Scalping is one of the main trading styles. It is quite easy to distinguish it from other methods:
- Low timeframe - from 1 to 5 minutes
- Short duration of trades - from several seconds to several minutes
Does Scalping Suit You?
Scalping trading is very fast. Decisions are made at lightning speed. This trading style is preferred by those who love constant actions, as well as traders who lack the patience to wait for the results of the transaction for several hours or even days like swing traders do.
However, scalping doesn’t suit every trader. First, you should fulfill several conditions:
- Sufficient trading experience. To learn how to quickly find suitable trading signals and instantly make trading decisions, a trader must gain experience in a less active market. Only when you gain confidence in swing or day trading you can try to switch to scalping.
- Lots of free time. Each scalping transaction brings a small profit. That is why scalpers have to constantly monitor markets in search of suitable trading setups and open dozens of trades per day. It takes a lot of attention and time. If Forex is not your only job, you might not be able to pay enough attention to it and get enough profit.
- Emotional stability. Movements on charts with low timeframe are extremely dynamic. You need to make decisions quickly and close dozens of losing trades. If you have not yet learned to control your emotions then this can lead to anxiety and severe stress. First, gain the correct trading mindset.
Advantages of Scalping
- Large number of trading setups. Scalpers will always find what to do. There’s no need to search for suitable trades since there is a lot of them on charts with a low timeframe.
- High dynamics. On minute charts, the price is constantly moving, creating a rapidly changing environment, favorable for action lovers.
- Quick results. You know the outcome of your transaction in just a few seconds. You don’t have to worry about your positions in your absence like swing traders do.
Disadvantages of Scalping
- High trading costs. Scalpers open dozens of trades during the day and are forced to pay a spread for each of them. Often, traders need to open several profitable trades a day in order to at least recoup these costs.
- Market noise. High volatility at low timeframes causes a large number of false signals. Often, scalping trades close by Stop Loss due to that market noise. Tight SL is knocked out by insignificant price fluctuations that would not be noticeable when trading on higher timeframes.
- Lots of time and attention. Scalpers can’t afford to open a trade and check it once or twice a day, like day and swing traders do. Successful scalpers spend several hours a day in front of their charts. It’s like a full-time job. Scalping can bring real profit only if Forex becomes your main activity.
Last Few Tips
If you are new to Forex, then don’t opt for scalping. Quick profits seem very attractive but scalping is an extremely risky trading style. Without sufficient experience in the currency market, your quickly closing transactions will bring losses, not income.
And finally, I want to give you a couple more useful tips:
- Open your trades during the high liquid periods. The spread at that time is the tightest, which can reduce your trading costs.
- Even short transactions need to comply with all the rules of your risk management system. Fight the urge to open unconfirmed trades.
- Successful scalpers are highly disciplined traders. Profit in this trading style can be obtained only in the case of a clearly thought out trading plan and methodical following each point.
Ready to try out a new trading style? Then open an account right now.