What does forex scalping mean? Generally speaking, this is such a trading style on the Forex currency market, which is based on the principle of generating income from numerous transactions that are completed within a very short time.
Novice traders often use various scalping strategies in their trading . Forex is a very dynamic market that responds to various economic news, events and many other factors. Therefore, opening a position for a long period implies that the trader has certain knowledge. Forex scalping provides an opportunity to earn money in the foreign exchange market even for those traders who only recently decided to engage in Forex trading.
Unlike the complex rules that some Forex strategies suggest using, scalping involves the quick execution of trading operations on charts with a time frame of one or five minutes. An order is closed immediately after the profit value covers the spread size and arranges for the trader. Since his income is often expressed in points or, as they are also called, pips, scalping on Forex received an alternative name - pips (catch pips, pips).
A characteristic feature of scalping is, first of all, in a large number of transactions in one day. The number of trading operations can vary from 30 to 1000 pieces. In order for a trade to be successful, a great deal of leverage is required. Most scalpers work with leverage from 1: 200 to 1: 600. For example, a leverage of 1: 500 allows you to conclude a transaction with a volume of 0.1 lots, having only 20 USD on deposit.
It is worth noting that professional traders consider scalping on Forex an unattractive strategy, because for many of them it is associated with the absence of a specific strategy for conducting trading operations, a high risk and high psychological stress. There is certainly some truth in this statement. But, nevertheless, at the moment, many different trading systems have been developed for various currency quotes and time periods, the basis for which is scalping. All of them work on the same principle - "Get on time to get your income."
An important factor for successful scalping trading is the broker's trading conditions. We are talking about such parameters as the time of order execution and the spread value. For example, the LiteForex broker has a EUR / USD spread of 3 points, and four decimal places are used to reflect the value of the currency (1.3628). And the Alpari broker offers five decimal places (1.36282) and a spread of about 1.8 points, which makes it possible to increase the profitability of transactions. Therefore, when choosing a broker , you should carefully familiarize yourself with its technical parameters.
As an example of a Forex scalping strategy, consider the following trading system. This system is based on the use of a 3-screen system and does not require knowledge of indicators. Despite its simplicity, it allows you to make very good profitable operations. Proper risk management and strict adherence to the rules allows you to achieve good results on Forex. This system is multicurrency and allows you to work with any quotation. It can be described with just three rules:
• open in Metatrader for the same currency quote 4 windows simultaneously with the following timeframes: H1, M30, M15 and M5;
• if in each window the last closed candle is white or green, then a position is opened for the purpose of buying;
• if in each window the last closed candle is black or red, then a position is opened for the purpose of selling.
Like any trading system, scalping has its drawbacks. These include the need for constant monitoring of price dynamics and constant stress. However, statistics say that for most novice investors this system is the first that they put into practice.