Scalping in Forex

Scalping referrers to trading style where traders initiate positions for the purpose of exiting them as soon as they move in their direction for x amount of ticks. They try to predict where the very next, tick by tick, price move will be. Thus, it is the most aggressive way to trade the market, and many scalpers enter and exit the market over fifty times a day. Trades can last from few seconds to few minutes which means that everything happens ultra fast.

Many brokers define scalping differently. Some may consider any trade that is closed within 10 minutes or 8 pips of the entrance a scalp trade. Almost all brokers allow this method, but there are a few that do not, so if this sounds like a good strategy to you, make sure you have a broker that permits it.
Success of scalping depends on three major points.

1st Identifying the shortest term chart patterns which have the highest probability of happening. Usually that implies trading around supports and resistances, and brake outs. This can become highly intuitive way of trading as a person develops own ‘feel’ for the market and where it may move in the next few seconds.

2nd Controlling the loss. Unfortunately many scalpers allow their losses to be multiples of their winnings. If you permit your total loss to be 5 times your targeted profit, you can only afford one loss in 6 trades so as to keep your head above the water.

3rd Your broker. Actually, the quality of a broker is best noticed when a trader tries to scalp with them. It is extremely important because how well they execute your trades makes a huge difference in this strategy. If the executions are not instantaneous, and you have to wait few seconds to receive your fill, you probably will be at a huge disadvantage. Equally important is the amount of slippage. Since your profit depends on few pips, you just simply can not afford a broker who constantly gives you fills that are away from the price where you placed the order.

Furthermore, spreads that your broker lets you trade with is equally important. Remember, those spreads are your commissions – higher they are, more you have to make in order to be profitable.

Usually it is not a good idea for novice trader to start scalping. But you can certainly grow into as you learn more and acquire adequate experiences.