Forex Scalping

Filed under: Learn Forex Trading |

Screen shot 2013-08-28 at 10.48.09A forex scalper is a type of trader who only holds positions for one or two minutes, and sometimes just seconds. As the trades generally only lock in a few pips-worth of profit, this means that scalpers have to have access to large amount of funds and leverage in order for the trades to be worthwhile. Even so, a scalper usually has to take a large number of trades throughout the day because profits are so small – and this takes up a lot of screen time. So is this a practical forex trading strategy?

 

One way of getting around the time constraints is by using some automated trading software (such as an expert advisor in MT4) that can put the trades on for you when certain market conditions are met. However, whether you trade manually or via an automated system, there is one major problem that will challenge any forex scalper – that of the broker’s spread.

 

The spread is the difference between the buy price and the sell price, and this is generally just 1-3 pips depending upon which broker you choose. However, when your profit target is just a few pips, the spread can completely nullify any trading edge. This is why I think it is better to engage in long term trading on the daily charts, as with wide stops and targets, the spread becomes less of a factor. Trading the longer timeframe charts is also a lot less demanding and stressful, as scalpers have only seconds to get in and out of their trades, and they have to constantly look at their charts. I’m sure that many people are profitable and may even make a good living from scalping, but for me, it is simply too time consuming and the risks are too high.

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