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Jun 22

Forex Trading Strategies Guide: Scalping 101

Posted by bo at 17:46 | Others | Comments(5) | Reads(41427)

This guide has sought to introduce scalping and discuss the pros and cons of the strategy. After a brief introduction into the characteristics of scalping, we discussed how scalpers profit and how they use leverage. We also pointed out the major necessary things to make scalping successful, including a good broker and an efficient platform. Finally, we discussed the best currency pairs and times of day when scalping works best.

But this guide runs the risk of being overly simplistic if we fail to talk about the variations on scalping. Traders might use any one out of a number of techniques to make their strategy successful. Trend scalpers follow the direction of the market and try to profit from where it is headed. Think of this as following the macro-direction of a currency, but on a much smaller scale. Other scalpers prefer to take advantage of news events and other shocks to the market. These traders stay away from the period closest to the news event, but profit in the time just afterward.

The more important point to recognize is that scalping varies drastically according to conditions. At times the distinction between scalping and other strategies is quite unclear. For instance, if a scalper opens a position and then observes a longer profitable trend, it only makes sense to take full advantage of it. Depending on what is happening, a trader might switch back and forth between all of the strategies, or form his own hybrid.

However, this points to a very important issue that applies to all forex trading. There is a deeply psychological aspect of dealing with risk and loss that every trader should be conscious of. Here are a few qualities to aim for.

First, scalpers and all forex traders for that matter, must exercise discipline in their trading. This is the only problem with moving between various strategies—it becomes too easy to make emotional decisions and take foolish risks. Let your strategy control your decisions. In particular, don’t make the mistake of varying the size of your trades too much—especially when you have a string of successes. One bad trade can erase a lot of progress.

A second, related point is cool-headed thinking. When markets become chaotic, it is easy to be controlled by the volatility and make foolish mistakes. At those times, remember your strategy and follow it assiduously.

Third, you must be patient for the long-term. Scalping works when lots of small but profitable trades add up to a large sum. Be willing to wait for that, even if it requires persistence and temporary loss.

Finally, it is imperative to know yourself. Know what style works well for you. Observe what market conditions tend to reap the best profits for your trading. At certain times, it may be best not to trade at all. When you recognize that conditions mirror what has worked well for your strategy in the past, you should jump into the market fully.

Beginning traders sometimes assume that scalping is the easiest way to earn a quick profit. However, scalping is actually one of the most challenging strategies. Some scalpers suffer losses at the beginning, but with a lot of practice, discipline, education, and the right tools, this method can be one of the most profitable forex strategies.
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Scalping is very good type of Forex trading I'm using it and day trading.  Thanks for this article.
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