Forex scalping is one of the most popular strategies nowadays. It involves making a several really short trades, every single day. It’s almost like day trading, because when you’re scalping you won’t hold your trades overnight. The difference is that when you’re scalping, you’re trading to make just 5-15 pips a trade.
But is Forex scalping for you? Let me give you some information first before you make your decision…
1 – Around 60 – 80% of the time, the Forex market is in consolidation mode. This means that it tends to be in a range for hours before a significant move takes price to another level. This pattern is ideal for scalping, once you fully understand it.
2 – Forex scalping is based in 3 factors:
a) Market liquidity: The more market liquidity, the better, just like when you’re day trading. This means your orders will be executed promptly; there’s always someone out there looking to buy or sell the currency pair you want to trade.
b) Market Volatility: Although the Forex market is volatile, it relies in a range bound 60 – 80% of the time, which is the perfect time for scalpers to trade.
c) Market Timing: Traders won’t be all day long in front of their computer, especially if they’re not full-time traders. You need to evaluate the best time for you to trade (when the market is usually in range bound mode).
3 – You need to be selective with the trades you make. Usually it’s not enough to enter in a trade just because the currency pair is in range bound. You should train yourself to look at supports, resistances, some technical analysis indicators and always being aware of news releases.
Forex scalping often involves high leverage since the trader is trading for just 5 – 15 pips a trade. This way, the profits rise, but the losses too. You need to be careful with the leverage you use because it can be a great thing but also a very bad thing.
If you opt for Forex scalping, you can do it in 2 different ways:
1 – Through a manual system, which requires you to be in front of your computer. This takes you more time but gives you more control over your own account.
2 – Through an automatic system, where the robot makes all the work for you. This way has one terrible disadvantage: Forex brokers don’t like to lose money. Many times, many of them, “change” the prices so that you lose and then the trade goes in your way. Usually Forex brokers don’t like scalpers. This is something that you need to be aware.
If you’re already thinking that you already made your decision about being a Forex scalper or not, I’d like to mention one more thing: only a discipline and patience master will succeed in scalping. Besides, the trader must have a very high winning percentage, since the risk/reward in this kind of strategy is usually 1:1. And of course, the trader must cut his losses.
With all this in mind, I know that you now have in your power information that you can use to make a wise decision. I’m not saying scalping is good or bad. I’m just saying that, just like any other strategy, it may be right for you or not.
thanks very much, please i will be interested to learn more.
You’re welcome Victor.
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Pls what do you mean by forex traders changing their prices.pls explain.is this not criminal on their part
Dear Daniel,
If you stay in this market for some time, you’ll see that “strange” things do happen here… Some brokers manipulate prices in order to take your orders to the stop losses. You need to be careful and acknowledge that some brokers won’t act in your own interest
Good luck
Thanks for your post so far, but i will like to know how to protect my trade so that broker will not manipulate prices in other to take my orders to the stop loss. Is it wise not to put stop loss at all?
I will be glad to recieve a helpful reply from you.
Thanks and God bless.
In case you use automatic systems, you can use software that “hides” your orders from our broker. You can also define a mental target and stop loss instead of placing them directly on your trading platform.
Great read, you can always learn something new about forex!
Thank you.
Good Luck!
Many thanks for your write-up I am aware this will help a whole lot of my clients.
You’re welcome Garland. Good Luck!