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Thread: Forex Scalping

  1. #1
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    Default Forex Scalping

    Forex scalping is a popular method involving the quick opening and liquidation of positions. The term “quick” is imprecise, but it is generally meant to define a timeframe of about 3-5 minutes at most, while most scalpers will maintain their positions for as little as one minute.

    The popularity of scalping is born of its perceived safety as a trading style. Many traders argue that since scalpers maintain their positions for a brief time period in comparison to regular traders, market exposure of a scalper is much shorter than that of a trend follower, or even a day trader, and consequently, the risk of large losses resulting from strong market moves is smaller. Indeed, it is possible to claim that the typical scalper cares only about the bid-ask spread, while concepts like trend, or range are not very significant to him. Although scalpers need ignore these market phenomena, they are under no obligation to trade them, because they concern themselves only with the brief periods of volatility created by them.

    Is Forex Scalping for you?

    Forex scalping is not a suitable strategy for every type of trader. The returns generated in each position opened by the scalper is usually small; but great profits are made as gains from each closed small position are combined. Scalpers do not like to take large risks, which means that they are willing to forgo great profit opportunities in return for the safety of small, but frequent gains. Consequently, the scalper needs to be a patient, diligent individual who is willing to wait as the fruits of his labors translate to great profits over time. An impulsive, excited character who seeks instant gratification and aims to “make it big” with each consecutive trade is unlikely to achieve anything but frustration while using this strategy.

    Attention is essential for the forex scalper

    Scalping also demands a lot more attention from the trader in comparison to other styles such as swing-trading, or trend following. A typical scalper will open and close tens, and in some cases, more than a hundred positions in an ordinary trading day, and since none of the positions can be allowed to suffer great losses (so that we can protect the bottom line), the scalper cannot afford to be careful about some, and negligent about some of his positions. It may appear to be a formidable task at first sight, but scalping can be an involving, even fun trading style once the trader is comfortable with his practices and habits. Still, it is clear that attentiveness and strong concentration skills are necessary for the successful forex scalper. One does not need to be born equipped with such talents, but practice and commitment to achieve them are indispensable if a trader has any serious intention of becoming a real scalper.

    Automated trading systems

    Scalping can be demanding, and time-consuming for those who are not full-time traders. Many of us pursue trading merely as an additional income source, and would not like to dedicate five six hours every day to the practice. In order to deal with this problem, automated trading systems have been developed, and they are being sold with rather incredible claims all over the web. We do not advise our readers to waste their time trying to make such strategies work for them; at best you will lose some money while having some lessons about not trusting anyone’s word so easily. However, if you design your own automated systems for trading (with some guidance from seasoned experts and self-education through practice) it may be that you shorten the time which must be dedicated to trading while still being able to use scalping techniques. And an automated forex scalping technique does not need to be fully automatic; you may hand over the routine and systematic tasks such as stop-loss and take-profit orders to the automated system, while assuming the analytical side of the task yourself. This approach, to be sure, is not for everyone, but it is certainly a worthy option.

    Some words on trade sizes and forex scalping

    Finally, scalpers should always keep the importance of consistency in trade sizes while using their favored method. Using erratic trade sizes while scalping is the safest way to ensure that you will have a wiped-out forex account in no time, unless you stop practicing scalping before the inevitable end. Scalping is based on the principle that profitable trades will cover the losses of failing ones in due time, but if you pick position sizes randomly, the rules of probability dictate that sooner or later an oversized, leveraged loss will crash all the hard work of a whole day, if not longer. Thus, the scalper must make sure that he pursues a predefined strategy with attention, patience and consistent trade sizes. This is just the beginning, of course, but without a good beginning we would diminish our odds of success, or at least reduce our profit potential.

    Now let’s take a look at the contents of this article where forex scalping is discussed with all its details, advantages and disadvantages. Our suggestion is that you peruse all of this article and absorb all the information that can benefit you. But if you think that you’re already familiar with some of the material, to shorten your route, we present the table of contents of this article.



    Contents

    1. How scalpers make money: Here we will take a look at the logic behind scalping, and we’ll discuss the best conditions and necessary adjustments which must be made by a scalper for profitable trading.

    2. Choosing the right broker for scalping: Not every broker is accommodative to scalping. Sometimes this is the stated policy of the firm, at other times the broker creates the conditions which make successful scalping impossible. It is important that the novice scalper know what to look for in the broker before opening his account, and here we’ll try to enlighten you on these important points.

    3. Best currencies for Scalping: There are currency pairs where scalping is easy and lucrative, and there are others where we advise strongly against the use of this strategy. In this part we’ll discuss this important subject in detail and give you usable hints for your trades.

    4. Best times for Scalping: There is an ongoing debate about the best times for successful scalping in the forex market. We’ll present the various opinions, and then offer our own conclusion.

    5. Strategies in Scalping: Strategies in scalping need not differ substantially from other short-term methods. On the other hand, there are particular price patterns and configurations where scalping is more profitable. We’ll examine and study them in depth in this section.

    a. Range Scalping: Some traders consider ranging markets better suited for scalping strategies. Here we’ll examine why, and how to scalp under such conditions.

    b. Breakout Scalping: We’ll examine news breakouts, and technical breakouts separately and discuss suitable scalping strategies for both.

    c. Trend Scalping: Here we’ll take a general look at forex scalping in trending markets.

    6. Trend Following while Scalping: Trends are volatile, and many scalpers choose to trade them like a trend follower, while minimizing the trade lifetime in order to control market risk. In this part we’ll examine the usage of Fibonacci extension levels for scalping trends.

    7. Disadvantages and Criticism of Scalping: Scalping is not for everyone, and even seasoned scalpers and those committed to the style would do well to keep in mind some of the dangers and disadvantages involved in using the style blindly.

    8. Conclusions on Scalping: In this final section we’ll combine the lessons and discussions of the previous chapters, and reach at conclusions about who should use the forex scalping trading style, and the best conditions under which it can be utilized.

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    My recommendation would be to find a broker with raw spreads and a low commission. The raw spread will give scalping strategy the best possible price to trigger your orders. Of course, account conditions and order execution is crucial also. I currently trade with a broker that uses ECN technology that reduces latency and the execution is super fast. As well, they have specific Liquidity providers who can handle scalping strategies as well as very good conditions (EUUSD 0.2 -0.5). I know these brokers are limited, and you won't find them among the biggest brokers lists as 99% of them are alleged market makers. You'll have to work a little harder and dig a little deeper as I did to find Tickmill, which suit and provide trading enviroment for any trading strategies, including scalping entry type.

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    And we also know scalping as a strategy which will make us be able to earn profit in quick time. Because when we do scalping, we only need a few minutes to hold position even only in a few second. But every broker has rule for this strategy even there are brokers which not allowed their client to do scalping. Just be more selective in choosing a broker.

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    Quote Originally Posted by CahCuncun View Post
    And we also know scalping as a strategy which will make us be able to earn profit in quick time. Because when we do scalping, we only need a few minutes to hold position even only in a few second. But every broker has rule for this strategy even there are brokers which not allowed their client to do scalping. Just be more selective in choosing a broker.
    Using demo account, we will be able to learn how to do scalping in forex and we also will who whether this trading strategy is suitable to be applied when trading by ourselves. And we also must choose broker which has low spread

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    Forex scalping generally involves large amounts of leverage so that a small change in a currency equals a respectable profit. Forex scalping system strategies can be manual or automated. A manual system involves a trader sitting at the computer screen, looking for signals and interpreting whether to buy or sell. In an automated trading system, the trader "teaches" the software what signals to look for and how to interpret them.

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    some said scalping are only for expert traders, it's a specialized trading method. but there's many traders suggest to avoid such trading strategies. for now I'm just stick with my price action method, as i'm here to get well known with harmonic,gartley method, from what I research this board are where those strategies comes from, so it's much better when learning from the real source.
    with my trade I just aim for 10-30 pips average, dont if this one considered as scalping method. but for some reason my current brokers ( local based ) are not eligible anymore for such method, new silly rule applied, any entry required 5 minutes minimum active before closed. now I began my search for any suitable broekrs for short term trading style, with no restriction, good spread, my nearest conclusion currently with Tickmill ECN service, but my plan is to put test deposit before put real intend deposit amount. any advice about their service are welcome, been search thru the net hardly found any odd issues about them, but to make sure will have to ask and lurking into several forum members where real traders gather.

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    Scalping is a trading strategy that is profitable for traders. With the short time it will allow us to make a profit. For that we need to be able to have good analytical skills that will make us able to get profit

  8. #8

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    Scalping is a trading technique that most of the traders use, you need to be very skilled trader for this , but most of the time many inexperienced do take their chances in scalping.

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    Quote Originally Posted by orni308 View Post
    Scalping is a trading technique that most of the traders use, you need to be very skilled trader for this , but most of the time many inexperienced do take their chances in scalping.
    yes, with scalping we can quickly gain an advantage in this forex trading and therefore we need to have the ability to analyze the market so well that we will be able to get the most benefit from this business in a relatively short time

  10. #10

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    Scalping means that trader can make a bit of money every day out of the most volatile currencies. I've tried it a wgile back but I understood it was not exaclty my trading style. So switched to long term and medium term trading.

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