A Beginner Guide To Forex Scalping

Submitted by: spaceman1973

Scalping for rapid small profits is a very popular Forex trading strategy, requiring extreme discipline and focus. Professional Forex scalpers make between 10 and 100 trades each day. If a position turns against them they get out of quickly rather than holding on and hoping that it will turn around. A Forex scalping system goal is to make 5-15 pips per trade.

The aim of a Forex scalper is to go long or short a currency pair at the bid or ask price and then get out of the trade quickly when they are in profit by a few pips. Using this strategy of taking a few pips from the market at a time, can quickly compound into huge gains as long as a strict exit strategy is used to prevent losing trades absorbing all profits.

Usually Forex scalpers use the 1 min, 5 min and hourly charts to identify trades that can earn them a small profit. As the Forex scalper is only interested in making a few pips per trade it is very important to use a broker with low spreads and instant execution of trades.

A few things that can improve your chances of being profitable as a Forex scalper are:

- Make sure you know when news relevant to your currency pair will be released.
- Record the previous days Open, High, Low and Close.
- Learn some basic candlestick patterns so you can recognize them when they occur.
- Draw in major trend lines, pivot points and support and resistance on the daily and hourly charts of your currency pair.
- Determine the major direction for the day, Bullish or Bearish, trading in the longer term direction will gives trades more chance of being successful.
- Adjust your stop when you are 10 pips in profit.
- If the trade is taking to long to go in your direction or you don't feel comfortable with it, get out.

An advantage of Forex scalping is that the small targets of 5-15 pips are easier to accomplish. One of the difficulties Forex traders have is when the trend reverses during a trade, because Forex scalper's get in and out of the market quickly this is not as likely to occur. Many traders have been profitable with Forex scalping, so there is proof that it can be a successful Forex trading method. A disadvantage is that the risk to reward ratio can be very low. As the profit per trade is so low, one bad trade can wipe out all the profits for a day. This means it is even more important to set and move a stop loss.

There are a few traps that new Forex traders fall into when they begin Forex scalping. They may become addicted to making random profits, especially if they are immediately profitable. This can lead to the trader taking more risky trades and not sticking to their plan. A second trap is trying to make up for the losses of yesterday. New traders often think about how they can make back the money they lost a previous day, this tends to cloud their judgment and may lead to emotional trades that are doomed for failure.