HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
XM information and reviews
XM
82%

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

Finding Forex Trading Signals Services that are very profitable

How you can find a great currency Trading alert or signal service is not that hard if you follow the systematic method recommended in this article...

How To Embark On Day Trading With Just $500

In the fast-paced and dynamic world of finance, day trading has emerged as a compelling avenue for individuals seeking to capitalize on short-term market fluctuations...

The Bitcoin's smarter brother: an Octa's guide to Ethereum

What makes this digital asset so unique, and what drove its robust growth over the recent years? In this article, the experts at Octa, a financial broker with globally recognised licences, give a rundown of the ETH's impressive ascent in the world of cryptocurrencies.

Swap, Spread and Everything You Need to Know about Forex Market Commissions

It comes as a surprise for many newbies to see a negative balance when they open their first trade, although the price has not moved. It comes to...

What is Notional Volume and Why Does It Matter

Notional volume is often used as a measurement when valuing a derivative contract. There are also various other ways derivative contracts can be valued...

Can I become a millionaire trading FOREX?

Can I become a millionaire trading FOREX? Continue reading today's article to learn more! Yes, you can, BUT... it's essential to understand what you're doing, acknowledging, of course, the risks of trading...

Insider Trading: What It Is, What It Isn't and Is It Worth It?

The term "insider trading" has been popping up in the headlines recently. There's talk of big-name politicians and business tycoons being investigated for it...

Reading Forex Charts: Decoding Patterns, Indicators, and Informed Decisions

In the world of forex trading, understanding price movements is paramount. Forex charts serve as the canvas upon which traders analyze historical and current price data to make informed decisions...

How long did it take to become a profitable trader?

Each person has different skills, different life experiences and obviously, some are more fortunate than others. The same can be said about traders. Things may differ for any trader when...

Ultimate guide to trading Polkadot for beginners

Blockchains and the innovations they offer largely existed as isolated entities in the crypto space, unable to share value or communicate with each other...

How to Choose a Currency Pair for Forex Trading

This article is intended primarily for beginners, but it may also be interesting and useful for those who already have some experience in trading in financial markets...

Stock Trading Guide: How to Trade Stocks

Stocks, also known as shares or equities, represent ownership or equity interest in a company. Owning stocks can entitle shareholders to dividend payments or voting rights on corporate policies...

Unlocking Potential: A Comprehensive Exploration into Day Trading

In the fluid and ever-evolving universe of finance, day trading has surfaced as a pivotal activity for individuals desiring to traverse the bustling waves of the stock market...

Bullish vs. Bearish: What's the Difference?

Bull vs bear describes investment trends that have the power to impact the global financial markets. You've probably heard investors refer to a market...

First steps of a trader. Where to start your Forex journey?

Welcome to the world of trading! You probably want to become more active in managing your finance and are now in doubts where to start. This article will guide...

Trading on Forex: A Primary Source of Income

There are a lot of discussions about trading within the boundlessness of the Internet, both in conventional businesses and state-financed organizations. People say...

Forex swap: what it is, how it is calculated, and what are swap-free accounts in Octa

One of the most misunderstood terms in Forex trading is swap or Forex swap. To trade successfully, you should understand what Forex swap depends on and how it is calculated. This article describes what a Forex swap is, explains its mechanics, and describes swap-free trading accounts.

Real Forex Trading: Find Out What All the Fuss is About

The market for trading forex or foreign currencies is known as foreign exchange trading, or forex trading or FX. The largest market in the world, forex, and what happens in it, influence real, everyday life...

Risk management in financial markets: principles, objectives, strategies

How to protect your savings and investments in a financial crisis? How to create a trading strategy capable of generating profits even in non-standard...

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.

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%
FXNovus information and reviews
FXNovus
75%

© 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.