Forex scalping is a trading strategy in which the trader makes a profit from an insignificant price change that occurs soon after the trade is entered in to, or begins to make money. For the right trader, forex scalping can be profitable with the perfect exit strategy, but just as easily one failed trade can destroy an entire day of profits.
In a market as volatile as currency, it’s important for a trader to find ways to make a profit that doesn't rely on traditional trading strategies. Scalping offers an opportunity to those willing to take the time to learn and perfect the strategy. Once you’ve learned forex scalping, it can be simple to turn a profit for the day, all it requires is that you make sure your losses don’t outweigh your gains. To make sure you increase your gains and decrease your losses over time, it’s important to understand the different trading strategies and learn how to make them work in your favor.
The primary Style of scalping, is when the scalper participates in many trades per day. The scalps can be as few as five or ten, up to hundreds of trades each day. This strategy requires that the trader rely on shorter time frames, typically one-minute intervals, which allows the scalper to see the action as it happens. Dealing with forex in such short time frames requires a scalper to exercise keen decision-making abilities as well as a timely entry and exit into the market. Some scalpers that use this method also use the services of a direct-access broker to ensure immediate action as the market dictates it’s necessary.
If you trade in the foreign exchange market, but utilize a different time frame than the Primary system, you may want to consider scalping as a supplementary approach. The supplementary approach relies more on the scalper exploiting trends where they find them. If typically, you deal with a lengthier time frame for trading and the market is irregular, you may want to exploit the trends you see within a shorter time frame. This will allow you to make smaller profits when you otherwise wouldn’t make any.
Note: Although brokerage firms and forex brokers often frown upon forex scalping, both the primary and supplementary systems can yield high profits. The major concern for any scalper should be precise execution of an exit strategy. Exiting the market at an inopportune time can wipe out all the profits for the entire day. Strict adherence to your set exit strategy and a careful eye on trends within the market will allow you to scalp or trade with ease.