When you decide to become involved in forex trading, there are a number of key decisions you will have to make at the outset. These decisions are vital to your future success as a forex trader. Having opened your forex trading account, you need to determine your trading strategy. Having this in place provides you with a clear objective.
Having goals to hit prevents indecision which can be costly. A trader without a strategy is one without direction. This can lead to a lot of early indecision and reversals of trades which ultimately cost money as well as time. On the other hand, implementing a proven strategy can see you make consistent gains from the beginning. Forex scalping is one such strategy.
What is Forex Scalping?
At the most fundamental level, forex scalping as a trading strategy is making the decision to trade certain currency pairs based on the real-time data available. The strategy usually involves making large trades into a position on a currency pair and moving out again very quickly and very frequently after small movements in the market. The strategy is implemented by many top forex traders and can often result in a profitable outcome.
How to Implement a Forex Scalping Strategy
The strategy relies on trading volume to be successful. Traders will move big on certain positions for a short period of time and for a small profit on each trade which they hope will quickly accumulate. Due to the trade size and volume, it is advisable to choose the best broker platform where commission per trade is at its lowest.
To successfully engage in forex scalping, you will require high amounts of leverage in order to extract the maximum benefit from each trade. Implementing this strategy on a larger scale will require more than a basic account on a forex trading website.
You will need to form worthwhile relationships with the best rated brokers in the industry to really make forex scalping profitable. You will also need to ensure that you possess the relevant skills and experience to interpret the signals presented by a TA correctly and with strong confidence.
Is the Strategy Worthwhile?
There is always a certain element of risk involved in stock and forex trading. Even with the best forex account and broker you can find, the risk of sustaining losses is ever present. The risk associated with forex scalping are substantially higher since the entire premise of the strategy revolves around making high volume trades with potentially large amounts of capital being leveraged on small market movements.
Forex scalping is a strategy which you can only engage if you have the willingness to risk large amounts of your bankroll throughout a sustained period, reliable technical analysis, and strong will power not to get carried away. The risk is that with a substantial loss, which can happen relatively quickly, some traders tend to follow-up by chasing the loss, essentially leveraging more than they can afford to lose.
Inevitably, forex market trading is risky business by its very nature. Forex scalping though, whilst it can certainly produce sustainable gains for those with the experience and bankroll large enough to engage it in, is not generally seen as an advisable strategy for individual traders. This is certainly true of the less experienced.
Consultation with any forex trading guide will tell you to avoid over-trading and over leveraging. These are two things which can happen quickly and routinely during forex scalping. Ultimately, this means that the strategy is best reserved for retail investors rather than individuals.