The Forex market demands that the traders stay in touch with the many strategies that work here. When looking for success in the Forex market, traders will need to keep changing their strategy from time to time in order to benefit from the different stages that the market has to offer. Scalping is an important strategy of the Forex trading arena and has helped many traders make a decent profit.
Do all brokers allow for Scalping?
Before understanding what scalping is all about, one must first understand that not all brokers will allow for scalping. In fact the dealing brokers will often take strict action if they find their traders to be indulging in scalping. Since the dealing brokers need time to utilize a dealing desk, they are dead against the strategy of scalping. In scalping, the trader is able to enter and exit the market within a minute or so and this does not allow the dealing broker to make a profit from the trader.
Now this does not mean that you cannot practice scalping. Non – dealing brokers have no issues with the strategy and will allow for it. However, they do require the brokers to keep a high minimum deposit with them and in some cases it will even go all the way up to $2,000. This is a skill that the best Forex brokers know how to do well.
How does scalping work?
Scalping basically requires a trader to enter the market and then exit it quickly after the small changes in the price of the currency. Even the slightest of change in the profit line is enough for the trader who will convert it and exit the market quickly. Now, here it is important to remember that one is not aiming 50+ pips but instead anything from 5-15 pips is enough. Once this margin has been reached, the trader is to make a quick exit.
In scalping the two most important issues are risk management and knowing when to exit the market. If you fail on either of these two fronts, you are not going to be able to succeed in this strategy. While it is a fact that the profits are low in range in scalping, so are the losses. All the same, one must keep risk management in mind. In case you see a trade going south, simply make a quick exit before things turn bad. In most cases when scalping, the trader will exit the market within a minute or so of entering it.
Is short term trading and scalping the same?
While the two are very similar, short term trading and scalping are not the same thing. Keep in mind that the dealing brokers will allow for short term trading but not scalping. The two have a thin line between them but their fundamentals are quite different. In short term trading, the trader will hold on to a trade for a longer time as opposed to the under one minute mark of scalping.
Keep these tips in mind when hoping to benefit from scalping, and you are likely to fare better at this strategy.