How to Scalp Forex Pairs
Scalping is an extremely short term trading strategy that usually has a timeframe of about 3 to 5 minutes, with trades usually lasting for one minute. Obviously, this strategy is for seasoned veterans who have a clear understanding of forex trading, technical analysis, breakout trading, trading on news, etc.
Scalpers are traders who look for brief moments in time where there are volatility discrepancies, value distortions, etc. Scalpers are not looking for the “big trade”, rather just the spread between the bid and ask is typically the profit targets. However, scalpers are not willing to take on big risks, which means they will risk less of their capital for a small win. However, over a period of time those small wins start to add up and soon you have a nice return. Like I said before, they are not looking for the long term or “risky” trades. In fact, scalpers have lots of patience and are willing to take their time for a trade to develop.
On any given day, a professional scalper will open and close any where from tens to hundreds of positions each day. As you can imagine this can be very taxing for someone who does not have patience or the proper time needed to be successful. Not to mention, you do not become a scalper overnight, it takes a lot of time to thoroughly understand the set ups and the education needed to be successful. That is why the road to success is paved with failed attempts and broken dreams, to paint a doom and gloom picture.
Another important piece of information is that if you are committed to being a scalper, you must open an account through a brokerage that allows scalping. Some brokers will not allow scalping or have sky high fees that will eat your profit. Basic research on the Internet will help you decide which broker fits your style.
Next, not all currency pairs are fit for scalping. Liquidity is a major concern when scalping because you want the market to have enough volume so that you will be able to enter and exit a trade at a more ideal level. That is why the only pairs that you should focus on are: EUR/USD, GBP/USD, USD/CHF, EUR/GBP. These are the some of the most liquid markets out there and they will be able to get you in and out of trades fast.
The bottom line here is scalping is a risky trading strategy that could really do a number on your account balance if you are not careful. There is a lot of uncertainty with scalping and it certainly takes a lot of discipline on your part to make sure you have the right brokerage, the right education, the right tools and knowing the ins and outs of the business. All of these come with time and simply can not be detailed fully in one article. If you are interested in scalping and you consider yourself to be a great trader, educate yourself some more. Buy books on the subject, surf the Internet, there are numerous ways that you can educate yourself and thereby protecting yourself from any hidden dangers in the world of investing.