Scalping: A forex strategy makes awesome profits Scalping is a forex strategy in which traders seek to make small profits by keeping trade positions for small period of time for a maximum time of 3-5 minutes. Nowadays, scalping is one of the leading strategies among the traders who go for multiple trades in the short periods. Consequently, scalping allows traders to make potential profits that can go up to 500 pips collectively by conducting multiple scalps which is much more than the other traditional strategies. Traders who want to deal with the core part of the strategy must acquire quality of patience. You trade with small but eventually you make big profits by multiple trades. Since there is also a great risk since losses are possible with small trades too, scalping is suitable for the impulsive traders. It is considered that ideal time for scalping should be when markets are more predictable or quiet not when economic data is released since at that time market volatility would be on the boom and you can’t predict the market behavior. In quiet periods, fluctuations are not wide because of lower market exposure and so lesser are the chances of losses. Though profits are lower from scalping, scalpers are dependent upon many small profits to make a potential profit to fulfill their objective. Inherently, there is less risk with scalping but on the other side it lowers your potential of making big profits which is possible by combining successful small trade’s profits. Scalper must have the capability of sticking their eyes on the computer screen that means high level of concentration or complete attention is needed with this type of forex trading strategy. Some scalpers prefer to do trading in ideal only by adopting a smart approach. While some traders who think that scalping is a time consuming process then automatic scalping systems are a good option for them if it is used carefully. You might not need to have your eyes glued to the screen always but still attention is also required here. GBP/USD, EUR/USD and USD/CHF are the currency pairs which are considered good pairs for scalping. But EUR/USD is the most preferable currency pair having least volatility since they react slowly even on any economic events or any major announcements. Thus, this pair does not show any sharp movement. Currencies which are usually lesser known are not suitable for scalping, like currencies of Brazil or Russia. Either these currencies shows unpredictable price gap or it shows sudden major volatility. These types of currencies are known as exotic currencies. This is because they are highly liquid currency pairs. They also react in a more slow and subdued manner to major announcements about economic data. They do not show sharp movements very often. These currency pairs are called majors. Alternatively, there are also carry pairs which exhibit liquidity, but are also volatile. These include the currency pairs of EUR/JPY and USD/JPY. The yen usually comes under a carry pair. The principle of scalping works only when you maintain consistency towards trading. On the basis of analysis of both trend and momentum, a scalper determines on which pairs he/she can apply the principle of scalping. To locate the strong trend traders’ use 200 periods MVA, one of the most powerful tools to indicate the price behavior whether it’s going up or down than the average limit. There are some limitations of scalping. It consumes more time and sometimes the losing trades exceed the limit of profitable trades. It depends how you can manage your trades as per your
requirements and risk factor. Once you get comfortable with the concept of this strategy you may move towards Advanced Forex Scalping Bollinger Strategy.