Scalping strategies could be an interesting method for you to trade in the financial markets, if done correctly. So firstly, what exactly is scalping and scalping strategies? Most traders find it quite attractive to make quick trades and quicker profits, but scalping requires a disciplined and persistent approach. This article explains about scalping in greater depth and what scalping really is considered to be. In addition, we will analyze if scalping is an appropriate trading style for you, how traders can apply scalping methods and what aspects are critical to increase your success with scalping.
What is scalping in Forex?First and foremost, we’ll explain what scalping is in Forex and when it is considered scalping trading. Forex scalping as a definition is a trading style or technique where traders buy and sell a financial instrument (such as EUR / USD) within a short period of time. Like other styles of trading, scalpers enter financial markets by taking long (buy) or short (sell) positions. These orders are closed by doing the opposite: a sale closes a long position and a purchase closes a short position considering the number of positions, the trader's intention and the leverage are critical factors that play a role when scalping.Order duration - this varies with each order, but FX scalping trading can be as short as a few seconds and as long as a couple of hours, although this is rare. Usually, an operation takes at least a few minutes and up to a maximum of an hour or two.
- Trader's Intentions: A scalping strategy or method is deliberately aimed at short-lived trades and often smaller profits. A swing trader who decides to close his trade unexpectedly after an hour is not a scalper. In this case, the trader is only closing the trade more prematurely.
- Leverage: Scalpers usually apply more leverage than any other style of trading to increase profits. Of course, keep in mind that leverage works both ways: You can achieve potentially high gains, as well as higher losses.
- Number of Positions: Scalping trading strategies usually offer more opportunities in one day. Scalpers tend to enter and exit more frequently, compared to intraday or intraweek trading systems.
When you compare scalping to standard daily trading, there are some advantages and disadvantages to scalping. Let's start with the benefits of scalping and applying a Forex scalping technique:
- They offer more opportunities to operate.
- They tend to offer a high percentage of profit.
- Exposure to market risk over time is limited.
- They provide fast results.
- You can regularly enter and exit operations.
- The main disadvantages of scalping Forex trading are as follows:
- Small gains, while losses can be larger at times.
- More time is spent behind a computer.
- There are higher costs through the spread per trade.
- For some traders it can be stressful.
The pros and cons mentioned above are the main reason why it is recommended that traders test their scalping strategy on the LVMexchange Demo account. If traders use a live account, it is recommended that they apply risk management techniques, to ensure that they effectively manage the risks involved in this style of trading.Traders can apply scalping strategies to a wide range of financial markets and instruments, including Forex and CFDs. The main reason is price volatility. Here are some of the most interesting Forex instruments and CFDs to trade:Currency pairs such as EUR / USD, GBP / USD, and GBP / JPY are known for their price volatility during the trading day, and offer various opportunities for forex scalping.
*LVMexchange notice: Remember that small trades closed quickly to scrape profits off the top… it’s important to consider that the actual amount of profit is determined by the trade volume. Small quick trades, of highly expensive or valuable amounts, is of course more profit.