What is Forex Scalping?
Scalping in forex trading may be defined as the process where forex traders open a trading position for a short time period. This period usually lasts a few seconds and may not exceed a minute. Traders who employ this trading strategy are commonly referred to as scalpers. Such traders often prefer this trading strategy as it minimizes their trading risk. The scalpers argue that subjecting their trading positions to longer time frames exposes them to the risk of making losses as the market may decide to go against their trade. When they scalp, they have the opportunity to close their trades before this happens. However, this type of trading also carries substantive risk as they often have to use high leverage, which is the only way they can make reasonable profits.
Scalping in Forex trading may eventually lead to better profits than conventional trading methods as the scalpers are able to compile their small profits into a large final tally over a shorter time period. The scalping process may either be conducted manually or through the use of automated software. The manual way involves the traders searching for viable signals, analyzing them and making conclusive decisions on what currency pair to buy or sell. The automated way involves the trader adjusting some technical settings on the automated software so that it may look for relevant signals and interpret them accurately.
Scalping with Charts & Binary Options
Scalping in forex trading requires the extensive use of forex charts, as this is one sure way of assessing market trends. While scalping may seem to be an attractive trading strategy, it is worth noting that extensive experience with such a strategy is the only way a trader may be able to profit from their trades. It is also important to note that the entire trading position may be wiped out within seconds due to the high leverage involved.
Binary trading is one of the latest tools being used by Forex traders. Forex binary options forecast how certain currencies will perform on the market in a certain period, giving you a chance to plan your trade. The purpose of scalping using binary options is that you can easily select Forex pairs that will bring you maximum profit at a very low risk. You can sample trade binary options with 24option, which offers you several binary option platforms to trade on and tutorials on how to effectively use them.
Purpose of Scalping
Scalping is becoming popular in Forex trading and The purpose of scalping is to earn profit within the shortest time. A scalping transaction lasts for only a few seconds and if it goes beyond a minute it is no longer considered as scalping but normal trading. The short trading period ensures no transaction is left open, therefore minimizing risks incurred in long trading processes.
There are usually small differences between the buying and selling price, the trader capitalizes on this difference so as to maximize profit. There is no limit to the number of scalping transactions you can carry out in a day. Currency is normally liquid and there is no paperwork involved. The process can either be manual or automated. However most Forex traders are opting for automated systems because it is easier to generate and interpret charts and read trade signals.
You can as well scalp through a broker by maximizing on the difference between the bidding price and the ask price. Always ensure that you choose the right Forex pair as the number one purpose of scalping is to ensure you gain from every transaction you make.
