This article is a guide on using various scalping methods for trading forex.
Scalping is not only profitable but also highly popular among many traders. However, this technique is also associated with several risks. When compared to others, scalpers are the marathon runners of the trading world. They have to capitalize the new opportunities faster and when those opportunities go down, the profit-making trade turns into a loss. A scalper would never wait too long to get another chance for the same trade.
The benefits of this type of approach in a wide range of profit changes. For a trader with long-term trading focus or for a swing trader, even a single loss in trade is a huge loss. When it is about long-term trade, it would need lots of investment, even in terms of efforts and time before turning them into profit, and if you fail in any one trade, it is a massive setback.
However, when it comes to a scalper, he doesn’t have to face such a problem. He may lose one trade, without concern for the place or time, and yet he would be making an overall profit. This can help in reducing all the stress and help build a positive trading psychology. But, you should remember that short-term trading is not essentially going to give you a risk-free and even path to make huge profits.
As a scalper, you would be simply playing your cards on probability. On the other hand, a long-term trader would play his cards using basic evaluation and strategies. Even though each and every individual trade is not a big deal for a scalper, but if he wants to make overall profit, he has to succeed in majority of his decisions. The unique characteristic of a scalper is that he would both enter and exit different positions when trading on a trend, yet making choices with regard to the major price action’s direction.
When the scalper trades a ranging market, it may not be the case that he makes several decisions with regard to directionality. The scalper must clearly know the duration for which the period of low stability would last. Speaking in other terms, scalpers also need to depend upon proper strategies and maintaining discipline. However, they have to follow these traits on a different note when compared to what other traders experience.
The Myth – Brokers Hate Scalpers
If you visit any forex trading blog or forum, you would find that there is a widespread misconception that has been spread intentionally. It states that brokers have a dislike for scalpers. Those who spread the myth have an argument that scalpers don’t take many risks in trading and are mostly successful. Brokers try to counter trade such client so as to hedge their own positions. So, when the trader gets to make any profit, brokers who counter-trade have to bear losses. And, this is the reason attributed by the propagandists for the brokers to hate scalpers.
However, the fact is that a forex trader is not going to make any profit instilling enmity with any broker. Brokers who are regulated are strictly monitored by their licensing authorities. And, majority of these companies are lawful firms who follow ethical practices. And, when anyone has to trade the market, there is no alternative or other router but it all goes through the brokers.
The issue against scalpers comes into the picture only because they make instant entries and exists and this makes it difficult to hedge for forex brokers who have slower servers or software. And, in such situations, they can become confused and think that the scalpers are manipulating the system. And, this can result in the termination of the forex account of such traders.
Powerful Trend Markets and Scalping
A lot of traders would prefer to scalp in good trending markets. The reason that supports this perspective is that scalpers succeed in an unstable environment. Trends are said to create a lot of instability and thus create lots of trading opportunities. However, can this idea be warranted on the basis of analysis and facts?
Keep in mind that while you scalp, a single omitted and haphazardly made trade can nullify the profits made from several profitable trades. As a scalper, you require steadiness more essentially than anything else. The different components required for a victorious trading strategy include disciplined trade-sizing, stop-loss order, take profit and a level of uncertainty for new opportunities.
You must ask yourself, the type of markets that would provide the ideal conditions for implementing such principles. Are scalpers going to succeed in extremely rending and unstable markets or in stable markets that have very low levels of volatility. Calm markets would enable you to capitalize the smallest fluctuations in the long-term with smaller risks and larger profits.