It is possible to keep positions open in Forex for various periods — from a few milliseconds to several years. Moreover, theoretically, the trading rules allow them to be kept open forever. But in practice, it turns out that the maximum benefit from trading can be obtained when trading on short timeframes that do not exceed a few minutes. This scalping strategy has become extremely popular among traders, although not all brokers accept it. What is scalping Forex, and why it may or may not be suitable for a particular trader? Read the article to understand which group of traders you would belong to.
Why Is Scalping Profitable?
Profit Maximization with a Small Deposit
In addition to quickly closing a trading position, an essential feature of scalping is the possibility to maximize small profits through high leverage. The profit from each order cannot be high, since the probability of a sharp jump in prices in seconds is extremely small. Therefore, scalpers often use leverage of at least 1:200. Thus, even with small deposits, they can receive significant profits, because they make dozens and hundreds of trades per day.
More Opportunities for Loss Compensation
Since trades are made at a high speed, losses are not as catastrophic as with other styles, as they can be quickly covered by profitable trades. Therefore, scalpers are accustomed to the idea that it doesn’t matter how many of your trades turned out to be losing — the main thing is that in the end, the number of successful ones should be greater.
Possibility of Workload Reduction with Robots
If you open and close all orders manually while following the scalping strategy, this requires a huge speed of execution of all operations and high concentration. It is very difficult to sustain such an intense rhythm. But thanks to a large selection of the best scalping robots that are offered by Forexshop, you can delegate most of the routine work to expert advisors. In this case, there is less work and more profit due to the indefatigability of the robots and their constantly activated attention.
Removing Some of the Risks Inherent in Other Trading Styles
Traders who do not follow an intraday trading style face the challenge of a market gap. Leaving their orders open overnight or over the weekend, they may find the next morning or on Monday that the price of the currency has not gone in the direction they expected. As a result, they receive losses that scalpers do not incur since all orders are closed during the trading session.
What Sides of Scalping Make It Not Suitable for Everyone?
Possible Conflicts with Brokers
Scalpers can make substantial profits, but this often results in losses for brokers, especially when trading with high leverage. That is why many brokers do not allow trading on too short timeframes. If you try such a strategy with a broker that does not allow it, at best, the order will not be accepted, and at worst, the account will be blocked.
High Demands on Technical Issues
If a trade is to be completed in a few seconds or less, the information transfer rate must be ideal. Any delay can result in a big loss when trading with high leverage. Therefore, if you cannot provide ideal technical working conditions, it is better not to follow this strategy.
High Requirements for Psychological Stability
Like many other trading strategies, scalping involves certain risks. But because much more trades are conducted during the day, these risks are multiplied. It means that the feelings associated with possible losses are also intensified. Therefore, this strategy is not suitable for emotionally susceptible people with an unstable psyche. And just like you need to master technical analysis well before you start scalping, you also must undergo preliminary psychological preparation.
To make a conclusion about whether scalping is right for you or not, it is better to try this strategy in practice. You may underestimate your abilities, and when you start scalping, you will feel additional strength and passion. Or, on the contrary, what seems so simple will turn out to be completely exhausting. Therefore, practice is the best criterion for making a choice. But in order not to make mistakes in scalping, master its principles on a Demo or Cent account. Thanks to them, you will acquire the skills that will allow you to earn significant profits when switching to trading for real money.