Scalping

Scalping is similar to those suspenseful thrillers that keep you on the edge of your seat. It's fast-paced, thrilling, and mind-boggling all at the same time.

Scalp trading, often known as scalping, is a common trading practice in which trades are initiated and closed in relatively short periods of time.

These types of trades are often held for only a few seconds to minutes at most!

Forex scalpers' main goal is to grab very little sums of pips as many times as possible at the busiest times of the day.

Its name comes from the method through which it achieves its objectives. A trader's goal is to “scalp” a large number of tiny profits from a large number of trades.

What is there about scalping that attracts traders？

Even in relatively tranquil markets, smaller moves occur more frequently than larger ones. This means that a scalper can profit from a variety of tiny movements.

Scalpers can make hundreds of trades in a single day in search of modest returns.

At the end of the trading day, all positions are closed.

Scalpers are best suited for people who can devote several hours of undivided attention to their trade because they must be hooked to the charts.

To be effective, you must be able to concentrate intensely and think quickly. Not everyone is capable of dealing with such frantic and demanding trade.

Check out this post from Dr. Pipslow, our regular psychologist, on how to improve your focus skills.

It is not for individuals who are searching for big wins all of the time, but for those who prefer to make tiny profits over time in order to generate a larger profit.

Scalping is based on the idea that a series of minor wins can quickly add up to a significant profit.

These minor victories are attained by attempting to profit from rapid fluctuations in the bid-ask spread.

Scalping focuses on taking larger positions for smaller earnings in the shortest time possible: seconds to minutes.

The premise is that price will finish the initial stage of a movement in a short period of time, therefore market volatility will be exploited.

Scalping's basic purpose is to create a position at the ask or bid price and swiftly close it for a profit a few points higher or lower.

A scalper seeks to “cross the spread” rapidly.

For example, if you go long EUR/USD with a 2 pips bid-ask spread, your position will start with a 2 pips unrealized loss.

Keep in mind that when you buy, you're paying the asking price. However, in order to depart, you must sell at the bid price.

A scalper aims to transform that 2-pip loss into a profit as soon as feasible. To do so, the bid price must climb to a point where it is higher than the ask price at which the trade is being made.

You may be a forex scalper if:

• You enjoy fast trading and excitement.

• You're not bothered if you have to concentrate on your charts for several hours at a time.

• You have a short attention span and dislike waiting for extended exchanges.

• You have the ability to think swiftly and change your bias, or direction, quickly.

• You have quick fingers (put your esports skills to good use!).

• You're a surgeon, right？

You may not be a forex scalper if:

• You feel easily overwhelmed in fast-paced circumstances,

• You won't be able to devote several hours to your charting without interruption.

• You'd rather make fewer deals with higher profit margins than make more trades with lower profit margins.

• You enjoy taking your time to examine the market's entire picture.

If you decide to scalp, here are some things to think about:

Only the most valuable items are traded.

Because of their enormous trading volume, pairs like the EUR/USD, GBP/USD, USD/CHF, and USD/JPY have the tightest spreads.

Because you will be entering the market frequently, you want your spreads to be as tight as possible.

Only trade during the busiest hours of the day.

During the session overlaps, the most liquid times of the day are. This is from 2:00 a.m. to 4:00 a.m. Eastern Time, and from 8:00 a.m. to 12:00 p.m. (EST).

Be sure to factor in the spread.

Spreads will play a significant role in your ultimate earnings because you will be entering the market frequently.

Scalping might result in greater costs than earnings due to transaction charges associated with each deal.

That's the same of working for an hour at a $5/hr job and then going out and purchasing a $6 Starbucks Caramel Ribbon Crunch Frappuccino.

To account for instances when the market goes against you, make sure your targets are at least double your spread.

Concentrate on one pair at a time.

Scalping is a pretty intense game, and you'll have a better chance of succeeding if you can focus all of your efforts on one pair.

As a newbie, trying to scalp numerous pairs at the same time is virtually suicidal.

After you've gotten used to the speed, you can try adding another pair and see how it goes.

Make sure you keep track of your finances.

This is true for any sort of trading, but because you are making so many trades in a day, it is extremely critical that you follow risk management guidelines.

You can be thrown off by major news reports.

Trading around highly anticipated news items can be extremely risky due to slippage and excessive volatility.

It's frustrating when a news report causes pricing to move in the opposite direction of your trade!