Scalping Forex: Can It Be Done Successfully And Is It A Real Solution For Novices?
by Chris on February 15, 2010
Scalping forex trading is a tactic that a lot of traders try at one time or another. It indicates taking small profits, typically up to a maximum of 3 times the spread, in a short time period which can be a few minutes or even less. It is seen as a risky strategy and it has been described as one of the most difficult ways to make profits with currency trading. But is this true?
One problem with scalping is that a lot of brokers do not like it. There are two reasons for this. The first is that depending on their business model, they may not be able to cover the position in the market before the scalper closes the position, leaving the broker booking the loss. The second reason is that some traders in the past may have developed methods of scalping within the spread which hinder the broker from realizing the full amount of the spread on every trade.
Any of these reasons can lead to brokers closing the accounts of traders who are believed to be scalping, especially if they are doing it successfully. So before you get involved in or switch to these tactics, check with your broker whether they will let you to use your method. If not, you may have to look for a new broker.
Moreover, there are problems inherent in the short term nature of scalping forex.
Scalping is a a tempting strategy for a lot of newcomer forex traders because of the speed. Many novices, especially, become anxious with regard to leaving a trade open over a long time. They do not like to leave the computer for more than a few minutes at a time and having open trades while they sleep or while go out for the day can be troublesome. They feel more in control if they are closing transactions very quickly. But this is deceptive. You have to make very quick decisions when you are trading within such a short time frame. Experience is vital.
Another reason why scalping is attractive to novices is the thought of instantaneous profits. Everybody seems to be looking to make money fast nowadays. They do not seem worried by the fact that it is not inevitably the most reliable way of making money and you can easily lose it instead. Scalpers frequently use maximum leverage and this is risky. But with low leverage you can make very little on each transaction.
Fx scalping requires a very cool head and a lot of experience in trading. There certainly are traders making profits with this as their main tactic. But there are without doubt a lot more who are losing. This is perhaps because so many novices are attracted to it, while it is one of the worst strategies for a beginner to follow. Much better idea is the long-term swing trading, combined with reliable forex signals. The use of forex signals is highly recommended for every newbie trader. There are many forex signal providers available online, but be careful when choose one.
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