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IS SCALPING A VIABLE FOREX TRADING STRATEGY?

Understanding Scalping as a Forex Trading Strategy

Forex scalping involves buying and selling foreign currencies with the goal of earning a profit on small moves in exchange rates. The international currency market is the largest and most volatile in the world with more than $5 trillion exchanged on a daily basis which makes successful scalping possible.

The purpose of scalping is to form a profit by buying or selling currencies, holding the position for a short time, and shutting it for a not very big but consistent profit.

For example, if a U.S. Trader initiated a buy position of euros at the euro-to-U.S. Dollar exchange rate of $1.1050 and later sold the position at a rate of $1.1150, the profit would equal 0.0100 or 100 pips, which is approximately 1%.

forex scalping trading strategy might involve a profit target of only 10 or 20 pips. However, the scalper would initiate many trades or add to the position size of each trade to maximize profits.

Key Points

  • Forex scalping involves buying or selling currencies, holding the position for a very short time, and closing it for a small profit.
  • Forex scalping involves placing many trades throughout the trading day.
  • Trades are often automated based on a set of price signals derived from technical analysis charting tools.

Forex Scalping Tools

A forex scalping trading strategy can be either manual, where the trader looks for trends and interprets themselves whether to buy or sell the pair. However, many scalpers use automated or semi-automated trading systems when executing their trades with their brokers. The trader instructs the system what signals to look for and what action to take once a signal has been generated.

Using the earlier example of the U.S. Trader that initiated a buy position of euros at the euro-to-U.S. Dollar rate of $1.1050 and sold for a profit at $1.1150, the trader could have automated the take-profit order. In other words, a trade could have automatically been closed when the EUR/USD rate moved to $1.1150, closing the position with profit.

The trader could have also automated a stop-loss order in case the rate moved against the position. So, if the stop-loss order was set at $1.10, a trade would be closed automatically once the exchange rate reaches this price level. Stop-loss orders are crucial for managing risk with scalping strategies, since they limit trading losses.

The Pros of Scalping

As a result of the low barriers to entry into the world of forex trading, scalping has become a viable strategy for the retail forex trader. Scalping is popular with newcomers since the strategy requires less knowledge of the market. Since the forex market is large and liquid, traders can get in and out of trading positions easily.

Scalping is a good choice for those who hate waiting for a trade to close. Positions are generally held for a very brief timeframe, and that allows for a lower chance of reversals that can harm a trading position.

Pros

  • Scalping requires less market knowledge – helping newcomers.
  • Forex scalping has low barriers to entry, making it good for retail forex traders.
  • The liquid forex market means trades can be entered and exited easily.
  • Since trades are held for a short period, losses from reversals can be reduced.

The Cons of Scalping

It’s important to note that the forex scalper usually requires a larger deposit that can handle the amount of leverage the investor must take on to make the short and small trades worthwhile.

Leverage is a form of margin in which the position is magnified since the trader borrows from the broker to expand the position size. However, just as leverage can magnify gains, it also can magnify losses.

The profits are smaller on each trade, which makes it challenging to reach a trader’s financial goals. A “5-pip” yield on a trade might be insufficient for many traders.

Cons

  • Leverage with forex scalping can magnify gains, but also magnify losses.
  • The small profit-per-trade can make it challenging to reach a trader’s financial goals.

Conclusion

Despite a few disadvantages, there is still a decent profit that you can make in a day by using scalping as your strategy. The trick here is to hold your position for just enough time to see an uptick in the currency traded. If this can be repeated multiple times during a day, the possibility of registering a smart overall profit for a session is high.

Start off and stick with currencies and trades with the lowest spreads. While doing multiple trades with small margins, remember that even a single pip can make a difference overall.

To scalp effectively, you would need to rely on charting tools that help analyze the movements of currencies. Such analysis and data translate to signals that help in making buy and sell decisions in a fast-moving market. With these automated trading systems, you can place your orders with forex brokers in line with signals that are triggered based on market movements.

Solution

IS SCALPING A VIABLE FOREX TRADING STRATEGY?

I created Apollo Scalper Indicator for everyone who wants to take advantage of fast price movements and forex volatility.

This tool will pinpoint the most precise moments to enter and exit trades, which leads to amazing results you have never considered possible!

In addition to this, I’ve come up with an Apollo Scalper Manager that will give you
an opportunity to just set it and forget it. You multiply your profit when you minimize your losses. When all the processes are automated, you do not make mistakes, and you don’t miss your chances to get money!

Even though I develop software that allows trades to earn pips absolutely effortlessly, I still encourage everybody to learn the field you’re working in! Thank you for reading my educational articles! And as my way to say “Thank you!”, I offer you an exclusive 10% discount code on ANY Apollo Scalper package: november10!

Oliver Murphy

Hi! My name is Oliver Murphy. I am the Head of ALTRA Group, the team of the most qualified and experienced forex traders and programmers. Our Mission Statement: "Trading Forex Made Easy and Profitable for Everyone"! Join our team today!

5 Comments

  1. Thank you, Oliver! Got it working today. 4 wins so far on 5-minute timeframe, not bad. Can’t wait to go live

    1. Hi, Brian
      I’ve sent you an email with the instructions.
      Please check your inbox

  2. Mr. Oliver, thank you for your work and for the discount! That’s what I needed

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