Relevance of forex scalping as a trading practice in 2017

In the forex market, scalping as a process typically includes the trading of currencies based on a pattern of real-time analysis. One of the major reasons why many traders prefer scalping is that they are able to make profit by buying or selling those same currencies, through holding the position for a limited duration of time, before closing the account for a small amount of profit. Many trades are placed throughout the trading day and the system that is used by these traders is usually based on a set of signals derived from technical analysis charting tools, and is made up of a multitude of signals, that create a buy or sell decision when they point in the same direction. A forex scalper looks for a large number of trades for a small profit each time.

A forex scalping trading system can be either manual, where the trader looks for signals and interprets whether to buy or sell; or automated, where the trader "teaches" the software what signals to look for and how to interpret them. The timely nature of technical analysis makes real-time charts the tool of choice for forex scalpers. The forex market is large and liquid; it is thought that technical analysis is a viable strategy for trading in this market. It can also be assumed that scalping might be a viable strategy for the retail forex trader. It is important to note though, that the forex scalper usually requires a larger deposit, to be able to handle the amount leverage they must take on to make the short and small trades worthwhile.

What exactly does forex scalping entail?

Forex scalping is a very well-known method that involves a rather quick opening and subsequent liquidation of positions. The term "quick" is somewhat imprecise, given this context, but it generally indicated an approximate time frame of three to five minutes at the maximum; though most scalpers maintain their positions for as little as less than a minute.

The popularity of scalping is due to the fact that it is perceived to be the safest of all trading strategies. Many traders would argue that since the scalpers maintain their held positions for a very brief period of time when compared to regular day Forex traders, the average market exposure of a scalper is much shorter than that of a trend follower and also that of a day trader; consequently, reducing the risk of large losses resulting from strong market moves to a miniscule proportion. Indeed, one can even claim that your typical scalper cares only about the bid-ask spread, and not way too much about market concepts like trend, range and sub-range. Although most scalpers tend to not pay too much attention these market phenomena, they don’t place themselves under any obligations to trade them, because they are concerned with only brief periods of volatility created by them.

Is Forex Scalping for every trader?

However, forex scalp strategy is not meant to be suitable for every type of trader. The returns that are generated in each position by a specific scalper is usually rather small; but the profits gained from each closed position make up to massive amounts, when combined together in unison. Ordinarily, scalpers do not like to take huge risks. In other words, they are in fact more than willing to forego great profit opportunities in return for the safety of small but consistently frequent gains. Hence, a specified scalper needs to be a patient, diligent individual who is more than willing to wait as the fruits of his consistent labour translate into great profits over an extended period of time. Forex scalping should not be the business of an impulsive, excited character who seeks instant profits, results and gratification. It is not the forte of people who want to achieve many things at any given instant as each consecutive trade is probably unlikely to achieve anything for him other than utter and sheer frustration, if he keeps using forex scalping.

Scalping also demands a lot more attention from the trader in comparison to other styles such as swing-trading, or trend following. A typical scalper will open and close tens, and in some cases, more than a hundred positions in an ordinary trading day, and since none of the positions can be allowed to suffer great losses (so that we can protect the bottom line), the scalper cannot afford to be careful about some, and negligent about some of his positions. It may appear to be a formidable task at first sight, but scalping can be an involving, even fun trading style once the trader is comfortable with his practices and habits. Still, it is clear that attentiveness and strong concentration skills are necessary for the successful forex scalper. One does not need to be born equipped with such talents, but practice and commitment to achieve them are indispensable if a trader has any serious intention of becoming a real scalper.

Scalpers should always keep the importance of consistency in trade sizes while using their favoured method. Using erratic trade sizes while scalping is the safest way to ensure that you will have a wiped-out forex account in no time, unless you stop practicing scalping before the inevitable end. Scalping is based on the principle that profitable trades will cover the losses of failing ones in due time, but if you pick position sizes randomly, the rules of probability dictate that sooner or later an oversized, leveraged loss will crash all the hard work of a whole day, if not longer. Thus, the scalper must make sure that he pursues a predefined strategy with attention, patience and consistent trade sizes. This is just the beginning, of course, but without a good beginning we would diminish our odds of success, or at least reduce our profit potential.