs her or his software to make trades based on his or her preferences. Automation is becoming more popular with individual traders, as they can have their attention split between markets or tasks this way.
Regardless of the type of system, a forex scalper will always prefer the most accurate, up-to-the-minute real-time charts.
Is it Worth It?
Forex scalpers are typically those with large buy-in amounts or “retail” traders. If you are a day trader with little money and less experience, it will likely be unwise to choose forex scalping.
Some scalpers start their careers with “play money,” learning how to best utilize the charts and deciding whether automated or manual trading is best for them. Other people throw caution to the wind and make forex their full-time job as soon as possible.
Some people swear by this type of trading, as it creates many opportunities for trading throughout the day. Most scalpers try to gain no more than 10 pips per trade, and they try to keep losses to 7 pips.
Avoid the Pitfalls of Forex Trading
You’ll need beginner’s strategies and other articles to help maximize your investment and move you to the next level. If you want to trade forex currencies full-time, but avoid the pitfalls that so many beginners succumb to, check out RedHotFX.