Forex Scalping often has a negative connotation. Forex scalping is actually harmless, and it’s very simple in principle.
It involves buying lots of currencies, holding your position a short time, and selling at a profit. Individually, each sale is only a small profit. However, spread across multiple purchases, it can add up very quickly!
More Intense Than Day Trading
Sometimes, newbies think forex scalping is like day trading. However, it is more intense in many ways.
To be successful, you must be willing to trade multiple times in a single session. And you have to be quick: those with the best forex strategy are able to time profitable transitions down to the minute.
You can use clues to find when to trade as well, such as when news (good or bad) about the economy is released. And remember, we weren’t kidding about the profits being in small increments that add up: sometimes, the profit may be a single “pip,” which translates to 1/100th of one percent!
Finding a Broker
Forex is all about the international market, which means you’ll need to find a broker you can trust. Be sure to research their business and reputation before you start committing money.
In many ways, the most important thing about the broker is their platform. This is how you will buy and sell, and understanding the platform is your key to profitability.
Fortunately, most platforms give you the ability to practice using them. And even if you cannot practice, you can simply trade very small amounts until you are comfortable using the system.
This may be a no-brainer, but scalping depends on liquid markets. This means you’ll want to identify certain currency pairs (such as USD/JPY) and pounce when the exchange will be profitable.
Don’t forget that the whole idea of liquidity is that it’s not constant. The currency pairs that made you a big profit yesterday may be completely cold today, so it’s important to always be on the lookout for the best times to buy and sell.
Get the Tools and Check the Fine Print
We’ve talked about the short time frames for most forex sessions. Many of them are no longer than thirty minutes! Therefore, your best tools of the trade will be specialized charts.
You will want tick charts as well as one-, two-, and five-minute charts. This helps you calculate minute changes in value that can lead to major profit.
Finally, don’t forget to check the fine print with your broker. Some of them may limit execution guarantees, or not offer them at all!
The Bottom Line
Now you’ve learnt a little more about forex scalping, bee sure to visit out our blog regularly because here at RedHotFX, we are devoted to bringing you the latest practical trading information.