What Is Scalping In Forex?
What Is Scalping In Forex?
If you’re a trader looking for an environment that’s fast and full of excitement, then you should consider scalping! Scalping is a popular short-term trading strategy where you make more than one small trade on currency pairs from small price movements to profit throughout the day. At most, these trades get held onto for a period of a few seconds to a few minutes, letting you benefit from price fluctuations.
A pip (percentage in point) in the forex market is another name for a currency’s smallest price movement, which you’ll use to measure profits and losses. A scalper’s main goal is to get small amounts of pips throughout the busiest times of the day, as many times as possible. Phew, that’s a lot! But don’t get discouraged. I’m here to take you through the process of scalping!
What’s the Deal With Scalping?
Scalpers can benefit from all the small movements, as they happen more often than the larger ones, even when markets are calm. If you’re considering scalping, you’ll get the opportunity to make small profits from placing a few hundred trades every day.
Unfortunately, you’ll have to have high concentration and strong focus skills, as you’ll need to be giving your attention to handling the demanding and fast trades. Expect to watch the charts hours on end! Look, I get it. Not everyone can be staring at the screen all day, but it is what it is!
The ultimate goal of scalping is to make small wins over a longer period, so don’t expect to make big profits right away. Scalping comes with a lot of patience and time so that you can reap the rewards!
To be successful with scalping in forex, you need to choose high volatility currency pairs. This will give you more opportunities to trade so that you can get results from quick gains within a fast-paced market.
If you choose to trade with less volatile pairs, it could take longer for the rates to move. So, instead of having trades that last 5-10 minutes, you’re looking at trades that’ll last 30 minutes or more.
How Do You Know if Scalping is Right For You?
You must be wondering if scalping is for you. Scalping is only a good idea if you have the right personality and risk tolerance for it. Well, let’s look at a few characteristics of someone who would be great at scalping:
You enjoy the excitement and speed that comes with trading
- You have no problem staying focused and watching your charts throughout the day, often for several hours
- You don’t have any trouble changing direction and can think quickly on your feet
- You can get your fingers to move quickly!
- You hate waiting too long for trades
How Do You Know if Scalping is Not For You
Scalping is not for everyone, but how do you know if it’s not for you? Let’s look at a few characteristics of people who would most likely not enjoy scalping:
Fast trades stress you out
- You prefer to get higher gains from fewer trades
- You don’t have the time to watch over charts for hours on end
- You enjoy analyzing the market
What You Should Know Before You Start Scalping
There are a few things you need to know before you choose to start scalping.
Only trade the most liquid pairs
The most liquid pairs are GBP/USD, EUR/USD, USD/CHF, and USD/JPY. These currency pairs have the highest trading volumes and offer the tightest spreads. You’ll want tight spreads seeing as you’ll be entering the market often. If you’re new to trading, I recommend that you start with one pair and slowly move your way up to more pairs until you’re comfortable with scalping.
- Only trade when it’s the busiest time of the day
The most liquid (or busiest) time of the day is when sessions overlap. This usually happens between 2:00 am and 4:00 am and again between 8:00 am and 12:00 pm EST. Another way to know the best times is to look out for when trading sessions start in London, Asia, and North America.
Focus on one pair first
Scalping can get pretty intense, so I suggest you start by focusing on one pair to be successful. You’re shooting yourself into the foot if you try more than one pair at the same time when you’re still a beginner. Only once you’ve gotten the hang of scalping, I would suggest you try it with two pairs, and so it goes on.
Bad news is never good for you!
There’s so much volatility happening in the market, and it often comes from bad news reports, such as government data that gets released. This is dangerous for scalpers because you can experience price jumps in the opposite direction of what you were hoping for!
Practice with a demo account
It’s never a good idea to start something that you know nothing about. I can’t stress this enough – practice first before you try scalping live! Trading platforms usually come with demo accounts for you to practice on, and the practicing gets done on a live platform, but only with virtual money. You’ll get peace of mind if you lose money knowing it’s not real cash.
Manage your risk
The number one rule of trading is to never trade with money you can’t afford to lose! There are people, especially beginners, who think they will make money quickly and end up losing everything they put in. Be smart and don’t do that! Instead, start small so that you won’t feel it as much if there’s a loss. And don’t trade with your emotions! Making decisions with your feelings will only get you in trouble with you making bad decisions. Don’t think with your heart – think with your head.
Scalping is risky and takes a specific personality type to reap the benefits and make good profits. Don’t be too shocked when you start for the first time – the speed of this trading strategy can get overwhelming !
Keep practicing on a demo account if you feel uncomfortable or unsure of yourself, and remember to never trade with more than you can afford to lose. There are simple rules to follow, and you can be successful if you’re not afraid of thinking on your feet.