HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

What is forex scalping? Understanding the ins and outs


In the forex industry and investment world, scalping refers to trading currencies based on a set of real-time analysis. The idea and purpose behind this, is to make profit through buying or selling currencies by holding the position for a limited amount of time and closing it for a small profit. In other words, it involves looking around for small profits regularly by entering and exiting a position multiple times within the same day.

The system that the majority of traders use is most of the times based on a set of signals stemming from technical analysis charting tools. These tools depend on a variety of signals that make up a buy or sell decision when they point in the same direction. As a result, a forex scalper looks for a very big number of trades for a small profit each time.

How Scalping works: Scalping vs Day Trading

Unlike scalping, in day trading a trader opens a position and then closes it again during the present trading session and never carries a position into another trading period or holds it overnight. While a day trader looks to take a position a few times a day, a forex scalper will trade multiple times during a trading session.

There is another major difference between scalpers and day traders. The former, may trade off 5- and 30-minute charts, whereas scalpers often trade off tick charts and 1-minute charts. To be exact, some scalpers aim for moves that operate at high speed and occur when there is a release of economic data and news including the announcement of the employment statistics or GDP figures.

Scalpers on the other hand, are more likely to try and scalp between 5 and 10 pips from each trade they make and to repeat this again and again within the day. High leverage and just a few pips profit at a time adds up to scalpers’ trading. The latter usually achieve the desired results when their trades are profitable and can be repeated multiple times throughout the day.

Assuming that with one standard lot, the average value of a pip is about $10, it means that for every five pips of profit made, the trader can make $50 at a time. If the trader trades ten times a day, this would equal $500.

Scalping: Pros & Cons

Starting with the advantages, scalping does not require much market knowledge, which is more suitable for newbies. Also, there are low barriers to entering which is very good for retail forex traders. Since the forex market is liquid it means that traders can enter and exit a trade easily. Moreover, trades are held for a short period, therefore, losses from reversals can be reduced.

On the negative side, leverage with forex scalping can increase gains but also losses as well. Since there is small profit-per-trade, it makes it challenging to reach a trader’s financial goals. Also, there is potential for one large trading loss taking away many profitable trades. There is finally some amount of risk in forex scalping because of market volatility.

A forex scalping trading strategy can either be manual or automated. In the first case, the trader looks for signals and interprets whether to buy or sell. Nonetheless, many scalpers use automated trading systems when making their trades with their brokers. In such a case, a trader would instruct the system what signals to look for as well as what action to take once a signal has been triggered. The use of an automated stop-loss order is also common in case the rate moves against the position. Since they reduce trading losses, stop-loss orders with scalping strategies are ideal for managing risk.

#source


RELATED

Trading styles

Like every other trader, whether you are a novice trader or talented expert in the field of trading forex, you come with your own unique trading style. No two traders are alike...

Cryptocurrency Trading for Beginners: Best Strategies and Patterns

Today, there are almost 19 thousand cryptocurrencies in the world. On the one hand, this is a huge opportunity! For comparison, only a few thousand companies...

Basic guide to Forex risk management strategies

Trading risk management is vital to becoming a successful trader and making money online. Learn the risks of poor risk management and discover how you could...

How Does Dollar-Cost Averaging Work?

Active trading can be stressful, time-consuming, and not yield the desired results. On the other hand, there are alternatives. You can look for an approach to investing that is less burdensome...

Best Currency Pairs to Trade and Live Happily Ever After

It is so easy to get confused in the world of financial volatility and numerous assets that the FX market offers for trading. We know what you feel. Often newbies...

Tips for Selecting a Forex Broker

The online world has grown rapidly, providing a diverse range of financial opportunities that were previously limited to traditional marketplaces.

The Moving Average Convergence Divergence (MACD)

The Moving Average Convergence Divergence (MACD) is a versatile and widely used technical indicator that offers insights into trends, momentum, and potential reversal points in the forex market...

What is speculative trading? A beginner's guide

The world of finance is a complex, nuanced and sometimes daunting place. There are many different types of traders with differing motivations...

What is revenge trading?

Revenge trading has been identified as one of the major causes of traders' failure. In fact, Brett Steenbarger, a well-known trader and trading coach...

Get Exposure in Amazon Stock Via CFDs: Insights for Traders

Amazon is unarguably one of the world's most successful companies. Amazon is a marketplace for vendors and buyers of different products from across the globe...

What is a cryptocurrency wallet and how does it work?

To securely store the crypto investments, traders will need a cryptocurrency wallet. Cryptocurrencies are changing the world. They allow for decentralised...

What Are Meme Coins?

The cryptocurrency community has a ceaseless admiration for memes and pop culture. From its inception, meme coins have seen exponential growth in the crypto space...

Mastering Market Liquidity: What Is It And How To Make Use Of It

The term "liquidity" is constantly being tossed around in the finance industry, but what exactly does it mean? Today, we will explore the concept of liquidity, its importance in trading and investing...

Is Demo Trading Really Worth It?

There is an unfavorable outlook on demo trading merely for the fact that you can’t generate profit with virtual money. A lot of traders essentially...

How to Effectively Assess Your Forex Trading Performance

In the fast-paced world of Forex trading, constant growth and adaptation are essential. This not only demands a thorough understanding of the market dynamics but also necessitates regular assessment of one's trading performance...

Dogecoin vs. Bitcoin: Which one is the Better Investment?

Dogecoin and Bitcoin are two well-known crypto assets. However, some traders may not know how to compare Dogecoin vs. Bitcoin, so knowing some of the significant similarities and differences...

Can Brokers Really Manipulate Market Prices?

The trading realm is rife with tales of broker manipulations causing devastating losses. With a plethora of platforms available, how can traders discern between genuine...

A Guide to Cryptocurrency trading

If you've decided to invest in the cryptocurrency market, as with all investments, it's important to do your research. Although Bitcoin is the most well-known...

What is the financial market?

By definition, the term financial market refers to any marketplace where financial products are traded. These include the stock market, bond market, foreign exchange market...

What Is a Limit Order?

A limit order is an order that has a prespecified price to buy or sell a security. For example, if a trader is looking to purchase stock with a limit of $10.50, they will only buy the stock...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.