Forex Scalping is a quick and simple trading strategy that can provide you with quick gains without taking too much risk. It is a method where traders allow their positions to last only for a matter of seconds, to a full minute and rarely longer than that. As a rule of thumb if a trader holds to a position for more than a minute or two it is considered no longer a scalping, but rather a regular trading. However, we don't want you to be stuck to definition, but focus on the underlying principles.
The goal with scalping is to make small profits while exposing a trading account to a very limited risk, which is due to a quick open/close trading mode. There wouldn’t be any point in scalping for many traders if they weren’t offered to trade with highly leveraged accounts. Only ability to operate with large funds of presents traders the opportunity to profit from even a 2-3 pip move.
How do they do it? Example:
Suppose a scalper opens a trading position of 100 000 units with EUR/USD. For each pip he will now earn $10… Closing in with only a 3 pip profit brings it up to $30 — not bad for less than a minute of work.
Why Some Brokers Are Against Scalping?
If a scalper constantly wins, the broker would obviously sustain some losses. Obviously, dealing desk brokers will not allow this and are most likely to ask you to stop or find another broker. However, if a scalper stays in, the brokers can slow scalper performance down by setting delays between an initiation of the order and its actual filling. This provides the dealing desk brokers with more time to countertrade/process each order to prevent own losses in case a trader closes in profit.
The broker that will not object to forex scalping is the one that has the best trades processing automated platform. Using straight through processing (STP) there is no intervention between a trader and a market maker — the software is taking care of the whole business process. So, it's more likely a broker with a slow business processing platform would object to scalper's forex trading style.
There are many strategies at work based on the simple principle of scalping. Below are the list of techniques. 1. Scalping system #1 (Economic news releases) 2. Scalping ideas (ADX and Bollinger bands) 3. Scalping system #2 (Morning breakouts)
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