When people are talking about small-time online Forex trading, they almost always talk about scalping. After all, it is one of the most profitable Forex trading strategies — and you can scalp effectively with only 100 USD as your starting capital. However, scalping is also one of the riskiest and most exhausting strategies available, and it is easy to get wrong.
What Is Scalping in Forex
Scalping is a catch-all name for trading strategies that prioritize a large number of orders that get closed only after a couple of ticks. Scalping takes advantage of minuscule price movements on the tick or minute chart and often nets the trader only minimal profits.
To determine when to open which positions, the scalpers constantly parse the news and try to hop onto the bullish and bearish movements. The amplitude of these movements doesn’t matter — the scalpers jump off them after getting only 5-10 pips of profit.
5 pips equal to 0.5% of profit — not much by any mean. However, that’s just one deal — and scalpers open around a dozen of them each hour. Not all of them are successful, but at the end of a trading day, an experienced scalper often has 5% or more of pure profit. Which equals 100% profit monthly, provided the scalper keeps regular working hours.
However, scalping is highly demanding and certainly isn’t for everyone. For each successful scalper, there are hundreds of those that lost all their money on the strategy.
What Makes Scalping in Forex Difficult
A lot of Forex trading strategies depend on thoughtful analysis and careful planning. For example, Price Action is all about finding patterns in the candlestick charts and making educated guesses to what these patterns mean. Therefore, Price Action traders usually trade on hourly or even daily timeframes, which provides them with ample time for analysis.
Scalping is different from the ground up. The best timeframe for scalping is 1-minute, so very often you have to go with your gut. The time for pattern analysis or risk assessment is a luxury in scalping and often leads to lost profits. And there isn’t much profit in each deal, to begin with.
To be a successful scalper, you need to:
- Be prepared to crunch charts and numbers for 8 hours per day;
- Make decisions fast, almost without thinking;
- Stay calm under high-stress conditions;
- Understand that losses will happen;
- Trust your luck for long periods.
If any point on the list doesn’t describe you — don’t try scalping. Even if you manage to stay successful, you will end up burning out on this job.
Also, it is very important to find an appropriate Forex Broker because not every Broker permits the use of different trading strategies. A good example of proper Forex Broker is JustForex where all the trading strategies are allowed to be used. This reliable broker has good reviews and offers favorable trading conditions.