Scalping Forex as a Forex Trading Tactic
May 6th, 2009
Scalping forex is a strategy to trade and to profit from small price fluxuations in the foreign exchange market. Anyone who has traded or even studied forex trading knows that the forex market is very volatile. During almost any trading period of at least a few hours there will be several opportunities to profit by scalping the forex market.
For example, you may buy Euros against the Dollar at 1.2800 and ten minutes later the Euro is at 1.2820. This degree of fluctuation is normal and may occur many times in a 24 hour period. If your trading plan is to use a day trading forex strategy you could immediately sell your position and book a 20 pip profit. Even trading a mini contract of $10,000 this would work out to a profit of $20 for maybe only ten minutes work. Sound good? Unfortunately, in practice it is not as easy as it may sound.
To learn more go to Day Trading Forex.
There are a couple of tough problems in adopting a forex scalping strategy that remains profitable. The first is that it is an extremely stressful way to trade. You probably will find yourself glued to a computer monitor screen watching the forex market jump up and down for hours at a time. In order to make big money you have to make a lot of accurate trades. This is easier to talk about than to do. If you decide to give forex scalping a go then you should limit your trading time to just a very few hours a day.
Choose “office hours” that are during the active part of the trading day, say for Euros from the middle of the European trading day until noon in New York. Then pick out two or three hours from that time period for your office hours. Do not try to trade with a scalping forex strategy for too many consecutive hours. If you do you will probably become too mentally fatigued and make silly costly mistakes.
To learn more go to Day Trading Forex.
Here is the big problem for most would be forex scalpers. A real challenge in attempting to successfully scalp forex is to have the discipline required to quickly cut off losing trades. This is why most traders will fail with a scalping forex tactic strategy. One losing trade that gets away from them will wipe out the profits of ten winning scalping trades.
To successfully use a scalping forex strategy a forex trader must have iron clad discipline and enter and exit the market according to strict rules. The trader must also trade at a very high winning percentage. Then the trader must be ruthless in cutting off losses.
Scalping forex may sound like an attractive trading strategy but for the above reasons I can not recommend it other than as an occassional tactic. To make money over time at scalping forex you would have to trade almost perfectly on a very consistent basis. If you are that good of a trader you will make a lot more money by taking a somewhat longer term approach with your forex trading positions.
To learn more go to Day Trading Forex.