What is Forex scalping?
‘Scalping’ is the name used for a trading method that used to be reserved for share traders but which has become both sensible and effective to use on the foreign exchange market. The aim of this method is close to that of Day Trading as here again your objective is to make many small profits by accumulating orders and positions over the short term. Forex scalping therefore uses spreads, preferably those that are low and require a high level of reactivity and availability from the investor.
In any case, scalping is not really recommended for beginners as it requires a certain market knowledge and it is therefore best to start by trading in a more traditional way before trying this technique.
Some advice for using Forex scalping:
The foreign exchange market is undoubtedly the ideal market for practising scalping due to its strong liquidity and the very low transactions costs. The first piece of advice to follow is in fact to try trading particularly in the currency pairs with lower spreads. As the profits are often very small with scalping, it is in fact very risky to choose pairs with high spreads that could negate your transactions or even make them negative. Favour less expensive currency pairs such as EUR/USD, USD/JPY or GBP/USD.
The choice of the time when you will apply this method is equally important. It is actually preferable to choose the most volatile moments, such as 2 p.m. to 6 p.m. as all the traders, European and American, are active at this time.
For the technical analysis, ideally you should set your charts for 1 minute intervals that will indicate the tiny variations more precisely.
Finally, the last piece of advice is to limit your losses to the maximum. In fact, the lower your losses, the more your profitable transactions will be sufficient to make you a profitable trader. You therefore need to know how to cut your losses at the right time.
The advantages of Forex scalping:
As explained above, the primary advantage of Forex scalping is that it does not require a long term market analysis and is particularly well adapted to the currencies market.
Another thing, Forex scalping enables traders to no longer depend on market conditions as here we only trade on small opportunities. It is due to this that the support and resistance levels are the two best indicators to use for scalping.
The accumulation of positions also offers the advantage of reducing losses over the long term. Although it is possible to keep a scalping position at night, it is however advised, as with Day Trading, to close all open positions before the end of the day’s trading session to avoid risk.
We can conclude by saying that although Forex scalping is a fairly simple method, it requires certain abilities to be perfectly mastered. It is therefore reserved for traders who benefit from an initial trading experience.