Scalping As A Popular Forex Trading Method

September 6, 2011 by  
Filed under Forex Tips

A strategy of scalping is very popular among Currency traders. It is applied by traders who have the profit from the rate fluctuations during one day. Usually the time between the position opening and closing is very short and may last only few minutes. As a result the profits gained from these positions are low too, but the total earning achieved by the big number of positions can be high enough. Some traders may make up to 200 positions a day.

Apparently not all of these positions are profitable, the goal is to reach the profit in total, that is quite possible. While making scalping the stop-loss order is set closer to the rate of position opening in order to guarantee the decrease of losses if the market changes its direction.

All online traders know about the changability of the online market. Even the rate within one day moves by a certain cycle with its ups and downs. If during one day the average rate change is about fifty pips, the difference between the minimum and maximum prices will have much greater value. Once you get a small trend, you will have a chance to significantly increase your profit.

Novice traders often get a false impression of the great opportunity to increase their profit as there is an opportunity of reinvestment. Unfortunately this first opinion may be deceptive as without any proven strategy, this strategy is doomed to failure. First of all you need to know on what level you place the stop-loss orders. Because if you put it too close to the rate of opening, it increases the risk of losses in the market during the movements even if you can assume the direction of trend correctly. In order to avoid this risk, we recommend you to avoid placing the stop loss if you make scalping. But you must always be in front of the computer and watch your positions. In case of a strong movement against you and there is no opportunity to roll back to initial levels in the next few hours, you must close the trades, otherwise you may lose all. More than that, if you have a big deposit and trade without the stop loss, your total balance may be lost and you will get a margin call.

The second reason of the newbies failure might be in the emotional side and the tension that arises when dealing with real money. We recommend all newbeis to try scalping trading on a demo account first, since there is virtual money there is no fear of loss.

Every scalping trader must be cautious while choosing a Forex broker to trade with. Not all Singapore brokers allow scalping. We recommend you to review the best Singapore Forex brokers list and join the one that matches the needs of your trading technique.

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