Traders, especially those starting out are often looking for forex strategies that will extend the scope of the things they can do from their trading platform. As we all know, forex is the most liquid and the most volatile market, hence while many traders are bearing through minor price fluctuations to get a gain of some 100-200 pips per their trade, there is a whole army of forex scalpers trying to squeeze every possible opportunity out of these small fluctuations in the foreign exchange quotes.
There is a great deal of confusion when it comes to the topic of scalping. The allure of fast paced trades, and even faster money is a great pull to new and experienced forex traders alike. To determine whether we should be scalping or not we must first define what scalping really means. Scalping is the action of taking many short term intra-day trades with the intention of only holding the trade for a few minutes. Those who scalp the forex market may only look for a very small take profit, capitalizing on moves smaller than 20 pips more often than not.
Scalping the forex market requires constant analysis and the placement of multiple orders, which can be as demanding as a full-time job. In addition, there are only a few hours a day when you can scalp currencies. After availability, the next most important thing is being able to think on the fly. For a scalping forex strategy to succeed, you must quickly predict where the market will go and then open and close positions within a matter of seconds.
Just like any forex trading system, there are many different forex scalping strategies. But only few earn the title of best forex scalping strategy! Scalp trading can be based on the news as key political speeches; recently released statistics (think GDP, unemployment, trade balance reports, interest rates and inflation levels) can all have a major impact on a country’s economy, and consequently, its currency. Essentially traders are speculating on how foreign currency might react, even if it is only for a short while (that’s all they need.)
Most traders tend to be either scalpers or day traders or position traders – sticking to an area of expertise that suits their personality, lifestyle or, simply, what works for them. Forex scalping can be seen as an ‘individual’s trading style’ or alternatively, it can be very useful for markets that move sideways. When a market is moving sideways, it is hard to place trades over a longer time frame as the direction or the price is more obscure. When the forex market is choppy – Scalp trading can prove to be the perfect tool for putting pips in your account during these tricky periods, taking small profits here and there when you see the right signals.