Imagine two children swinging a set of jump ropes in the street. Each child holds one end of the ropes, and two more children wait on the outside for their chance to jump between the swinging ropes. The first jumper watches the ropes closely and waits several minutes before finding the perfect chance to enter, and then they continue jumping for awhile before exiting. The next jumper sizes up the ropes quickly and dives in at just the right moment, diving out after just a second between the ropes.
If the swinging ropes were the Forex market, the second jumper would represent a trader embracing the technique known as scalping. While other traders may spend time analyzing long-term charts so that they can buy into positions and ride them out as long as possible, the scalper wants to analyze charts for the current moment and get in and out as quickly as possible.
Scalping can earn you a lot of money in a short period of time, but it is earned in small chunks. Rather than raking in a large profit from a trade you left open for a long period of time, you skim small profits away from trades that were left open only hours, minutes or even seconds. Your goal is to take advantage of profitable times right when they present themselves.
It sounds simple to jump in and out of the market while the potential for profit is high, but this trading style requires a lot more work than that general description reveals. Traders spend a large percentage of their time sitting in front of their computers or connected to charts and other resources through mobile devices. They need to buy their positions and sell out at just the right moment, so taking their eye off the market even for a few minutes can lead to lost opportunity, and money.
Scalpers typically watch the one-minute and two-minute charts hour after hour, entering and exiting trades over the course of the trading session. While a day trader may allow their trades to sit open for a full day or half of the day, scalpers prefer to get out quickly and then repeat the trade as often as possible in order to maximize earnings.
You need to devote a lot of time to trading in order to earn your profit in this manner. You must also have the right personality for Forex scalping:
Forex scalpers spend much of their time acting on instinct and newly-released information. They don't have time to study long-term predictions from other market pros because they are busy acting on information relevant to the present moment. The data fluctuates by the second in the Forex market, and that is exciting to most scalpers.
If you prefer to think in-depth about issues before taking action, you will probably find scalping uncomfortable and difficult. The same goes if you don't like to spend a lot of your time tied to charts and your trading platform.
If you have the time to devote to scalping and are intrigued by the idea of collecting small profits over and over on a daily basis, read through this checklist to see if you have other qualities needed to successfully trade in this manner:
These three qualities were identified by professionals from Australian Financial Review as common qualities maintained by successful Forex scalpers. Most traders embracing this style have experience in the market and have worked out strategies for controlling their losses and coming out ahead when those losses occur. They also have more money to invest in their short trades, and that is often profits they have earned from long-term trades in the past.
Not all trading platforms welcome scalpers with open arms, and others are simply not setup to accommodate fast action. You need buttons that you can hit quickly to enter and leave any position with any currency at any time. If you have to jump through too many hoops to make a move on your account, you need a new platform before experimenting with scalping.
Risk Disclosure: fxBrokerSearch.com will not be held liable for any financial loss or damage caused by users acting upon any information contained within this website, not limited to and including: all numerical data, quotes, charts and buy/sell signals. Moreover, please be advised that Forex trading is one of the most volatile investment forms in the world and all trades should be placed with full consideration of the risks and costs.
fxBrokerSearch.com does not support nor encourage the execution of any investments. Trading with a margin is high risk endeavour and not suitable for everyone, therefore, each investor should carefully consider all relevant trading conditions, such as experience, risk and cost, before taking part in any type of trading, including Forex.
While every effort has been made to ensure all our data is as accurate as possible, fxBrokerSearch.com cannot be held responsible for any prices that are not in line with real-time data. Indeed, the currency exchange market is constantly changing and all CFDs (stocks, indexes, futures) and Forex prices are set by market makers.
This means advertised prices may not be accurate and could differ from the actual market conditions. For this reason it is not appropriate to rely on any data presented by fxBrokerSearch.com for the purposes of trading.
Based on these conditions, fxBrokerSearch.com will not be held responsible for any losses incurred through trades conducted in light of data presented on this site.