In the foreign exchange market, “scalping” is a term, which is considered for a short time trading. It is widely used by many forex traders these days. It is a fact, that it is not only known as a short-term strategy but it is the most short term strategy in the competitive world of foreign exchange business. Let to discuss it in a brief.
What is Scalping in Forex Trading?
The involvement in the forex market to make a profit via buying or selling of forex pairs for a very short time. A day trader opens and closes positions once or maybe a few times a day. They analyze charts of five minutes, fifteen minutes, 30 minutes or one hour. It is a very high-risk trade quick opening and ending of beg position to earn few pips employing high leverage but more profitable. A scalper can win a lot of money when trading on standard lots. He can make on one pip for trading one lot is $10 and if ten pips are involved, $100 can be made on a single trade. If this trade is successfully made two, or more times within a day, then the trader can earn $200 and $300, etc simultaneously. This strategy is considered safe because of the liquidity of the market thus it is popular among traders. However, it does not suit every forex trader.
Is Scalping Profitable for Traders?
Traders who do not wish to stay in positions with greater opportunity to gain are good scalpers. Scalpers are satisfied with a few earnings which come frequently. They tend to forego positions where they may earn a bigger profit. In other words, they do not like to risk and prefer to go to a direction that is safer. They believe that they may earn a huge amount in scalping just like those traders looking for to make it big. This is because when all the small pips generated from each position they initiated are combined, the result is a huge profit just the same.
Scalpers are traders since they can wait for their profit to grow forex profits. They are the traders who do not hurry to earn great gain in just a short period. They are satisfied to earn a few pips in every trade. Traders who have the impulse to earn large profit instantly cannot employ scalping since they might end up frustrated with just a small profit in each position. They are better with positions earning higher gain but accompanied by greater risks.
Although scalping seems easy trading, it entails wants attentiveness. The scalper should be attentive to all the positions he/she initiated because it could be disadvantageous to be neglecting the others while attending to some. Concentration needs to become a successful trader so that the scalper should have more practice.
Traders who consider trading as an additional source of income view scalping as time-consuming. Scalping is not for part-time traders. Scalpers may spend more than five hours daily for practice.
Is Scalping Illegal in Forex?
Forex scalpers are making a heyday out of forex trading. They make profits in their trading and enjoy the most liquid market in the world. However, some sectors see them as illegal and that they trade illegally.
Since scalping is done at a quick pace, scalpers usually do trading only in the major currency like EUR/USD, USD/JPY, USD/EUR, and USD/GBP. They are only after these major currency pairs, which are usually the major volume drivers. They do their trading in session dependent on the liquidity of the currency pairs. They take the opportunity to trade which currency picks up as the major trading currency for the moment. They also look for the opportunity for the currency pair price to change-even for the slightest. They buy and sell quickly and usually take only small gains. They do not trade for the whole day but do trading as many that they can within a short time frame. By combining their small gains from their quick pace trading, they make money.
Since scalpers are after profits, they make sure that their trade is executed at the level they want to. However, their gains are also dependent on their execution of entry and exit. They place order only at a certain level they intend to and do not execute orders away from their intended order level.
Scalpers enter and exit in more than one way. This is sometimes called in forex trading as redundancy. They make use of this jargon to safeguard them from catastrophe. They make sure that they have strong and fast internet connectivity, which is very crucial in their need to get out fast and take the change quickly.
Some forex brokers would not accept scalpers for the reason that they do not allow scalping on their forex trading platform. There is no regulation that would illustrate scalping as illegal. In fact, while other forex brokers shun away scalpers, forex brokers for scalping give scalpers the help their need in their trading. They can give the scalpers the right direction to go and help them determine the sense of direction needed in a successful trade.
Scalpers use a system, which allows them to follow automatically. They do not have time for deep thinking; they make use of a system that they use repeatedly. Forex brokers for scalping usually provide scalpers a system that allows scalpers to make use of short-term charts in their trading and allow them to take instant small profits.
Forex scalpers aim is to make profits without compromising the forex market and if this is illegal, then all strategies used in forex trading for making money can be all deemed as illegal.
How to Choose Best Forex Broker for Scalping?
Those traders to come up with effective scalping results. There is a need for them to come up with the right or choose the best forex brokers for scalping. So before all, you may investigate that either broker allows the scalping or not.
You also need to take note that whenever you are on your way scouting for the right scalping broker, you should not be lured by what the broker tells you. most of the time, brokers tell the clients that scalping is a good idea for a currency trading business but this does not necessarily mean that you should go with that broker once and for all. Why? It is because that broker you are dealing with might not be good enough for you especially when it comes to scalping.
So what are the things that you need to keep in mind when looking for a reliable scalping forex broker?
First, you don’t work in the market maker broker; you should choose the right ECN broker.
Secondly, you need to determine the value of spread, which the broker offers to the traders. This aspect should not confuse you in any way as brokers actually come with various types of spreads. The fixed spread is considered as the most desired for scalping trading. Why fixed spreads? Because they come with costs that are transparent. It allows the trader to create more plans for the betterment of his trading business.
Third, the best forex broker for scalping is the ones that allow scalping strategy, and also gives a quick response to the trader order execution in the financial market.
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