Forex scalping is one of the most famous trading styles as it requires limited funds to enter the markets and provides an energetic trading environment full of thrills.
Successful traders always argue that consistency plays an important role for being profitable as a long term trader. There is no straight answer as to which is the best trading style simply because it has to match the individual’s trading experience and appetite for risk. Forex scalping remains a popular trading style due to its principle of fast execution of trading positions. There is no definite time period for the opening until liquidation of positions, but it could range from 3-5 minutes as most scalpers look to exploit adverse price movements and then exit their positions immediately.
Scalpers do not look for great profit opportunities, but instead aim for many small gains within a day. Since execution and speed is of great importance, automated trading systems are often deployed and scalpers make sure that they have a good knowledge of the MT4 platform to setup take profit and stop loss orders to speed up their exit positions.
The practice of scalping is not about relying on luck and random placement of positions with the hope of making profit, but is instead very methodical about decisions to be taken. A lot of scalpers look for sharp movements within the currency market, usually caused by sudden and temporary changes in market liquidity, with the scope of entering a position just after an adverse price movement and then exit as soon as the price pulls back. These sharp movements are often so small that the combined profits from days or even weeks would not make up for the time and effort spent by a trader. This is where leverage is an important part of the scalping strategy, and traders are often involved at some level as it helps for profits to be multiplied in size.
Choosing a Forex Broker
Even though transaction speed and leverage are basic factors for the forex scalper, they are still secondary considerations compared to the choice of a forex broker. Since forex scalping requires the opening and closing of many positions during a day, a scalper must do some research on some forex brokers to find tight spreads for the markets they are planning to trade. Moreover, that forex broker should have an official policy to allow for scalping, strong technical tools through their platform, and the ability of timely execution of orders. easy-forex allows scalping on all its platforms including MT4 and offers a range technical tools enabling traders to make the most of their market insights. Their web, desktop and mobile platforms are best-in-class and recognised for their performance and fast execution and one of the most important features is that they guarantee their stops. This allows the trader to manage their profit/risk strategy effectively especially in volatile markets where the rate they set is guaranteed, regardless of what happens.
Best Forex Currencies
The best currencies suited for a scalping strategy are the ones with high popularity and hence high liquidity. Currency pairs such as the EUR/USD are traded by banks all over the world and they are, in principle, not susceptible to sharp movements as they carry less volatility compared to other, more exotic currency pairs. The time periods considered by risk-taker scalpers to be the most appropriate to scalp the markets are 14:00 – 15:00 (GMT) leading up to the opening of the New York market and also anticipation for news releases soon after the opening. Risk averse scalpers would prefer time periods well into the New York trading session, probably between 22:00 – 02:00 (GMT), where the markets are slower and calm and with slow oscillations.
The popularity of scalping as a trading style is not by any means due to a risk free strategy. The scalper will care less than another type of trader in case one of the trading positions ends with a loss. The scalper’s risk exposure within one trading position is far less than the one of another type of trader. However, scalpers play games of probability too and they need to make sure that most of their many trading positions are profitable. Scalping is not for the faint hearted. This method will be suitable for a trader who wants a fast environment and doesn’t mind the pressure.
Building a trading career by following the scalping strategy means that one has to be disciplined in order to approach the markets methodically and mechanically, with no room for deviations from the rules. The trader has to be patient and calm in times when the markets under observation are volatile. It requires a lot of concentration and the need to be in an environment away from distractions. People who thrive in fast paced and energetic environments will find that scalping could be the right trading style for them.
Author Bio: David Parker is a marketing consultant & content manager for www.easy-forex.com.