October 6, 2020 | AtoZ Markets – To scalp or not to scalp? It’s the age-old question that is guaranteed to cause a stir in any conversation about trading. Scalping, as a trading strategy, has garnered a die-hard following in the online Forex trading community, but why is it that so many individuals who have adopted this style of trading often proclaim that they’ll never go back to other strategies?
Yes, scalping can be a profitable trading strategy, but is it the best trading strategy out there?
Since there isn’t a universal trading strategy to suit all traders, you can practice this technique through a free demo account before putting real cash into your trades. After all, trading is a skill which can only be improved upon through experience.
If you’re curious about forex scalping as a profitable trading strategy, it’s important to do your research before diving into the markets.
So, what is Forex Scalping?
In the financial world, scalping refers to the act of ‘skimming’ small, regular profits. This is done by opening tens, even hundreds, of smaller positions within a day. Even though the profits from each individual trade are small, scalping can be a profitable trading strategy if your profits build up. Instead of putting all their eggs in one basket, scalpers will divide their investments into a diverse set of positions.
Forex scalpers take into consideration the current data presented by the market. They analyse, open and close positions with just a few seconds or minutes in between. This trading style can turn out to be more profitable than simply holding one position open for a longer period. Since the positions opened by scalpers are small, they also involve less risk. If you put all your funds into a few trades, you risk the chance of losing them all if those positions go south.
Scalping versus Day Trading
Both scalping and day trading involves opening and closing trading sessions within the timespan of a current trading session. The difference between the two is the number of trades opened within that session and the attitude that goes into each one.
Day traders may opt to open a couple of positions at different points during the day, holding positions open for minutes or hours to earn a larger profit. Scalping, on the other hand, is a more intense approach to trading, which involves fast reactions and an ability to maintain composure in a highly volatile period.
Forex Scalping is more time consuming than other trading strategies, as it requires constant opening and closing of positions, as well as an ability to think on your feet and adjust your trades according to current news events. For traders who don’t have enough time to dedicate to scalping, it might be worth looking into other profitable Forex strategies that don’t require you to pay as much attention.
Tips for Forex Scalping
While scalping may not suit everybody’s trading style, it’s worth giving it a shot, either with a low deposit or a free demo account. Here are a few things to keep in mind when scalping:
- Only trade liquid pairs – the currency pairs with the highest trading volume offer the tightest spreads. These pairs containing the US Dollar, such as EURUSD, GBPUSD and USDJPY are considered to be the most frequently traded. Tight spreads are important since you’ll be entering the market often throughout the day!
- Trade during the busiest times when the market is the most liquid – this happens when major trading sessions overlap. Trading between 2:00 am and 4:00 am or 8:00 am and 12:00 noon Eastern Time (EST) are the best times to scalp.
- Focus on one pair first – it’s better to scalp a single asset repetitively until you get the hang of it. Otherwise, you may end up unable to keep up with the market movements.
Where can I scalp Forex?
Forex scalping can be an extremely profitable trading strategy, but many brokers prohibit such techniques. With LonghornFX, you can use any trading strategy you choose, opening positions as small as 0.01 lots. Paired with high leverage of up to 1:500, traders can easily scalp a high profit with lower deposits.
LonghornFX also offers free demo accounts to all clients who sign up. Create an account to start trading with just $10.