What ist
Forex Scalping?
The forex market is the most
liquid of today’s exchange, trading in excess of 1.6 trillion
dollars daily. This is roughly greater than 5 times the daily
trading volume of the U.S. Treasury Bond Market, and 160 times
the average daily volume of the U.S. Stock Market. This extreme
liquidity gives forex traders an edge in the art of lightning
fast execution and the quick trade method referred to as
“scalping”.
Forex scalping is the art of using
high leverage and a large number of short term trades to steadily
increase an account. Usually, only 1 to 5 pips are targeted for
each trade. This type of trading appeals greatly to day traders and
those looking to minimize the risk involved in trading currencies.
Next to money management, “risk control” is the single most
important trait to a surviving (and thriving) currency trader. The
small amount of time that is spent in the market limits much of the
risk in exposure in comparison to a longer term system. Also, the
freedom involved in a speedy forex scalping system in such a liquid
market is a “magnet” that drives many traders from other markets to
try their hand in currency. A disciplined and steady scalper could
seamlessly double or triple an account, and spend only a fraction of
the time in the market as a common day trader.
Though forex scalping may seem like a
preverbal “holy grail” at first glance, there are still many unseen
hurdles that surround the controversial method of trading. If you do
wish to add scalping to your trading toolbox, it is extremely
important to pick a broker who can support a scalpers’ system. You
will quickly find that many brokers do not allow scalp trading, as
the method of quickly entering and exiting trades may actually cause
the broker to lose money at the dealing desk. Forex scalping also
does not give the broker a means to trade against their clients.
Out of the hundreds of online forex brokers, only a handful support
(and sometimes encourage) scalping.
Effective forex scalping strategies
take advantage of extremely slight price fluctuations (sometimes
only 1-3 pips) many times in order to steadily build an account.
Because of the smaller number of pips gained per trade, larger than
normal leverages play a key role in a successful forex scalping
strategy. By leveraging much more than a standard day trader in a
liquid environment, a very skilled scalp trader is able to make just
as much money as the day trader in a shorter period of time.
However, this is an obvious double-edged sword. The market can just
as easily move against you on a high leverage, which could produce
substantial blows to your account.
Also, it is important to take into
consideration the physical and mental speed of a trader who will
only stay in the market for seconds to minutes. Executing a
scalping strategy by hand can be extremely difficult considering the
quick amount of time you must be in and out of the market for your
strategy to be affective Many successful forex scalping strategies
are built to be automated; the rules to the system are coded into a
trading platform to automatically perform scalp trades around the
clock. Though it is completely possible to trade a forex scalping
strategy manually, the majority of today’s traders would agree that
automating the process based on a set of rules would be the best way
to ensure speed and reliability. When choosing a platform to
automate your scalp strategy, it is extremely important to stick
with those platforms that allow the execution of your system on
every tick (such as MetaTrader 4). This ensures that your entrances
and exits will be on a per-tick basis, and will give you a much
higher probable rate of success than those platforms who will
execute your code more periodically.
Forex
scalping can be a good method of growing a managed
forex account quickly, but should not be looked at as the
“holy grail” of trading. Most brokers do not support scalping,
and a consistently profitable forex scalping strategy can be very
difficult to engineer. However, if much time and effort is
spent in system optimization and setting up a good relationship
with a scalp supporting broker, the benefits could be well worth
the time spent.
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